The Impact of Economic Incentives on the Planned Composition of Long-term Care Services in Norway 2008 - 2014

Abstract There are economic incentives in the funding system which may cause distorted outcomes in the composition of long-term care (LTC) services in Norway. Øien (2014) concludes that cost shifting has taken place by the allocation of a significantly higher share of elderly in institutions relative to home-based care in municipalities with a high share of affluent elderly. With data on the applications for a new state investment grant and income data on an individual level for the elderly, it has been possible to analyze whether the elderly’s income level has influenced the planned balance of nursing home care and sheltered housing at a local government level. The income file has been converted into shares of elderly with income above a threshold level, at which the municipal costs are equal for the two care schemes. Controlling for municipal revenue, the need for services, cost factors and existing LTC-service composition, there is no ground for concluding that economic incentives in the funding system have distorted the planned service composition in Norway from 2008-2014. Also the determinants of expanding capacity of nursing homes and sheltered housing were explored, and in particular whether local governments with high revenues decided to expand their capacity of nursing homes and sheltered housing more per capita than the ones with modest revenues. There seems to be some evidence that the existing capacity is influencing the investment levels, whereas demography and health conditions do not seem to have an effect. The strongest result found is that municipal revenue had a strong and significant influence on the investment volumes in the LTC sector