What is the effect of Long-Term Care (LTC) benefits on healthcare use?

Helena Hernández-Pizarro ’12 is part of a research team that uses administrative data to estimate quality of life and health.

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Photo by Matthias Zomer on Pexels.com

This post is based on the article Ayudas a la dependencia y uso de los servicios sanitarios, ¿qué nos dicen los datos administrativos? (Nada Es Gratis, April 2021) by Helena Hernández-PizarroGuillem López CasasnovasCatia Nicodemo, and Manuel Serrano Alarcón.

Since the 2007 implementation of the “Dependency Act”, people with functional limitations in Spain can request Long-Term Care (LTC) benefits. The Act’s main objective is to improve the care and quality of life of people who have lost their autonomy. Fourteen years later, evidence on the impact of the Dependency Act in Spain on its beneficiaries remains scarce. This is partly because we need data on the quality of life of this population in order to fully evaluate its impact and we still don’t gather a suitable indicator. However, we can assess the impact of benefits by utilising data on the use of healthcare services as a proxy to estimate quality of life and health, and that is the approach we have taken in our research.

The relationship between LTC benefits and healthcare use

The effect of LTC benefits on healthcare use is not trivial and may have implications not just for the quality of life of recipients, but also for the management of healthcare services.

If access to LTC improves the health status of dependent people (for example through better treatment management, better nutrition or avoiding domestic accidents), investments in the LTC system could save healthcare providers money in the future. On the other hand, LTC benefits might increase the demand for healthcare, for example through greater health-monitoring by caregivers.

Using data on the type of healthcare service, type of admission and diagnoses, we can better understand the relationship between benefits and healthcare use, and therefore increase the efficiency in the allocation of social care and healthcare resources to design a better integrated care system.

The data

To study the effects of LTC benefits on healthcare use, we needed to gain access to data from social services and healthcare providers and then link it. As others have shown, this was not easy, but fortunately, the interest of the institutions involved in this research —CatSalut, AQuAS, the Departament de Treball, Afers socials i Famílies de la Generalitat de Catalunya (DTASF) (Labour, Family and Social services department) and CRES (UPF) — helped to facilitate this process.

Even with access to the data, measuring the effect of LTC benefits on the health system is not straightforward. Those who qualify for benefits will by definition have worse health and, regardless of the new policy, will probably make greater use of the healthcare system than those who don’t qualify for benefits. Therefore, simply comparing those applicants who receive LTC benefits with those who don’t would not help us to identify the effects of the Dependency Act.

To deal with this, we use an instrumental variable technique based on the “leniency” of the evaluators. The idea is as follows. When there is an evaluation guided by objective criteria such as when grading an exam, imposing a judicial sentence or assigning the severity of a medical case, there is always a degree of subjectivity from the person performing the assessment. It is common in research literature to consider this as a source of exogenous variation, because there is no predictable basis by which assessors should differ. This allows us to use traditional statistical methods that can identify any consequences associated with new policies. In our context, despite the fact that the assessment is based on the Dependency Assessment Scale, each examiner has a small margin of subjective interpretation. Thus, there are examiners who, on average, tend to provide slightly higher scores, so that their applicants qualify for greater LTC benefits. Since the applicant cannot choose his/her examiner, being assessed by one examiner or another affects the probability of receiving a benefit which is exogenous to the assessment process.

The results

In the two graphs below, we summarize the most important results from our research.

Figure 1 shows that access to LTC benefits decreases by 7 percentage points the probability of a group of hospitalizations considered by the medical literature as avoidable with continuous care for the elderly (such as hospitalizations for injuries, ulcers and nutritional deficiencies). This represents a 60% reduction in this type of hospitalization.

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Figure 1. Effect of LTC benefits on the probability of avoidable hospitalizations

Figure 2 shows that unscheduled visits to primary care decrease by almost 10 visits two years after receiving LTC benefits, a 50% reduction with respect to the mean. Our analysis by diagnosis indicates that this reduction is explained by a sharp drop in visits caused by the economic and family situation of the individual.

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Figure 2. Effect of LTC benefits on visits to primary care. Scheduled vs Unscheduled

Conclusions

Our results show that LTC benefits can mitigate the use of healthcare services, in line with the conclusions of previous research. Additionally, our data allows us to go one step further, identifying in detail the types of services which are the most affected.

Particularly interesting are the results relating to primary care, where LTC benefits strongly reduce visits not strictly related to health causes. It seems that reinforcing the LTC system will not only improve the quality of life of dependents and caregivers, but may also reduce the pressure on the healthcare system.

Undoubtedly, these results are important given the chronic under-financing of the LTC system, especially in a context where COVID-19 has highlighted a need for real integration between social and health care. This is just one example of how access to, and analysis of administrative data can contribute to the evaluation of public policies, facilitating better informed decision making. 

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Helena Hernández-Pizarro (ECON ’11, HEP ’12, GPEFM ’17) is a Research Fellow at the Centre for Research in Health and Economics (CRES-UPF).

Rethinking Fogape – Master Projects 2014

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2014. The project is a required component of every master program.


Rethinking Fogape: An Evaluation of Chile’s Partial Credit Guarantee Scheme

Authors:

Margarita Armenteros, Niccolò Artellini, Andreas Hoppe, Marco Urizar, and Bernard Yaros

Master Program:

International Trade, Finance and Development

Paper Summary:

Small-and-medium enterprises (SMEs) often find themselves credit constrained due to a lack of collateral, limited credit history, and informational asymmetries that entail high monitoring costs for lenders. Governments around the world have introduced partial credit guarantee schemes (PCGS) to overcome these constraints and ease financial access for SMEs. These schemes aim to relieve credit-constrained firms by providing public collateral that reduces the risk borne by private lenders in the event of a default. In recent years, PCGS have been utilized as a way to protect SME lending in the backdrop of the global credit crunch.

Why are SMEs important? Any economy is dependent on the innovation, technological change, and job creation that new enterprises introduce, and in most cases, such firms are small in size. The role of SMEs in Chile is no exception. By 2009, the SME sector in Chile contributed to 20% of GDP, and the percentage of workers employed in SMEs stood at 56.4% in 2011. Nevertheless, Chilean SMEs have pointed to the fact that their difficulties in obtaining a formal loan rest with a lack of guarantees and high financial costs.

In 2000, Chile relaunched its public guarantee fund Fogape (Fondo de garantías para pequeños empresarios) with the goal of providing public guarantees for loans taken out by SMEs with private financial institutions. In 2007 and 2009, the government re-capitalized the fund by $10 million and $130 million respectively as a direct countercyclical response to the international financial crisis. Fogape is unique in the way by which it disseminates its guarantees into the credit market; it does so through an auctioning system that is designed to reduce moral hazard on the part of participating banks that bid for Fogape’s guarantees.

To assess econometrically the impact of Fogape on eligible firms, we used firm-level data obtained from two longitudinal surveys undertaken by the Ministry of Economy. We employed the strategy of regression discontinuity design (RDD) in which receipt of the treatment depends discontinuously on the value of one or more observable characteristics of the subjects. In our case, we exploited an arbitrary threshold of eligibility by which only firms with reported sales less than $750,000 are eligible for Fogape’s guarantees.

We estimated the intention-to-treat, or the effect of eligibility to Fogape on eligible firms vis-à-vis ineligible ones. In keeping with the literature on RDD, we restricted our sample of interest to only those enterprises whose reported sales fall within a distance h on either side of the sales cutoff of eligibility. Our robustness checks confirmed that eligible and ineligible firms at the margins on either side of the cutoff were not systematically different in key baseline characteristics.

We selected the following outcome variables in which we expected to observe a change due to Fogape’s presence: the log difference of sales from 2007 to 2009; debt-to-equity ratio in 2009; profit margin in 2009; and long-term debt over total debt in 2009.

Log Sales Growth

 

We did not obtain any statistically significant results, suggesting that the effect of eligibility is neither positive nor harmful to the various performance indicators of the eligible enterprises in our sample of interest. We found that eligible firms within our bandwidth h, ceteris paribus, experienced less proportional change in their sales from 2007 to 2009 than ineligible ones. We had expected to see firms that are eligible for credit guarantees to have higher sales growth because of the investment in working capital and productive assets that such access to credit would allow for. The finding from our RDD analysis that eligible firms had less debt-to-equity in 2009 than non-eligible ones was equally puzzling. We expected eligibility to have increased their debt-to-equity ratio vis-à-vis similar ineligible firms because of the loans they are getting through Fogape. Finally, the result that eligible, surveyed firms had less long-term to total debt in 2009 than ineligible ones within our bandwidth h was also contrary to our expectations. Fogape has put emphasis on its allocation of guarantees to long-term credit, which led us to believe that there would be a corresponding increase in the long-term over total debt ratio of eligible firms.

We started with the premise that SMEs are credit constrained, which validates Fogape’s raison d’être in the economy as a provider of credit. We also assumed that this guaranteed credit would be used for productive investments, which would then be reflected in firm profitability and sales growth. Why do we find no evidence of Fogape’s impact during the period of 2007 to 2009? Are firms receiving Fogape-guaranteed loans not truly credit constrained? Or are lenders substituting Fogape guarantees for private ones? Do these firms have the expertise or productivity to undertake successful investments? In the survey used in our study, it is possible to identify 369 firms that received Fogape guarantees for a secondary loan in 2009. Out of these firms, 40% obtained their primary loan using physical collateral and 18% using private guarantees, thereby hinting at a substitutability problem. However, it is still not possible to say that Fogape users, which already had access to the fund or other sources of credit, were not credit constrained to begin with. We suggest more research be carried out and that the portfolio of participating lenders be reviewed to determine whether lenders have been substituting private for public guarantees and if Fogape beneficiaries were truly credit constrained. We find evidence that firms also face difficulties besides credit constraints. In the 2010 World Bank Enterprise Survey, Chilean firms identify an inadequately educated workforce as their second largest constraint. Furthermore, 25% of small and 22% of medium-sized firms identify this very constraint as their main obstacle. To address productivity concerns as well as competitiveness issues facing SME’s, we propose more complementarity between Fogape and other pro-SME institutions and public programs.

Read the full paper or view slides below:

Developing a Fairtrade Cocoa Sector in Nicaragua – Master Projects 2014

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2014. The project is a required component of every master program.

Photo credit: X. Scheldemann/Bioversity International
Photo credit: X. Scheldemann/Bioversity International

 Developing a Fairtrade Cocoa Sector in Nicaragua

Authors:

Giuliano J. Bandeen, Armen Khederlarian, Edmund Moshammer, Tommaso Operto, and Christoph Sponsel

Master Program:

International Trade, Finance and Development

Project Summary:

This is a policy proposal directed at the Government of Nicaragua. Nicaragua’s cocoa industry achieves a very low export unit value in comparison to global competitors in West Africa, South East Asia and Latin America. Given the promising prospective growth of the cocoa world market and the higher price paid for Fairtrade cocoa, the aim of the present policy memo is to examine whether Nicaragua could benefit if farmers were to switch to certified cocoa production standards. We show that under perfect market conditions this would indeed result in higher profits. However we also identify that there are currently several obstacles preventing farmers from switching. These obstacles include minimum quantity requirements of international buyers, price information asymmetries, a low negotiation power in the supply chain, and financial and technological constraints. We propose three policies targeting these obstacles which consist of a provision of storage facilities, a credit guarantee and an educational campaign. All of them rely on group forming of farmers with mutual liability agreements.

Comparing the net present value profit of selling conventional cocoa with an investment in our proposed policies, which allows selling Fairtrade cocoa, we calculate an internal rate of return. This rate varies between both potential clients, European chocolate manufacturers Ritter Sport and Zotter and is 129% and 20% respectively. This hence encourages our policy proposal. By comparing different scenarios of government intervention we find that the highest average welfare gain results from an intermediate level of intervention. In this scenario the government would pay for warehouse construction and an educational campaign, and would provide a credit line guarantee to avoid that cooperatives pay a high risk premium. Additionally we include several robustness checks where we allow for changes in investment horizon, fertilizer effectiveness, government interest rate, farmers’ risk premium and most importantly international cocoa prices. We show that implementing our policies promises high potential gains from switching for individual farmers and the entire economy under a wide range of scenarios.

Read the full project report or view slides below: