A Strategic Consideration of the Introduction of the Long-Term Care Insurance System in China

: Transition and Evolution of Marketization Policy

Abstract

From a “mechanisms of governance” perspective from transaction cost theory, this study is focused on two strategic questions about system introduction of long-term care insurance in China―what is its significance to the current delivery system and what is the future direction for the marketization policy. The answerers to the questions can be summarized as follows. First, the system introduction of long-term care insurance can be taken as a kind of “orbital adjustment” to the past and current delivery system. It might be helpful for fixing problems in the current market and lowering the governance cost. Second, by the decreasing birthrate and aging population, China face the further asset specificity increasing problem in long-term care transaction. For keeping the care delivery system in good condition and the governance cost at an acceptable level, stricter conditions for receiving insurance benefits and a substantial increase in supply quantity are essential to the future policy.