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Informal Care and Elderly Heal
Informal Care and Elderly Heal
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INFORMAL CARE AND ELDERLY HEALTH CARE USE
Chapel Hill
2000
Approved by:
SLnJc.ruti
Edward C. Norton. Ph.D. (Advisor)
2
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Steven A. Garfinkel. Irn.D
‘Va.%
R. Gary Rafter. Dt
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UMI Number 9993391
Copyright 2000 by
Van Houtven, Courtney Harold
___ <g>
UMI
UMI Microform 9993391
Copyright 2001 by Bell & Howell Information and Learning Company.
All rights reserved. This microform edition is protected against
unauthorized copying under Title 17, United States Code.
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©2000
Courtney Harold Van Houtven
ALL RIGHTS RESERVED
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ABSTRACT
COURTNEY HAROLD VAN HOUTVEN: Informal Care And Elderly Health Care Use
(Under the direction of Edward C. Norton, Ph.D.)
Background: Informal care of the elderly by their adult children is a common form
of long-term care, is often preferred by the elderly to formal care, and can reduce medical
expenditures if it substitutes for formal care. Much work has been done to characterize
informal caregivers. However, there is a dearth of research quantifying informal care’s effect
on subsequent formal care use, beyond knowing that informal care can both replace and
supplement formal care. Objective: This study helps to assess the merit of proposals to
support informal caregivers, such as through tax breaks or respite care programs. I use two
waves of the Asset and Health Dynamics Among the Oldest-Old survey to answer the
following question: Does informal care of elderly parents by their children reduce formal
care use? I examine home health care, nursing home care, hospital care, outpatient surgery,
and doctor’s visits. Methods: I use two-part models to predict the immediate and medium-
term effects of informal care on formal care use of the single elderly. Because informal care
can both precede and follow formal care, I use two-step instrumental variables estimation and
lagged informal care to control for endogeneity. Results: Elderly who received informal
care were 72 percent less likely to use home health care and 89 percent less likely to use
nursing home care in the next three years than those who did not. Doctor’s visits fell slightly
in the short-term for informal care recipients (2 percent), while the risk of outpatient surgery
fell dramatically (by 43 percent) two years later. Caregiving did not significantly affect
hospital use. Specification tests show that simultaneity exists between informal and formal
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care. Conclusions: Controlling for endogeneity is essential to correctly inform the policy
process that informal care drastically reduces home health care and nursing home use. If
informal care is the type of care that elderly prefer, tax breaks, as well as caregiver training,
respite care, and increased workplace flexibility could all be considered as policies to help the
supply of informal care meet burgeoning demand. Such policies may be more cost-effective
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To my parents:
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ACKNOWLEDGMENTS
I would like to acknowledge the great mentoring and support of my advisor, Edward
Norton. I also benefited from methodological, substantive and practical advice from other
committee members, including Will Dow and Gary Rozier from the Department of Health
Policy and Administration, UNC, and Shula Bernard and Steve Garfinkel from Research
Triangle Institute. Sally Stearns also provided inspiration and mentoring at UNC.
Health Grant, and the National Institute on Aging, the National Institute of Health for a small
grant (R-03AG16558).
Glen Mays, Jeremy Bray, Mark Holmes and David Guilkey provided myriad
advice on discrete factor analysis and Fortran programming which was helpful. Cheers to the
firm o f Harold, Leahy, and Kieran for providing ample writing space, bad coffee and fine
Komives, Virender Kumar, and Jan Ostermann: What a lonely road it would have been.
While not lofty, it was child care help and devotion from Carla Menius (not to
mention Trisha, Cindy, Frances, Keisha, Michelle, Brian, Sommer, Stuart, Raven, Jenny, and
Lanna) that allowed me to complete this dissertation, as well as the friendship of Jennifer
Gerton, Richard Shrock, Paula Paradis, and Dan Reuland. I cherish the love and support
of the Harold and Van Houtven families, especially Gran, who spoils me still. To George
Louis, Dominic Harold, and Charlotte Elizabeth Van Houtven, you are my everything.
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TABLE OF CONTENTS
Page
Chapter
1. OVERVIEW.......................................................................................................... 1
Introduction........................................................................................................1
How does receipt o f informal care affect elderly formal care use?............... 17
How does informal care affect the net cost of formal care?.......................... 22
Overview of chapter......................................................................................... 25
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Hypotheses 42
3. METHODS........................................................................................................... 43
Overview of chapter......................................................................................... 43
Specification Tests........................................................................................... 60
Overidentification tests........................................................................61
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4. DATA AND SAMPLE SELECTION.................................................................72
Overview of chapter..........................................................................................72
The Asset and Health Dynamics Among the Oldest Old Survey.................. 72
Overview of chapter........................................................................................ 94
How does informal care affect formal care use of the elderly?....................95
Immediate effect.................................................................................97
Immediate effect.................................................................................108
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Sensitivity tests of the main results..................................................................117
Child attributes.....................................................................................122
Discussion............................................................................................ 129
Extensions.........................................................................................................131
Conclusion........................................................................................................133
7. REFERENCES......................................................................................................142
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LIST OF TABLES
Table 10. Simulated risks of home health care use and nursing home use given
different levels o f informal care, Wave 1 and Wave 2....................................105
Table 11. Simulated risks of having any home health care use in Wave 1.................... 107
Table 12. The effect o f informal care on nursing home use........................................... 109
Table 13. Simulated risks of having any nursing home use in Wave 1..........................115
Table 14. Survey regression of informal care (total ADL’s and LADL’s
helped with) on child and parent characteristics. Wave 1...............................123
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CHAPTER ONE: OVERVIEW
Introduction
This dissertation examines how informal care of the single elderly by offspring affects
health care utilization of the elderly. Informal care of the elderly by offspring is extremely
common, serves as an important substitute to formal care, and is usually preferred by the
elderly both to formal care and to institutionalization. Elderly who receive care from their
children are more often female than male, and based on projected life expectancies for the
year 2010, 74.1 for males versus 80.6 for females, will continue to be so (U.S. Bureau o f the
Census, 1997). Informal care is typically provided by daughters, who increasingly face
competing demands for their time between caring for elderly parents, working, and child
rearing. These factors make this an important issue in women’s health, because the focus is
largely on women. In addition, demand for informal care in the next three decades will
experience unprecedented growth as baby boomers approach retirement age (the last of the
baby boomers turn 65 in 2030, at which time the number of people in the U.S. over the age of
Informal care is also critically important for health and labor policy. Health policies
designed to control costs affect reliance on informal care. For example, restricting Medicaid
eligibility for nursing home care would increase the demand for informal care. Recent
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Medicare expansion o f home health benefits and the trend to Medicare managed care, which
might restrict hospital stays and return the parent home sooner, also affect the demand for
informal care. A more radical policy would allow Medicare and Medicaid to pay lump sum
transfers to family caregivers (Pezzin and Schone, 1997). On a pilot-project level, two states
have offered benefits to informal caregivers in the form of direct payments to family
members and other informal caregivers who provide personal assistance (Pezzin and Schone,
1999a). Finally, the insurer—either the government through Medicare or private insurance
companies—may find that paying informal caregivers is more cost-effective than paying for
home health care providers if they can give informal caregivers a lower rate (Ettner. 1994).
Such a radical insurer-initiated change would certainly affect the supply of informal care.
Even a more minor subsidy provision to informal caregivers, say in the form o f tax
credits or tax exemptions, might affect the provision of care and ultimately utilization
(Fisher, 1998). In fact, marking the first time that caregiving has been a part of the
presidential campaign, both Governor George W. Bush and Vice-president Al Gore proposed
specific compensation plans for caregivers in the form of tax changes. With some variation
in who qualifies, both changes are worth about $3,000 for family caregivers (Gore, 2000;
informal caregivers through respite care, support services, and information on formal services
(Gore, 2000). Tax breaks would increase the supply of informal care at the margin, even
though most caregivers would maintain they are not motivated by money. Meanwhile, a
national program to support caregivers would increase the supply of informal caregivers if it
helps prevent bumout but it may also replace some informal care because it will increase the
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In fact, President Clinton signed into law a program very similar to Gore’s National
Amendments of 2000” (H.R. 782), this law establishes the National Family Caregiver
Support Program. Currently funded at SI25 million (Goodling, 2000), the support provided
includes “critical information, training, and counseling, as well as much needed quality
respite care for those caregivers who are juggling jobs and other family responsibilities while
meeting the special needs of loved ones in their care.” (Clinton, 2000). This program may
have complicated effects on caregiver supply and demand and will be important to follow as
state and federal policies become increasingly aware that informal caregiving may not be
Labor policy and labor market dynamics may affect the supply of informal care. For
example, proposed amendments to the Family and Medical Leave Act of 1993, which would
ailow sick leave benefits to be used to care for parents, would increase the supply of informal
dependents (say through Medigap coverage) would reduce informal care if children decide to
stay on the job to receive the insurance benefits rather than care for parents themselves. In
addition, recent welfare reform legislation, which requires welfare recipients to work after
receiving a set period of benefits, may reduce the provision o f informal care in vulnerable
populations o f the elderly. Prior to this legislation, it was common for AFDC recipients to
care for elderly parents and their own children rather than joining the labor force (Puntenny,
1998). While these elderly parents may be eligible for Medicaid if their children do not care
for them, assuming they have similar socio-economic status to their child, potential tradeoffs
from one public program to another may be occurring. Finally, increased workplace
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flexibility due to telecommuting and an increased use of home offices may increase employed
Informal care by children is important because it ultimately affects the health status of
the elderly and elderly women in particular, their ability to live independently, and public
♦ Does informal care of elderly parents by adult children delay entry into
nursing homes, reduce home health care use, or reduce other health care
elderly?
I apply state-of-the-art statistical techniques and analyze data uniquely suited to address these
questions of elderly persons' health. I use a conceptual framework of utilization and informal
care based on Grossman (1972) and Nocera and Zweifel (1996). The endogeneity of
informal care in predicting health care utilization requires simultaneous equations methods. I
control for endogeneity using a conventional two-step instrumental variables (IV) approach,
using lagged informal care, and I also explore a full-information maximum likelihood
technique called discrete factor analysis. The data are the 1993 and 1995 waves of the Asset
and Health Dynamics Among the Oldest-Old (AHEAD) panel survey, which have detailed
These research questions have not been addressed to date, providing a unique
opportunity for this dissertation research to uncover how informal care determines elderly
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What is informal care?
There are many definitions of informal care in the literature. I view informal care
generally as any care that occurs in a non-market setting, meaning the caregiver is not paid to
provide care. Examples o f informal care include a neighbor assisting with a person’s
shopping, a wife administering medicine to her husband, or a daughter helping her mother
from bed to the bathroom every day. Informal care often occurs in the caregiver or care
receiver’s home. Whether a person who needs care lives independently is dependent on
many factors, but primarily depends on whether a spouse is present, on financial resources
and on health status. Further, informal care can occur on a short or long term basis.
Formal care, by contrast, is care that occurs in the market place, such as nursing home
care, home health care, inpatient hospital care, or ambulatory care. Formal care is paid care,
regardless of whether the care is paid for by private or public insurance, individuals, or is
classified as uncompensated care that is either absorbed by the formal care provider as bad
debt, or cost-shifted to other payers. Throughout this study I use the term “health care
utilization of the elderly” and the term “formal care” synonymously. In other studies formal
care has meant home health care only, but I do not limit the definition to a particular type of
Whether informal care is a substitute for formal care or a complement to formal care
is an important notion for this study. Litwak (1985) and Allen (2000) argue for a
complementary relationship between informal and formal care. Pezzin and Schone (1999a)
and Lakdawalla and Philipson (1999) argue that it is a substitute for formal care. Weissert et
al. (1988) support this by finding that informal care tends to decline with the use of formal
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care. It is plausible that informal care is both a substitute and a complement to formal care,
depending on the particular situation. For example, Ettner (1994) showed that most home
health care users also receive care from family members but that when cost of formal care is
alleviated, formal care is preferred to informal care. In a later article, Ettner pointed out that
the degree to which informal caregivers can substitute formal care for their own care is still
an unresolved empirical question (Ettner 1995 citing Christianson 1988 and Ettner 1994).
Informal care is not limited to the frail elderly, as chronically mentally-ill persons and
members care for persons with special medical needs. A recent New York Times article
pointed out that parents are increasingly caring for children with special medical attention at
home. Whether this is due to managed care’s influence on cutting inpatient stays or families
demanding to have an ailing child at home rather than in a hospital is a point of debate.
However, the trend towards more informal care is real for persons of all ages in the United
States. According to the New York Times, “Families are performing an unprecedented
amount of technical medical care in their homes, much of which would once have been
provided by doctors or nurses alone.” (Fisher, 1998). Many of these family members are
untrained and unprepared to provide care on top of the comfort that they have traditionally
provided (Fisher, 1998). So it is important to note that family-provided informal care is not
necessarily limited to unskilled care such as assistance with physical functioning tasks.
In this study I focus on informal care of the elderly. Most of these elderly are women
due to differences in mortality rates, but I will look at both male and female elderly. For the
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elderly, informal care is one of the main forms of long-term care. Quantifying the extent of
informal caregiving for the elderly is extremely difficult because it is not reimbursed in a
market (Norton, 2000). Norton estimates that, while difficult to quantify, about two-thirds of
care for the elderly is informal care. I focus specifically on care provided by offspring, as
informal care by offspring may have unique effects on outcomes compared to care provided
by a spouse, a neighbor, or a friend. In addition, State informal care programs (17 in U.S.
according to the Family Caregiving Alliance, 2000) and informal care policy proposals (Gore,
2000; Bush, 2000) benefit family caregivers, who, in the absence of a spouse, are most
commonly offspring.
The primary pre-condition for informal care demand, like formal care demand, is a
parent’s mental or physical health status; whether it is from a long term disability like
Alzheimer's Disease, or a short-term health shock such as the flu or a broken hip. Aside from
measures of self-rated health status, where a person ranks her health as excellent, good, fair
or poor, there are more objective measures of functional status, Instrumental Activities of
Daily Living (IADL’s) and Activities of Daily Living (ADL’s). IADL’s include help with
The six ADL’s most commonly measured are needing help with toileting, transferring to and
from bed, walking, dressing, bathing, or eating. Pezzin and Schone (1999b) found that the
number of IADL’s an elderly parent has drives demand for children as caregivers, while the
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number of ADL’s drives demand for home health care providers as caregivers. In addition,
Given impaired functional status, for a parent to demand care from a child it is likely
that a spouse is not available to provide care. If a spouse is healthy and living, he or she is
more likely to provide care than a child (Stone and Kemper, 1990; Lakdawalla and Philipson.
1999; Dwyer and Coward, 1991; Pezzin, Kemper and Reschovsky, 1996). Lakdawalla and
Philipson find that the presence of a spouse reduces the probability of nursing home entry by
more than half, and this result holds for all but the severely mentally-ill and those parents
who have children who live less than an hour away (Lakdawalla and Philipson, 1999). This
means that the presence of a spouse as caregiver can delay entry into a nursing home.
Further, living with a spouse, living independently or co-residing with a child can all
affect demand for informal care. B6rsch-Supan (1989) found that sharing accommodation
with adult children will “not only provide housing but some degree of medical care and social
support for the elderly." Living in a rural area also increases the reliance on informal care
because a formal service network is less available (Coward and Cutler. 1989).
care demand. The wealthier elderly may prefer to purchase formal care instead of relying on
children. Or, income may be spent to avoid institutionalization by making transfer payments
to children so that the children are more willing to take in their parents (Borsch-Supan et al..
1992b). This can be true despite researchers finding that there is little direct compensation
for children providing informal care, as other financial transfers such as a parent’s deed to the
house or other gifts can be indirect payments for informal care (McGarry and Schoeni, 1995).
Past research has found that lower income people demand much more informal care from
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family members than formal care. Contradicting this is a finding by Kotlikoff and Morris
(1989) that contact between children and the economically vulnerable elderly appears to be
less than the non-vulnerable elderly. But this could be due to supply-side constraints rather
than demand-side ones. For example, in a study of Medicaid home care subsidies, Ettner
(1994) finds that formal care is used in lieu of informal care by the frail elderly. When cost is
In addition, resource control was shown by Pezzin and Schone to have a significant
effect on informal care (1997). Resource control means whether or not a parent manages and
makes decisions about spending her own money rather than a child making financial
decisions for her. Switching resource control from a parent to a child decreased the
likelihood o f a child working full-time and of providing informal care (as well as the number
Insurance may also affect tradeoffs between informal and formal care. The presence
of insurance encourages formal care use rather than informal care use, because it reduces the
effective price of formal care. Medical insurance is not a major factor in determining demand
for some types of acute care of the elderly since nearly all elderly over 65 receive Medicare
providers may still hinder Medicare recipient access for low-income individuals, rural
individuals, and individuals in under-served regions. This may in turn increase informal care
demand.
Further, Medigap policies, which are optional for the elderly, may influence types of
care not covered by Medicare Part A. And for long-term care. Medicare strictly limits the
number of days o f nursing home care that it will cover, meaning that long-term care
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insurance or Medicaid, which covers nursing home care comprehensively, become important
when examining tradeoffs between informal care and nursing home utilization. On the other
hand, few elderly purchase long-term care insurance, so its effect on health care utilization
may not be significant in the aggregate. Further, both Medicare and Medigap insurance are
important to consider when examining demand for informal care versus home health care.
While all o f these factors and health status in particular are shown to determine
demand for informal care, it is clear that they also affect demand for formal care. This means
that formal care can be an important factor determining informal care as well. If a parent has
an acute episode which requires surgery or rehabilitation using a skilled nursing facility, it is
likely that such care will be immediately followed by informal care by children, until the
parent is able to function independently again. This close relationship between formal and
informal care, and the potential for two-way causation between the two types of care, must be
incorporated into any model estimating the effect of informal care on formal care.
In fact, Pezzin and Schone (1999a), in a technical study of informal care and
utilization find that use of formal care is the most important predictor of subsequent informal
care. They jointly estimate household membership, labor force participation of the child,
informal care and financial transfers. Theirs is the only study in the literature to consider the
joint determination of formal care and informal care, and they control for this by using
predicted prior formal care in their estimation of informal care and other outcomes. They
find that, in particular, formal care use appears to be an important substitute to informal care
both for those who live independently from each other, and for parents and daughters who co-
reside. In some policy simulations, if all parents received formal care, 35 percent o f parents
would receive informal care from a daughter, whereas they originally predict that 66 percent
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would receive informal care. Such a policy would also cause about a 60 percent reduction in
the number of children co-residing with a parent. This study is limited by two main factors.
First, they are only able to consider one daughter o f the parent, hence limit the caregiving
network by number and gender. Second, they do not have a nationally representative sample
of the elderly, but a random sample of the elderly from Massachusetts. The advantage is that
the methods incorporate the simultaneity of informal and formal care, and that the daughters
of the elderly parents are interviewed directly, limiting measurement error caused by parent
reporting.
from a home health care program (the channeling experiment). He concluded that “formal
community-based care" led to some withdrawal from informal care, but that the total
consumption of care went up. This also lends credence to formal and informal care having a
substitute relationship, and shows that the demand for formal care can also affect demand for
informal care.
If care is not available from a healthy spouse, children will typically provide informal
care, followed by other relatives, friends, and neighbors (Stone and Short, 1990). Among
children, research shows that female offspring provide more care than male offspring (Stone
and Short, 1990; Stone and Kemper, 1990; Borsch-Supan et al., 1992a; Kotlikoff and Morris,
1989; Stone, Cafferata, and Sangl, 1987). A study by Stone, Cafferata, and Sangl (1987)
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found that more than three-quarters of children caregivers are daughters, due in part to the
However, even women who work full time are over four times more likely to be
primary caregivers compared to men (Stone and Kemper, 1990). Again, this may be
explained by differences in opportunity costs if these women earn less than men do, but may
also be because some elderly parents prefer receiving care from their daughters.
Alternatively, it may be because daughters are more willing to sacrifice leisure time for
caregiving than are sons. Cultural perceptions of gender roles may certainly influence the
reliance on daughters.
Working constrains the amount of care that offspring can provide. In fact, a
substantial number of women in the labor force quit working when a parent becomes ill. Past
research has found that about 11 percent of daughters and 5 percent of sons who provide
informal care quit a job in order to provide that care (Stone et al., 1987). Regardless of
gender, researchers have found that the higher one’s income, the less likely caregivers are to
quit working (Muurinen, 1986). This finding is consistent with wages or income being good
measures of opportunity costs o f peoples' time. In addition, a 1990 article by Stone and Short
estimated that 29 percent o f caregivers either quit working or accommodated their schedule
to provide care (“work accommodation" was defined as working reduced hours, rearranging
work schedules or taking unpaid leave). By contrast, Wolf and Soldo find a negative but
While work certainly can affect the supply of informal care, causality between
caregiving and work decisions is not always easy to discern. While caregiving causes some
people to quit work, in other cases work causes others not to provide care and to provide
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financial assistance instead. Few researchers have considered this in their empirical work.
The exception comes from three studies that consider the simultaneity of informal care and
employment decisions. Ettner (1995) and Wolf and Soldo (1997) examine the effect of
variable, while Stem (1995) considers the effect of employment (among other things) on the
informal care and work make it difficult to include work behavior in models of informal care
In addition to work, competing responsibilities for child rearing also complicate the
informal care decision (Soldo and Myllyluoma, 1983). With women delaying their
childbearing age in the United States, many may be caring simultaneously for their own
children and an ailing parent (the so-called sandwich generation). Some researchers,
however, find that there are currently a relatively small number of women with dual care
responsibilities (Stone and Kemper, 1990, Rosenthal et al., 1996, Soldo, 1996). In fact, two-
thirds of daughters o f elderly parents are either middle-aged or elderly themselves, and hence
are grandparents rather than parents of minors (Stone and Kemper, 1990). So it may be more
accurate that adult children make tradeoffs between elderly parent care and grandchild care.
Nevertheless, delayed child bearing and changing demographics in the next three decades
indicate that the sandwich generation will grow, which will cause a greater need to make
tradeoffs between caring for elderly parents and one’s own children or elderly parents and
grandchildren.
Typically tradeoffs between work and caregiving or child-rearing and caregiving are
the competing demands studied, as I already highlighted. Of course, informal care also
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causes a loss of leisure time, so another factor driving the supply of informal care is the
relative value an adult child places on leisure time. For example, even non-working
Soldo and Mllyluoma (1983). Cantor showed that the most severe effect o f informal care
was loss of “free time for oneself and opportunities to socialize with friends, take vacations,
have leisure time pursuits, and run one’s own house,” not a loss of employment which is
typically considered (1983). These studies both speak to caregiver burnout, meaning that the
length of time a child has been providing informal care may reduce the supply of future
informal care.
Because children of the oldest-old are often old themselves, the adult child’s health
status may affect the supply of informal care (Wolinsky, 1986). However, Sloan and
colleagues (1997) and Boaz (1996) found a child’s health status to have an insignificant
effect on the amount of informal care provided. Even in perfect physical health, informal
care can cause emotional or mental stress to the caregiver (Cantor, 1983; Stone and Short,
1990). So even if child’s health and child stress indicators were available, reverse causation
mainly worried about obtaining sufficient help for their parent, and complained of emotional
strain (Cantor, 1983). Hence, the availability of other caregivers may be an important
indicator of whether or not a child will provide informal care. It also may determine the
amount of informal care provided. The number of siblings, and female siblings in particular,
may be an important determinant o f time spent in informal care activities. One study found
that having sisters, holding constant the care efforts of siblings reduces a child’s supply of
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parent-care hours (Wolf et al., 1997). Another study found that the number of caregivers is
inversely related to depression of the caregiver, so children who have other caregivers to
provide relief may be more willing to provide care (Pillemer and Suitor, 1996).
Related to stress is the severity of a parent’s health care needs. If the parent needs
highly specialized care, children may not supply care because they are not qualified to do so.
This is discussed in more detail in the conceptual model (Chapter 2). Interestingly, in a study
of the elderly with senile dementia, it was the availability of social supports, not the
behavioral problems caused by dementia and the ability to manage them that contributed to
It is clear that children are motivated to provide care for their parents for many non-
financial reasons. However, they also may be motivated by financial factors besides those
surrounding the work decision already discussed. The income of the child or the parent may
affect the supply of informal care. Several researchers have studied whether children are
motivated to provide care by expected inheritances (Pauly, 1990; Borsch-Supan et al., 1992a;
Sloan et al., 1996; Sloan et al., 1997; Cox and Rank, 1992; McGany and Schoeni. 1995).
Most found other factors to be much more important than bequests in determining the
provision of care. In particular, Sloan and colleagues tested an informal care model of
altruism versus a model o f strategic bequests (1997). In their work the model of strategic
behavior hypothesizes that children of wealthier parents will supply more informal care than
children of the non-wealthy in order to protect their inheritance. They find little evidence of
strategic bequest behavior, but find that a parent’s number of ADL’s and agitation level (as
measured by a binary variable “parent yells when upset”), as well as a child’s wage, a child’s
gender, and a child’s marital status are all significant predictors of informal care (ibid, 1997).
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In tests of altruism versus exchange, the results are mixed. Here it is the parents
behavior that determines altruism versus exchange. An altruistic parent will give those
children money who are less well off, regardless of care behavior. The exchange model
posits that the parent will give more money to those children who care for them, regardless of
how well off they are relative to other children. While Cox and Rank (1992) found that
children who provide informal care receive more financial transfers than their siblings
regardless of income level, McGarry and Schoeni found that financial transfers are directed to
less well-off siblings, and are not provided in exchange for caregiving (1995). Regardless of
the motivation, it appears that there is some evidence that the income of the child or her
parent can influence the decision about informal caregiving or the amount of informal
caregiving.
Related to income but exhibiting a separate effect on the supply of caregiving is the
child’s education level, which may be a proxy for knowledge o f services available to the
parent (Bass and Noelker, 1987). If a child is highly educated, she may be better at finding
formal care services for a parent and use these as a substitute for her own care.
Geographical proximity to a parent can increase the supply of informal care. For
example, children living more than an hour away from their parents had a lower probability
of providing significant help (Lakdawalla and Philipson, 1999). Stem also finds that distance
to a parent reduces informal care supply, but concludes that distance is endogenous to
predicting informal care, and ultimately does not recommend including it as a control without
instrumentation (1995).
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Finally, race may be an important determinant of informal care supply. Hanson and
colleagues (1983) find that whites and blacks view their responsibility for caring for their
parents differendy, however, this finding could be due to urban and rural differences as well.
How does receipt of informal care affect elderly formal care use?
Despite the myriad factors shown to affect informal care demand and supply, there is
The lack of information is due to a lack of data, but fortunately the arrival of AHEAD makes
I expect that informal care and formal care are similar in how they influence
subsequent formal care use. I also expect that formal care will differ between home health
care, nursing home care, inpatient care, and other types of care. In this section I review the
few studies of informal care and utilization, then briefly discuss, in the absence of informal
care's effect on utilization, how other researchers have found home health care and other
Health care utilization research on older adults shows that as persons age. physician
and hospital contacts increase, with a particular inverse J-curve shape (Wolinsky et al.. 1987),
This means that care increases until a person reaches about age 80, and then tapers off. We
know that this is the pattern for formal care, but we do not know how informal care affects
this pattern specifically. A preferred explanation of this pattern by Wolinsky and colleagues
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is that a substitution from family to physician services occurs as a person approaches age 80,
due to a reduction in the supply of informal care over time. After age 80, as a cohort hospital
use and physician visits may taper off due to mortality (Wolinsky et al., 1987).
This same study also finds that living with others delays utilization as people age.
Clearly, living with someone may be closely associated with informal caregiving, but this
study does not directly consider the effect of informal care on utilization, nor does it establish
causality between living with someone and utilization. The authors themselves point out that
their explanation is based on anecdotal reports, and needs further research (Wolinsky et al..
1987).
The Wolinsky article illustrates that elderly may substitute more costly hospital
services for ambulatory-based services, as the number of social supports fall. So lack of
informal caregiving may cause a substitution effect between one type of formal care and
another. In addition, Soldo found that only ten percent of the functionally disabled elderly
with an informal support network used formal services, compared to 80 percent without an
informal network (Soldo, 1985). However, Soldo’s study also does not establish a causal
relationship between informal care and utilization. Nevertheless, both of these findings
suggest that a close relationship exists between formal health care use and informal care.
In a review of studies assessing institutional care for the elderly, Wingard and
colleagues report that the “evidence predominantly supported the belief that availability of
caregivers is associated with a lower risk of nursing home admissions" (1987). However,
most of the studies they examine are univariate analyses. In addition, Garber (1989) finds
that “living arrangements and family supports appear to have large impacts on long-term care
utilization.” In particular, disabled individuals who live with a spouse or other family
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member consume fewer formal services and are much less likely to enter a nursing home. He
uses a Tobit model and multi-variate analysis, but measures living status rather than informal
The next study of informal care is one of the few multivariate analyses in elderly
health care utilization and informal care. Bass and Noelker (1987) tested whether
characteristics of the primary and secondary family caregivers influenced the elderly’s use of
in-home nursing and aide services. This study aimed to better incorporate informal supports
into the Andersen model o f health care utilization (Bass and Noelker, 1987). On average,
this study found that people who received informal care used nearly seven hours of formal
care per week. This is an excellent conceptual article on the enabling and need factors
associated with informal care, and their effects on health care utilization of elderly.
However, several criticisms of this study remain. There is no control group to compare the
results to, the sample was not nationally representative, the authors do not control for the
endogeneity of informal care, they only examine elderly who reside with a caregiver, and they
treat spouse and offspring caregivers the same, despite fundamental differences between
for the endogeneity o f informal care, and analyzing a nationally representative sample of
Looking at formal care use can help describe how informal care affects future formal
care use, since both can occur in response to a need for a particular type o f medical care.
Obviously, by definition formal care affects health care utilization, because they are one in
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the same. However, how a past formal care experience affects future formal care use
depends primarily on a person’s health status, whether the medical care was effective,
whether the person recovered, or whether she had complications. Rabiner (1994) describes it
well by saying that background factors, prior formal care, intensity of prior care, and life
satisfaction all affect subsequent formal care utilization. These background factors include
age, gender, hours of informal support, homeowner status, race, marital status, cognitive
status, incontinence, ADL limitations, patient satisfaction, proxy status, and Medicaid
eligibility (Rabiner et al., 1994). I already mentioned some of these factors, but the notions
that quality of informal care and life satisfaction (perhaps determined by satisfaction with the
caregiving situation?) can determine subsequent formal care use are important and have
Turning to home health care and nursing home care, the most well-known formal care
intervention for the elderly was the Channeling intervention already mentioned. The
substitution of case management and other in-home services for nursing home care. The
however, it was much smaller than expected. Rabiner and colleagues found that this small
effect was due to the direct reductions in nursing home utilization due to case management
and other aspects o f Channeling being substantially offset by the indirect increases in nursing
home utilization associated with additional home care use (1994). Further, while not relevant
to the Channeling intervention, Rabiner and colleagues point out that discerning the effect of
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not precisely defined in the literature. Nevertheless, they report that most studies from 1968
to 1988 found that home and community care generally reduced nursing home care but that
reductions were small (Rabiner et al., 1994). Parallels to informal care can be drawn from
this, especially the possibility that informal caregivers might identify problems and hence
Weissert summarizes the other major studies from the Channeling intervention (27 of
them). He states that they all come to remarkably similar conclusions: home care is not a
cost-saving substitute for nursing home care because few patients are at risk of
institutionalization; reductions in institutionalization are small; home care costs exceed the
small reductions in institutional costs; and patient outcome benefits are extremely limited,
and sometimes even negative (Weissert, 1988). He also points out that physical and mental
functioning in the elderly is difficult to maintain or bring back, but that contentment, on the
other hand, may be improved (Weissert, 1988). There is still debate about whether informal
Pezzin, Kemper, and Reschovsky (1996) explore the Channeling experiment as well,
but are interested in controlling for the endogeneity of living arrangements. They find that
the Channeling intervention had no significant impact on the hours of formal care, aside from
a small impact seen through changes in living arrangements. This is consistent with
Christianson’s (1988) finding discussed earlier. What Channeling did instead was to increase
the probability o f living independently for unmarried persons in particular, a significant result
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Many other studies in the literature echo the same findings. For other studies on
formal care factors driving elderly formal care demand, see Wolinsky (1994), Kemper
How does informal care affect the net cost of formal care?
Determining potential costs savings to the private and public sector from informal
care is an important motivating factor of this research, although due to data limitations I am
only able to assess this by examining changes in formal care use. To ascertain costs, one
must recognize that informal caregiving may be able to reduce use and hence expenditures on
some types of care but not on others. For example, because home health and informal
caregiving can be close substitutes for each other, home health care (HHC) costs may go
down with the presence of informal care. However, there are many tiers of home health care
that informal caregivers may not be able to replace, such as physical therapy, occupational
therapy, or RN services. The types of home health care more easily replaced by informal care
are custodial tasks such as assisting a person with bathing, with other ADL’s, or with
IADL’s. Formal home care is heterogeneous, so informal care may not be able to replace the
higher skilled home health care tasks despite an increased reliance on caregivers to perform
complex medical care (Fisher, 1998). This is important to keep in mind as home health care
tends to be lumped into one category of care for data reasons, yet home health care includes
Lending credence to this is a finding by Pezzin and Schone that children provide
IADL help while formal care providers provide ADL help (1999b). Further, Christianson
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found that the most common types of care from children were with housekeeping and money
management. The notion that substitution occurs for some types of care but not others is not
new. Ettner finds that Medicaid home health care subsidies replace informal care with home
health care for non-medical services but do not increase the total quantity of care received.
In addition, informal care may have no effect on reducing acute hospital care.
Clearly, having a child caregiver may reduce a parent’s risk of falling and breaking a hip, but
for chronic conditions or other acute illnesses common in old age, such as pneumonia, stroke,
and heart conditions, a child caregiver may have no influence on decreasing hospital care.
Further, an informal caregiver may be able to delay her disabled parent’s entry into a nursing
home to some degree. However, beyond a certain point in the parent’s need for care, such as
becoming bed ridden or having advanced Alzheimer’s, a single caregiver may not be able to
provide sufficient care and hence may not be able to delay nursing home entry. Of a similar
vein, once in a nursing home an adult child may have no influence of the duration of the stay.
In fact, in both of these examples the presence of a caregiver may increase rather than
decrease demand for formal care and hence costs—the close monitoring of a parent may
hasten contact with a hospital in response to an acute illness or injury, or hasten a nursing
home entry due to any deterioration in the health status of a parent. Or, a parent may increase
doctor visits due to a child being available to transport them to and from the doctor. In
addition, a child caregiver may be more cognizant of social services available to an ailing
parent, such as adult day care or respite care, and complement informal care with these
services. This too could increase public expenditures on elderly health care, although it is
difficult to determine whether adult day care might also produce a counter effect such as
reducing depression in a parent and hence alleviating the need for other formal care use.
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Recognizing the complexity behind any “cost-savings” calculations from informal care is
vital. Ultimately, while some health care costs may go down due to informal care, in other
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CHAPTER TWO:
Overview of chapter
The basic factors driving demand for elderly medical care are the same as those
driving demand for care for the general population: mental and physical health status, ability
to pay, and access to care. Health status in particular is an important predictor of an elderly
person’s independence, and in turn, of the need for home health care, nursing home care, and
to a lesser extent, acute care. In addition, the use of informal care may be an important
determinant of elderly medical care demand due to its characteristic as both a substitute and a
In this chapter I review classic work by Grossman (1972) on demand for health, and
incorporate informal caregiving into his model in order to express a theoretical model of
health care utilization for the elderly that is based on utility maximization. Next I review a
model by Nocera and Zweifel (1996) of informal care, and design a model of utility
maximization for adult children who may or may not choose to provide informal care to their
elderly parent. Finally, I describe how these two models are jointly determined and I
conclude the chapter with hypotheses that stem from the conceptual framework.
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Review of the Grossman model
Much work has been done to develop demand models for medical care, ranging from
Grossman’s classic 1972 article which identifies demand for the commodity “good health"
and allows a means to find derived demand for medical care (Grossman, 1972), to Manning
and colleagues classic study of the RAND health insurance experiment, where insurance is
exogenous (Maiming et al., 1987). In addition, researchers have developed demand models
that explicitly account for the endogenous nature of health insurance (Cameron and Triveldi
(1988), Gilleskie and Mroz, (1997), and others). None of this research incorporates informal
care.
An adaptation of Grossman’s model of health demand is most relevant for health care
use by older adults. Such a model needs to reflect differences in the elasticity of demand
between different types of care, allow informal care to enter as either a substitute or a
complement to formal care, and accommodate the unique nature of elderly health insurance.
The presence of universal public insurance for people over 65 in the U.S., Medicare, changes
In Grossman’s seminal work, he develops a demand model for “good health" rather
than for medical care, as he views the consumption of medical care to be a means towards
achieving good health, not an end in and of itself (1972). Grossman’s basic model assumes
person’s consumption o f health services and another good. Utility can be expressed as:
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where the subscripted index 1,.., T corresponds to the years of a person’s life, and subscript T
is age at death. A novelty of this model is that length of life is determined by a person’s
health services is expressed as h, = </>H„ where tf>represents the service flow per unit stock.
Ho is the initial health stock, and Hr is the health stock at death. A person’s health stock
depreciates over time at an exogenous rate, and once H falls below a certain level, what
Grossman calls Hmm, death occurs. However, one’s health stock can be increased by various
investments in health, staving off the arrival of Hmm. All other goods that enter the utility
function are expressed as the composite good, Z, which I describe in the next paragraph.
A person maximizes this utility function subject to four constraints. First, the
production function for health investment is a function of two inputs, medical care and time,
given a person’s stock of human capital. This can be expressed as the function
(2.2)
where M, is the medical care input, TH, is the time input, and E, is the stock of human capital.
Second, the production of the other good, Z„ is a function of a consumption good input and a
time input, given one’s stock o f human capital. The general form is
X„ time, THt, and the stock of human capital at time t, Et. The term Zo in equation 2.1 reflects
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goods that a person has inherited at birth. X, and Z, differ in that X, represents market goods
while Z, represents how market goods are transformed into a good that depends on time use
minus depreciation. The last constraint is a goods budget constraint that stipulates that the
present value of outlays on goods is equal to the present value of earnings income over the
From the constraints we see that Grossman treats health as a production good.
However, he points out that there is a pure consumption aspect to health as well as a
production aspect—possessing health makes people feel better, which improves their utility.
He also sees a pure investment aspect to health, as investing in health in early years may
increase the number of days an elderly person is able to garden, take walks, or otherwise
enjoy his or her retirement in good health. For working individuals, investing in health
increases the number of days a person can work, which leads to increases in utility. But even
non-workers, like the retired elderly, have an incentive to invest in health because health
Modifying Grossman’s framework, it is clear that for the elderly current investment in
health differs greatly from past investment decisions. First o f all, the kinds of decisions that
elderly make are different from those made when they were young. For example, instead of
deciding whether to start smoking or to get a college education, which they did when they
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were young, the elderly are deciding whether to stop smoking, to begin exercising, or to get a
flu shot. In addition, at age 65, a person’s past health behavior and past investment in health,
as well as his or her genetic makeup have already molded one’s health stock. These past
decisions are exogenous when maximizing current utility and future expected utility. For
example, it is well established that both income and education are positively correlated with
health (Rogot, Sorlie and Johnson, 1992, McGinnis and Foege, 1993, Pritchett and Summers,
1993, Ettner, 1996). However, at age 65, most all formal education decisions are sunk in
terms of their ability to improve a person’s future health, and are a part of a person’s stock of
human capital.
retirement and soon will be living on a fixed income either through private savings or
through Social Security income. Clearly, while income is important in predicting health over
one’s lifetime, income typically will not fluctuate a great deal for the elderly. Nor will
income be a major barrier to obtaining medical care, because nearly all of the elderly have
health insurance through Medicare. In addition, 85 percent o f the elderly have Medigap or
Medicaid, which reduces or eliminates copayments and deductibles. These safety nets mean
income for the elderly than for those adults under age 65. For these two reasons, the stability
of income and the presence o f insurance, the wealth constraint is not as binding as the health
investment production function (I,) and other goods (Z,) constraint for the elderly. It is still
important, due to the lack o f Medicare providers in some areas, the lack of good prescription
coverage, the need to spend down wealth to cover long-term care, and the differences in
premiums, co-payments and deductibles that go along with insurance and their differential
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effects on different income groups. However, the universal coverage of Medicare serves as
Past investments in health have large effects on current health of the elderly, for
example long term smokers and drinkers may have particular health problems while long
term exercisers and healthy eaters may have particular health protections. However, past
investments in health are sunk, so I am more concerned with seeing how recent investment in
health drives marginal changes in an elderly person’s health stock. Of all of the current
period inputs into an elderly person’s current health investment production function, medical
care, M , has the potential to produce large marginal changes in a person’s health in the event
of a health shock, because it is usually expensive investments in health that have the highest
marginal productivity for elderly health. For example, major acute episodes such as a fall,
stroke or a heart attack, which are common for the elderly, require large and immediate
investments in health to recover one's health status. Diet or a change in exercise regime can
do very little in this case. Another example is expensive prescription drugs that help control
O f course, exceptions to this are that things like daily aspirin doses and flu shots can
be effective and cheap preventive medicine, so the marginal benefit is high at very low cost.
Another important exception to this is the practice of flat of the curve medicine, where large
medical care purchases translate to small gains in health. A relevant example for the elderly
are large medical expenditures in the last months of life, when much medical care is
purchased but a person’s health stock has little to no chance of staying above Hmm.
Nevertheless, the mere aggregate cost of M, justifies focusing on it over other inputs into the
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An elderly person’s choice of M, following an acute illness episode or injury is vital
in predicting recovery and future use of medical care. This choice could include the type of
care sought or the perceived quality of care of a given provider. Sometimes there is little
choice as to the type o f care because a person may need to be treated in a hospital initially.
During the episode of illness following a health shock, however, there are many decision
points. In particular, there will be different rates of return on the health investment based on
whether the person chooses acute care, doctor care, nursing home care, or is able to receive
informal care. Each will have different effects on health. The adjustment in inputs a person
makes in the health investment constraint may or may not prevent their health stock from
Of course, even small investment in health, such as preventive care can have high
returns for the health investment constraint and health of the elderly. For example, annual flu
shots may prevent rapid declines in health for persons with weak immune systems. Likewise,
blood pressure monitoring may be important in preventing stroke in elderly patients. These
are important medical inputs as well, and can also reduce the rate of depreciation of a
person’s health stock. So in addition to a focus on home health care, nursing home care,
hospital care, and outpatient surgery in this project, I also examine doctor’s visits, although I
can not determine whether the doctor’s visit is for preventive care or in response to a specific
problem. A priori, I do not expect to find much of a relationship between informal care and
The focus on medical care and informal care is not to belittle the impact of current
time use decisions, THh and consumption o f other goods, X (, on health. To a lesser extent
these are also important components o f the health investment constraint, and important
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determinants of elderly health. For example, choosing to continue working may cause older
individuals to remain healthier longer or to increase feelings of self-worth and hence mental
health. In addition, social supports can be important for elderly mental health, so time spent
with others may have large effects on health, as may choosing to exercise. The same is true
for consumption behavior changes (.Xt) which affects the other good constraint (Z,).
Changing one’s diet or stopping smoking can all have positive effects on health. Similarly,
lifestyle changes, such as remarrying after being widowed, moving to a warmer climate, or
moving closer to children may also have strong effects on health, as may environmental
factors such as pollution exposure, or the safety of one’s home. I control for many of these
important behavioral decisions in the empirical work, despite a focus on medical care use
To recap, the focus on informal care {A,) emerges because informal care is the most
common type of long-term care for the elderly and its effect on utilization has not yet been
studied. Meanwhile, the focus on formal medical care (M,) emerges because of the large
marginal effect that medical care can have on the health of elderly individuals, and because of
the sheer magnitude o f the cost o f medical care for the elderly.
(2.4)
where t is the age o f the person when I first observe them, and T is the age at death. The four
constraints for the elderly are the same as those described in the previous section, with the
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exception of the health investment production function (2.2). For this constraint, I need to
incorporate informal care, which is exogenous to a parent’s decision making process. This
can be written as
(2.5)
where M, is medical care, T, is the time allocation to health investments, E, is the stock of
human capital, and A, is total hours a parent receives informal care from a child. The
structure of M, must account for the different elasticities of demand for different types of
medical care and the near universal health insurance coverage of the elderly. This can be
accommodated by
M, = M f a ? , M ? , M f , Mf p, M f i B ) (2.6)
where A/,** is home health care, M ? is nursing home care, M f is hospital care, Mfp is
outpatient surgery, and M f is doctor care. The disaggregation of medical care by type
allows for different rates o f return on different types of medical care investments. B in this
equation is insurance status. For the general population, purchases of M, are constrained by
the wealth constraint as well as the presence of insurance. And people choose insurance
variable. However, near universal insurance coverage for those age 65 and over allows an
important simplification to be made for an elderly demand model. Insurance can be treated
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as an exogenous variable in the elderly utility maximization problem, because insurance
decisions are less tied to expected use o f medical services than in the general population. This
Nevertheless, when looking at particular populations of the elderly, such as female elderly,
for cultural reasons associated with this cohort decisions about health insurance may have
been made for them long ago by a husband, hence, insurance decisions may be linked to a
husband’s expected need for care rather than her own. This may help dilute problems with
endogeneity in the cases of Medigap and prescription coverage since so many of my sample
I mentioned already that the five types of medical care in M, will have unique
marginal effects on elderly health and elderly utility. It is also important to consider that
utilization. Each choice at each point in time may produce different levels of health. For
example, for a fall resulting in serious injury, a person decides either to see a doctor, go to the
emergency room or seek ambulatory care. Time elapsed until treatment is also important.
Once the patient is in a recovery phase, the patient decides whether to continue rehabilitation
in a nursing home, through home health care visits from a physical therapist, or using
informal family-provided care. Even if it is someone besides the elderly patient making
decisions, such as a doctor, an insurer, or a family member, I assume that they are agents
acting in the patient’s best interest. After the rehabilitation phase the elderly patient may then
need to decide whether to continue a lighter schedule o f home health care, or rely on
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In this example, informal care (A,) may complement the entire episode of care, from
the hospital to the parent’s home. Once the patient returns home, home health care providers
may care for the patient for some hours of the day, while an adult child may care for the
patient for the remainder. On the other hand, the child may only provide care at the end of
It is clear from this example that informal care and formal care can be substituted for
each other over time, so the informal care input is also expected to have a large marginal
effect on health for the elderly. Given a fixed number of inputs and given the amount of
informal care a child is going to provide, an elderly person may adjust the amount of input M,
he or she uses (see equation 2.5), in allocating inputs to health investments. The interplay
between formal care and informal care is of particular importance in this project, but it may
be difficult to capture because I do not have timing o f formal and informal care. For
example, if an elderly person uses more informal care, I want to examine whether formal care
subsequently increases, meaning that informal care is a net complement to formal care, or
could cause utilization both to increase and to decrease over the episode of the parent’s
The general utility framework allows me to examine how the interactions between
different types of formal care and informal care produce elderly health. The interactions of
these inputs enter the utility maximization process explicitly through the health investment
constraint (equation 2.5). More importantly, this framework allows empirical testing. A
priori, I expect that the use of informal care will lead to declines in home health care and
nursing home care, but to negligible or small increases in hospital care, due to the acute
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nature o f hospital care. Home health care and informal care can be considered close
substitutes, which means one may fall if the other is provided controlling for changes in
health. For nursing home care, a child’s caregiving efforts can delay the need for a parent to
enter a nursing home, unless the limitations in functional status are too serious for a child to
manage alone. For acute care, if a child is caring for a parent, he or she may detect problems
that the parent is experiencing before they might otherwise be detected, so informal care may
actually increase the use of acute care. On the other hand, a child providing care may
decrease the risk of a parent experiencing a serious fall, which would decrease acute or
physician care. In general, however, preventing acute care through informal care may not be
possible due to a parent’s chronic conditions and the biological aging process. As a result I
expect the effect o f informal care on acute care to be ambiguous, as well as the effect on
outpatient surgery.
Just as the parent makes decisions about health care utilization, there is an important
decision facing the adult child if an elderly parent experiences any loss of independence and
needs assistance—whether to provide informal care or not. This process may occur either
before a parent’s formal care episode or in the absence of a formal care episode, due to a
parent’s gradual decline in functional status or other problems, or following a formal care
episode, such as a recovery from a fall, as was described in the example given.
A household production framework is the best way to illustrate the child’s decision
making process. Theoretical models o f supply of informal care involve tradeoffs between
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work, leisure, and the supply of informal care (Chang and White-Means, 1995; Nocera and
Zweifel, 1996; Sloan et al., 1997). The following model was developed based on work by
Nocera and Zweifel (1996), Stem (1995), Becker (1974), and Gronau (1986). For simplicity,
I assume that there is only one child per parent. I also assume that the parent ic single, so that
the child is the most logical care provider for the parent rather than a partner or spouse. A
child will maximize her utility by optimizing her consumption, leisure, and informal care
decisions, as well as considering the health status of the parent. This can be expressed in the
(2.7)
where / indexes the time period, X, is a numeraire of consumption goods, which can be
broken down into the consumption of formal care and all other goods; L, is time spent in
leisure activity; A, is time spent providing informal care; and h' is the health of the parent.
Like Nocera and Zweifel (1996), I assume that the caregiver’s utility depends on
consumption, leisure (labor is all time not spent in pursuit of leisure), and informal care.
Intangible factors such as guilt or cultural beliefs about a child’s responsibility for a parent
are not observed in the theoretical model or empirically, but they can certainly affect utility
by the way they affect all three o f these factors. For example, a child who decides to provide
no informal care initially may feel very guilty when using her leisure time, hence might
experience a drop in utility. The next period she may decide to provide or arrange for care.
Nocera and Zweifel (1996) point out that because informal caregivers are usually not
paid, a child caregiver must derive more utility from caregiving over the alternatives to
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caregiving (arranging formal care or no care), or she would provide no care. If a child
derives more utility from leisure than from caregiving but still feels she should help her
parent, she may optimize utility by choosing to pay for formal care and give up some of her
own consumption.
The optimization process is subject to two constraints, an income constraint and the
parent’s health production function. The income constraint, a function of time spent in labor
Here, T, is the total time endowment available per period, for example 7=24 if the
period. In addition, wt is the wage rate, and C, can be thought of as lump sum compensation
for caregiving. Few children caregivers are actually compensated for care through wages, so
another interpretation of C, could be that it includes future expected income coming from
parental bequests or indirect transfers from the parent. Alternatively, C, could include any
other non-wage income earned by the child. This constraint also can be expressed as
(2.8b)
which assumes that there is no savings. A child depletes all of her income, Yh by the end of
each period through the purchase of different types of market goods. Consumption goods are
disaggregated into X/c, which is any purchases o f formal care that the child may make for the
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parent and X og is purchases of all other consumption goods. P/c is the price o f formal care
The second constraint is the parent’s optimal health production constraint, which
emerges from the parent’s utility maximization process, and is a function of all of the health
investment decisions that an elderly parent makes. The optimal health production constraint
can be expressed as
(2.9)
where Z* is the optimal other good a parent consumes and /,’ is the optimal level of health
investment a parent makes. Arriving at the optimal levels of health investment and other
good consumption depends on market goods consumption, time use decisions, and medical
care consumption, as well as exogenous factors such as human capital and the optimal
amount of informal care available. The child takes h' as given (see equation 2.7).
framework through h ’ , based on an important notion pointed out by Becker (1992). Becker
points out that if a child operates partly from altruism, she will incorporate the parent’s health
status into her own utility function. Other researchers have not allowed the child to
incorporate the parent’s utility into his or her utility function (e.g. Sloan et al.. 1997). In the
utility framework, a parent’s health status enters the child’s utility function through the health
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Joint determination of informal care and utilization
The theoretical models of utilization and informal care are helpful in illustrating how
the two decisions by two different generations interact. The parent chooses her optimal level
of medical care use based in part on how much informal care her child will provide (see 2.5).
Likewise, the child maximizes utility and decides how much informal care to provide based
on the parent’s health production function h’ which is a function of medical care use (see
2.6). From this it is clear that the parent’s utilization decision and the child’s caregiving
decision are jointly determined. The decisions of one affect the other, so they are in no way
independent.
In other words, a child's informal care decision depends on whether her elderly parent
can receive home health care, or if there is an affordable nursing home nearby. Alternatively,
a parent may not invest in home health care if the child is willing to care for her. Therefore. 1
cannot consider informal care to be exogenous in predicting health care utilization of the
parent. Just as informal care may cause utilization to increase, so might utilization cause
In terms of the conceptual framework, a child will optimize her utility function and
decide on an optimal level o f informal care A '. Using that information, a parent will decide
on utilization, (A/*), once he or she knows how much informal care is available. But this
optimal level of informal care depends also on how much utilization, or M, a parent will
consume, so will adjust over time. This interdependence means that I must control for the
endogeneity of informal care in the empirical work, in order to get unbiased estimates of
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informal care's effect on formal medical care. I will carefully account for this in the
empirical model.
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Hypotheses
Testable hypotheses:
H2: The effect of informal care on health care utilization will vary by type
o f utilization. Informal care will cause a net drop in home health care
and nursing home use, but will have little or no affect on hospital use
due to its acute nature. It is not clear what effect informal care will
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CHAPTER THREE
METHODS
Overview of chapter
those who receive informal care from their children, while the control group is those who do
not. I test the null hypothesis that informal care has no effect on health care utilization. I
measure five types of health care utilization: home health care, nursing home care, acute
hospital care, outpatient surgery, and doctor’s visits. I expect the effect of informal care on
utilization to differ across types o f care. Because of the large percentage of the sample
expected not to have any utilization, I estimate two-part utilization models. Because informal
In this section I describe the empirical models of elderly health care utilization and
informal caregiving. I suggest three approaches to deal with the endogeneity of informal
care: use of lagged informal care, two-step instrumental variable estimation, and discrete
factor analysis. Then I describe the numerous specification tests employed to check
robustness of the model specification and the conclusions drawn from these tests. I end the
estimation.
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Two-part models of utilization
Because health care utilization is zero for many individuals, I use two-part models
with controls for selection, as has been developed in the health economics literature (Duan et
al., 1984; Jones, 2000). The first part is a probit or logit model that predicts the probability of
having any formal care. The second part uses ordinary least squares (OLS) to predict the
continuous amount of care, conditional on having any care. The dependent variable in the
outcomes from being negative. Further, the two-part model assumes that decisions are made
sequentially. In this case, an elderly parent first decides whether or not to use care, and then
decides how much care to use. It is important for two-part models to include all relevant
controls in order to minimize omitted variable bias. This ensures that the assumption about
Because the same explanatory variables are included in both parts of the model, any
omitted variables that belong in both parts will be correlated with explanatory variables in
both parts. If this is the case, the error terms are correlated across equations and decisions are
omitted variable bias still may persist, I also use discrete factor analysis which allows us to
relax the assumption of sequential decision making across the two parts by explicitly
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The unit o f analysis is the elderly parent. In the model, however, there are both parent
characteristics and child-level informal care characteristics, as both are hypothesized to affect
the types of utilization in question. Following the notation from the theoretical framework,
formal medical care is a function of informal care, A , , health, H t , demographic and income
The dependent variable, M IJt, is formal medical care use, either any home health care,
any nursing home care, nights in a nursing home, any hospital care, any outpatient surgery,
any doctor’s visits or number of doctor's visits. The / index represents an individual, and is
either i=l,...,2985 for the Wave 1 sample, or z-l,...2444 for the Wave 2 sample, depending
on the value o f w. The index t shows whether the equation is estimated for the Wave 1 or
Wave 2 sample, and ranges from i= 1,2. The index j represents the eight continuous and
discrete types of formal care, so ranges from j = l . . . 8 . The model is estimated using a logit
continuous measures o f utilization because the distribution is skewed. Finally, the index /
shows whether the dependent variable is medical care utilization in Wave 1 or Wave 2.
to be endogenous, hence I will need to control for the endogeneity of informal caregiving.
Informal care is only measured in the first wave, hence the t subscript is constant at f=l.
Informal caregiving is defined two different ways: whether any child provided care, and as
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total number of ADL’s and IADL’s (also referred to as I/ADL’s) a parent receives help with
Measures of the parent's health from Wave 1, HlX, include controls for both recent
and past health indicators. I control for self-assessed health status and self-assessed eyesight,
chronic conditions such as diabetes, arthritis, poor eyesight, incontinence and hypertension,
diseases such as cancer and lung disease, acute episodes such as falls, hip fractures, stroke,
angina and heart attacks, and health behavior, such as smoking and drinking too much
alcohol.
Many of these health status measures ask the respondent to look back over the past 5
years or look back over a lifetime. However, including current health status could introduce
endogeneity bias if it is correlated with past health status or some other unobserved
characteristic that is a part o f the error term. I am not interested in the parameter estimates on
health status per se, but it would be of concern if informal care is also correlated with health
status and hence with these unobservable characteristics. I check this by examining the
correlation between informal care and the most recent health status measures, and the
correlation between predicted informal care and the health status measures. I also run the
models with and without the most recent health status indicators and compare the results.
In addition I control for the usual demographic controls such as age, gender, rural
residence, race and ethnicity, as well as some socio-economic variables such as household
income, net worth, whether the respondent works or not, education, and importance of
religion, all values from the first time period. These are closely related to consumption, and
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I also control for insurance status (Medicaid, other private insurance, and long-term
care). Much work on demand for health care services has established that insurance status is
endogenous in models o f health care utilization (e.g. Arrow, 1963; Pauly 1983, 1988;
Manning et al., 1987; Gilleskie and Mroz, 1998; Cameron et al., 1988). Despite this, I
assume that insurance is exogenous. Most elderly make decisions about Medigap about the
time they turn 65, and at this time they are usually healthy. Considering the youngest
respondent in my sample is 70, there is a long lag time between choosing Medigap or
prescription coverage options, and needing care. Uncertainty surrounding future need and the
lag time between purchase and use help to break the path of endogeneity. Decisions about
long-term care insurance are also typically made long before the age of 70, when premiums
are lower. Finally, my sample is primarily women (80 percent), and for women of this cohort
it is very likely that husbands made the insurance decision for the family, which further
breaks the endogeneity path between insurance and individual health care use.
Regarding Medicaid, it is true that utilization can affect Medicaid status due to spend-
down to Medicaid from nursing home use. Since the AHEAD sample originally interviewed
only the non-institutionalized, spend down should not be a problem in the first wave. Any
nursing home use had to be relatively short-term use since a person had to be living in a
Medicaid coverage to be exogenous as well. Even if a person entered a nursing home after
being interviewed in 1992-93, the spend-down to Medicaid typically takes more than 2 years.
Medicaid nursing home residents are more likely to be chronically poor individuals than
spend-down individuals based on the sample selection criteria in Wave 1 that people not be
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not the point estimates, in discerning the impact of informal care on utilization, so I will not
try to correct for the endogeneity of insurance, due to the lack o f instruments.
Besides informal care, one other child-level variable is included in the utilization
model. I include education of the informal caregiver to incorporate Bass and Noelker’s
(1987) notion o f a caregiver’s education serving as a proxy for “knowledge about services."
This variable and the insurance variables are represented by the C(, vector.
I also hoped to control for caregiver stress, as the sociology literature finds that
caregiver stress is likely to directly or indirectly influence the elderly’s use of community
services in order to relieve the caregiver from the burdens of caregiving (Hess and Soldo.
1985, Bass and Noelker, 1987). Unfortunately, because the information in my data set is
reported by the parent and not the adult child, there is no information about caregiver stress.
If available, this variable would have belonged in the utilization equation as well.
consider the chance for reverse causation, the particular kind o f endogeneity I am concerned
with, to come into play. Clearly, just as informal care will affect formal care use, so will
formal care affect informal care (for more detail on the latter case, see Pezzin and Schone,
1999b). For example, as I mentioned in Chapter One, if a parent breaks her hip, first she will
seek inpatient care, then perhaps home health care for rehabilitation, and then she may need
one of her adult children to help her complete certain tasks of daily living until she is fully
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recovered. There are also unobserved care preferences that could affect both formal and
For example, consider the simplified three period model (t = 0,1,2) below which
shows medical care in the second period, M ljX, as a function o f contemporaneous informal
care. A,,, health status in the previous period, Hl0, and time invariant preferences for care.
P,-
In reality, Hl0 and Pt are part of the error term but I include them explicitly here to
illustrate the two types o f endogeneity which may occur. Using contemporaneous informal
care means that there is a potential for both reverse causation and unobserved care
preferences to cause endogeneity bias. Any health shock from the previous period, which is
an omitted variable, may be correlated with informal care in the current period since informal
care occurs in response to a health need of the parent. This causes endogeneity bias since the
health shock is captured in the error term. Further, unobserved preferences, which are time
invariant, could also be correlated with informal care in the current period.
Using informal care from the first period to predict medical care use in the second
period can break one but not both sources of endogeneity as illustrated below:
Since Al0 precedes Htl there is no correlation between the two. However, there
could still be endogeneity from unobserved care preferences if lagged informal care, A,0, is
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Unobserved care preferences and reverse causation indicate that not controlling for
the endogeneity of informal caregiving would lead to biased and inconsistent parameter
estimates in any model that includes informal care to predict formal care utilization.
caregiving. One method I propose to correct for endogeneity is to use lagged caregiving to
predict utilization. As shown in the first simplified model above, this eliminates endogeneity
from Hl0 from the error term. A better way, however, is to estimate a model that predicts
whether or not an adult child will provide informal care for the parent, and then to use
simultaneous equations methods. This accounts for both Hl0 and Pt in the example above.
The informal care model consists o f parent and child-level characteristics. I central for both
child characteristics and parent characteristics in this model, as both are hypothesized to
predict the caregiving decision in distinct ways. The parent-level characteristics are the same
as in equation (3.1), the model of utilization. The identifying instruments proposed are child-
level characteristics, and are described below. The caregiving model is as follows:
(3.2)
The superscript index w indicates whether informal care is estimated using the Wave
1 sample or the Wave 2 sample. As in the medical care use equation (3.1), the i subscript
which sample is being used (indicated by vv=l or 2). Including a parent’s health status, Hlt.
follows directly from the conceptual model. I expect demographic and socio-economic
characteristics, Zn , as well as insurance and the child’s education, C(I, to affect an adult
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child’s decision to provide informal care. Besides a child’s level of education, I expect all of
the other child characteristics to affect the parent’s formal care utilization only through their
effect on the likelihood of providing informal care. These are represented by I , ,, and are as
follows: child’s gender, child’s marital status, number of siblings a child has, and number of
Other models have found that a child’s gender, marital status, and number of children
affect caregiving behavior. In addition, a control for step child status is included due to
recent work by Pezzin and Schone (1999c) which shows that marital disruption affects
informal caregiving, and that transfers from parents are different for biological versus step
children.
Number of siblings is added to proxy for caregiver stress and more likely to proxy for
the caregiving network, as this variable loosely measures whether there are other caregivers
available to give respite to the primary caregiver (Stone and Short, 1990; Ettner. 1995).
I measure the adult child’s income, and also measure financial and property transfers
between parent and adult child. This is to control for the possibility of a bequest motive
Missing from the model are two obvious controls mentioned in Chapter One, namely
work status and distance o f an adult child to an elderly parent. In a 1995 article, Stem
hypothesized and found that a daughter’s care decision may affect her work status and
distance characteristics, meaning that these two variables are endogenous. While I think
these are important determinants in predicting informal caregiving behavior, I do not have
good instruments on a child’s work status or distance from the parent so do not include them.
Related to distance to a parent, another variable that is missing is co-residence with a parent.
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While it is an important predictor o f caregiving, Pezzin, Kemper and Reschovsky (1999)
economics and sociology literature, are that I have better measures o f income for both the
adult child and the parent, as well as a good measure of net worth for the parent. In addition.
I control for the importance o f religion to the parent in predicting whether the child provides
care or not. I wanted to explore whether the importance of religion could uncover the child’s
value system for providing informal care. Variables on “values” are typically unobserved by
the econometrician. My expectation is that families who view religion to be a very important
part of their lives may have different preferences for providing informal care. Ideally I would
measure the importance of religion to the child but I do not have this information.
Besides the absence of a child’s work status, distance to a parent and co-residence
status, a child’s own health status, and direct measures of caregiver stress are all omitted from
equation 3.2. These and other unobserved characteristics that may affect informal care
become part of the error term and are not estimated separately.
In the analysis I first estimate informal care’s effect on utilization in a simple two-part
model, assuming all right hand side variables are exogenous. Then I explore three methods
to correct for the endogeneity o f informal care. The first method is to use caregiving in the
first wave to predict utilization in the second wave. The second method is standard to use
when there is a right hand side endogenous variable, two-step IV estimation (better known as
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two-stage least squares if both outcomes are continuous). The third method is to use discrete
factor analysis to account for endogeneity of informal care and health care utilization (Mroz
andGuilkey, 1995).
To treat informal care exogenously, I use estimation methods for the two-part
utilization models which stem from either logit or OLS estimation. They differ because of a
need to control for the stratified cluster sample of the survey data. For the discrete measure
of any care, I use the ‘'svylogit” command. Stata uses a weighted maximum likelihood
or pseudo-MLE. With this approach, the weighted “likelihood” is not the distribution
function for the sample, and the traditional likelihood ratio tests are not appropriate (Stata.
1999; Skinner, 1989). For the continuous outcome of quantity of care, I use the "svyreg”
command. Here, Stata uses weighted ordinary least squares to produce consistent standard
errors due to the clustering of the data. This is also known as generalized estimating
equations, or GEE. The more generic term that I use, one-step estimation, refers to both of
By using informal care in the first wave (1992-1993) to predict utilization in the
second wave (1994-1995), temporal endogeneity can be interrupted. The basic model in this
approach is: M,jZ =g] (i4M,Hn ,Z tl ,C,, , e (y2 ). By definition, informal care takes place
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before the formal care event. Similarly, I control for the stratified cluster sample of the
survey data using survey commands in Stata. While controlling for reverse causation, this
method does not correct for unobserved individual heterogeneity, which can be another
measurement error. This approach corrects for reverse causation and unobserved individual
heterogeneity, but does not account for omitted variable bias, which in a two-part model can
exists, then the decisions are simultaneous, and a Heckman selection model or some other
model would be more appropriate. I control for endogeneity from clustering using survey
This approach hinges on finding good instruments, that is, variables highly correlated
with informal care, but not correlated with the error term in the utilization model. Good
instruments are usually difficult to find in practice. However, in this research, excellent
instruments exist. All of the identifying instruments that I explore are the adult child-level
characteristics in equation 3.2. I surmise that child characteristics generally affect a child’s
decision about caregiving, and through that decision, a parent’s consumption of formal care.
I consider a child’s gender to be the strongest instrument, based on other findings in the
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A child will provide a positive number of caregiving activities if the value he or she
gets from this choice is greater than the value associated with other care choices. I explore a
discrete measure of informal care and a continuous measure. The following framework
Let y ’j, be the value that a child gets from providing informal care and y'^ be the
value of not providing informal care (modified based on Stem, 1995), where / is the child, j is
informal care and k is formal care or no care, and t is the time period. The value of
caregiving is unobserved, therefore, from the data I have only an indicator of which
alternative is chosen:
described in equation (3.2). The system for my two-part model of utilization with an
endogenous right hand side variable, is summarized as follows. The right hand side variables
First-stage:
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Obtaining correct standard errors. For the continuous portion of the two-part utilization
model, 3.1b, it is straight forward to use canned two-stage least squares estimation of
equations 3.1b and 3.2, and the standard errors will be correct. However, estimating the
discrete portion of the two-part model, which asks, “Did an elderly parent consume any
formal care?" requires an iterative process. First, I estimate the caregiving equation (3.2).
then estimate the predicted probability of providing any care for each observation.
prediction. Next I insert the predicted values for each elderly parent into the logit equation
(3.1a).
Using this mechanical approach, the estimated standard errors of the coefficients in
the logit model (3.1.a) are not correct. To be correct they would have to be adjusted for using
the predicted value o f caregiving in place of the actual value (Bollen, Guilkey, and Mroz,
(1983). However, evidence from Guilkey, Mroz and Taylor (1992) shows that “the
asymptotically correct standard errors are no more effective in large finite samples than the
conditional standard errors." Hence, I do not estimate the asymptotically correct standard
errors when estimating the discrete part of the two- part models. I do estimate correct
standard errors using linear probability models and compare the standard errors to those in
Using instrumental variables to correct for endogeneity generally does not impose any
structure on the error term. But because I am estimating a two-part model of utilization with
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a logit model as the first part, I assume that the error term has a logistic distribution. This
may be too restrictive, because the error term may follow some other distribution.
If this is the case, using two-step estimation will not be consistent Further, less
directed at my project since I have between 2,000 and 3,000 observations, there is a concern
emerging in the econometrics literature that instrumented variables do not have desirable
properties in small samples (Staiger and Stock (1997), Bound and colleagues (1995) and
Goldman (1995)).
approach that deals with endogeneity from reverse causation, from unobserved individual
heterogeneity, and from clustering (Angeles, Guilkey, and Mroz 1996). It does not place
strict assumptions on the error distribution, and may be more efficient in small samples. This
method allows for explicit estimation of the correlation between the error terms so is able to
model unobserved heterogeneity directly. Discrete factor analysis is also known as full-
variable that is asymptotically efficient both when the disturbances s , and e 2 are normally
distributed and when they follow a non-normal distribution (Mroz, 1997). (He also shows
that the approach can be applied to continuous endogenous variables as well). The appeal of
discrete factor methods is that one can guard against biases caused by imposing incorrect
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distributional assumptions on the error terms. This approach assumes that unobserved
1997) is:
£ , = tt, -I- V,
where
P k = Pr(v, = 7 l i n v ', = 7 7 , i )
Here, the dependence of the disturbances s t and s 2 is captured through the implicit
dependence o f the factors v, and v 2. If <x, and <x, approach zero and the number of points
of support, K, grows large, then it is the same as the bivariate kernel for arbitrarily dependent
bivariate random variables (Mroz, 1997). Unlike the multivariate kernel estimator, the
discrete factor approach does not set the number of points of support equal to the sample size.
Instead, researchers usually experiment to find the number of supports which cause the
Identification is achieved by setting one of the supports to zero, but if the errors are
normally distributed, there can be problems with identification when there are a large number
only affects the estimators of the components of the error distribution ( , e 2). In practice
researchers have successfully used three points of support (Mroz and Guilkey, 1995,
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Goldman, 1995). I use specification tests suggested by Mroz (1997) to determine the
A more important issue is that it is not clear how one should interpret the parameter
estimates obtained from discrete factor approximations (Mroz, 1997). The parameter
estimates converge to a particular value in large samples, but the convergence is based on the
and the underlying joint distribution of the disturbances. Through Monte Carlo experiments.
Mroz finds that approximation estimators through discrete factor analysis can be interpreted
in the conventional manner, and “can help researchers avoid false inferences due to the
imposition of incorrect joint distribution assumptions while providing relatively precise point
Mays (1999) points out that using discrete factor methods for a two-part model
controls for error correlation between the discrete and continuous parts of the utilization
process by including parameters for common unobserved characteristics at the individual and
cluster-level. This offers an advantage over two-step estimation, because of the high
likelihood of omitted variables in my model (caregiver stress is just one example of a missing
variable).
Dampening this advantage, however, is that under certain conditions Mroz (1999)
finds that two-step IV estimation performs nearly as well as discrete factor analysis. In
Monte Carlo simulations, Mroz performs exhaustive tests comparing OLS estimation,
maximum likelihood estimation (MLE), two-step estimation, and discrete factor estimation.
He assumes different sample sizes ranging between 1,000 and 5,000 observations. He
assumes 0.8 correlation between the first- and second-stage variables. He also assumes an
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adjusted-R2 of .2 for both stages. Further, he assumes a mean value of .5 or .75 for his
endogenous variable.
Mroz shows that two-step estimators work well if the concern is to obtain an unbiased
estimator, however, he illustrates that the point estimates from DFM can be more precise than
this and other methods, especially with smaller sample sizes. With weak instruments, the
discrete factor models easily outperform two-step estimators, but with strong instruments,
Further, compared to all other types o f estimation, Mroz finds that DFM estimation,
with a liberal criteria for adding points o f support (a=.25) performs remarkably well in terms
of mean squared error (MSE). He also shows that there is little bias from DFM when
disturbance terms are not normally distributed, and that DFM performs better than maximum
Specification tests
Before running DFM, I use the Stata two-step instrumental variable results to conduct
five different specification tests of the instruments. I test for the validity of the exclusion
restrictions, for endogeneity of informal care, the strength of the instruments, for sufficient
explanatory power in the first stage, and a less standard test of the instruments to examine
whether measurement error invalidates their use. These tests are performed on all five
After initial investigation of the child-level instruments listed in (3.2), I pare down the
list considerably. The initial reason for doing this is the suspicion that financial transfers and
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consultation between a parent and child could be endogenous to the child’s informal care
decision. If a child provides care, this could cause financial transfers as indirect payment for
informal care. The secondary reason for paring down the list o f instruments is because
correlation between child-level variables and parent-level variables is high for age. income,
and education. Hence, they cause spurious correlation when used as instruments. Finally, I
do not use step child as an instrument due to the lack of statistical power to explain behavior
As a result, I use four identifying instruments that are highly correlated with informal
care but not a parent's utilization: a child’s gender, a child’s marital status, a child’s number
of siblings, and the number of offspring the child has (Ettner, 1995 used number of siblings
as an instrument in her study of caregiving’s effect on female labor supply). I feel that a
child's gender is the strongest identifying instrument based on other findings in the literature,
so I begin testing the instruments with child's gender as the exactly identifying instrument.
Overidentification tests.
First, I test the overidentifying restrictions. Three variables, a child’s marital status, a
child’s number of siblings, and the number of offspring the child has are overidentifying
instruments in Wave I. A child's gender, a child’s marital status, and the number of
offspring the child has are overidentifying instruments in Wave 2. To perform tests of
overidentification, I use the predicted value o f informal care from the exactly identified first
stage regression, and plug it, along with the overidentifying instruments, into the utilization
model. The null hypothesis is that these three variables are valid instruments, and so should
have no explanatory power in the utilization models. If a joint F-test on the coefficients of
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the three overidentifying instruments is rejected, meaning they are significantly different from
Columns two and five o f Table 1 show the test results for Waves 1 and 2 of the data.
In Wave I, the exclusion restrictions are valid for all utilization types but home health care
and nursing home care. In Wave 2, the exclusion restrictions are valid for all but nursing
Second, I test for the exogeneity o f informal care in predicting the five different types
of utilization. This entails estimating reduced form models of the informal care model (3.2)
and forming predicted values for informal care. I use the exactly-identified or over-identified
instruments based on the overidentification tests (columns three and six of Table 1). Then. I
plug in the predicted value o f informal care, as well as actual formal care, into the health care
utilization equation. If informal care is exogenous then the additional predicted value should
have no explanatory power. This is a variant of the Wu-Hausman test, sometimes called the
omitted variables version (Kennedy, 1992). In the discrete models of utilization, standard
errors are not corrected after using the predicted value. However, comparisons to linear
probability models which use survey regression commands and produce correct standard
Columns four and seven of Table 1 show the results from the Wu-Hausman tests.
shown in column two, I detect endogeneity of informal care in any home health care
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Table I. Tests o f the exclusion restrictions and exogeneity o f informal care, waves I and 2, AHEAD.
Any home health care F(3, 2930) = 4.87** Exact F( 1,2932) = 6.35** F(3, 2 5 9 8 )= 1.74 Over F(l,2391)=.93
Any nursing home care F(3, 2930) = 2.55* Exact F (l, 2932) = 5.27** F(2, 2391) = 2.62* Exact F(l,2391)=5.3**
Nights in nursing home F( 3,29) = 7.39*** Exact F( 1, 31) = . 19 F(3, 165)= .31 Over F (!,I67)=.37
Any hospital care F(3, 2931) =.63 Over F (l, 2931) = .63 F(3,2383) =1.62 Over F( 1,2385)= .89
Times in hospital F(3, 653) = 1.91 Over F (l, 655) = .81 F(3, 848) = 029 Over F (l, 890) = 1 2
Any outpatient surgery F (3 ,2926) = .24 Over F( 1,2982) = .00 F(3,2389) =4.19*** Exact F( 1,2391 )=.26
Any doctor’s visits F(3, 2 9 2 5 )= 1.13 Over F( 1,2927) = .98 F(3, 2282)=.68 Over F (l,2284)=2.04
Times to the doctor F(3,2564) = .94 Over F( 1,2566) = .24 F(3, 2163)= 1.33 Over F(l,2165)=2.50
NOTES: I. * significant at the 10 percent level ** significant at the 5 percent level *** significant at the I percent level.
2. All estimations use probability weights and account for the design effect.
3. In wave I, child’s gender is the exactly identifying instrument while in wave 2, number o f siblings is.
utilization and any nursing home use. This makes sense in practical terms, especially for
nursing home use. By the nature of the sample selection in AHEAD, a person had to be non
institutionalized to be interviewed. Hence, if a person had any nursing home use, it is likely
that it occurred prior to the receipt of informal care. Turning to Wave 2 utilization. I detect
individual heterogeneity. In Wave 2, however, since I use informal care in Wave 1 to predict
utilization in Wave 2, the sources for endogeneity come only from unobserved individual
While not used commonly in the literature, Mroz recommends more liberal criterion
for detecting endogeneity. He points out that a 25-50% exogeneity test would eliminate most
of the bias in the two-step procedure when the disturbances are actually joint normal (Mroz.
1999). Applying this criterion I find that informal care is endogenous for more types of care.
For p < . 25, informal care is endogenous in predicting the number of doctor's visits in wave 2.
visits, times to the doctor, and Wave 2 hospital care. This is a useful criteria, because it
allows researchers to consider endogeneity that is imprecisely measured through the use of
instruments. I suspected a priori that endogeneity existed between informal care and all of
the types of formal care under examination, but I was unable to detect it for all types at
conventional levels.
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Strength o f the instruments.
Second, I test the general strength of the instruments to see whether they are
significantly correlated with the potentially endogenous variable, informal care. A significant
correlation is required for the system to be identified. According to Bound, Jaeger and Baker
(1995), weak instruments can bias two-step least squares estimates towards OLS and can also
invalidate the distributions commonly used to evaluate statistics on Hausman and other tests
A joint F-test o f the four instruments rejects the null hypothesis that they are zero
(F(4,2929)= 6.95 for Wave 1; F(4,2388)=3.66 for Wave 2 ). Tests on the exactly
identifying instrument, a child’s gender, also show high explanatory power, but only in the
first wave (joint F (l, 2391) = 13.05 in Wave 1, and joint-Ftest of F (l, 2932)=4.04 for
Wave 2). Hence, I begin exploring some of the other instruments as exactly identifying the
system in Wave 2. I find that number of siblings is the best predictor of informal care in
Third, the explanatory power of the first-stage regression should be large so that the
measure of informal care is not replaced with a noisy measure. I test the explanatory power
by measuring the adjusted-R2 in the first-stage survey regression. Bollen, Guilkey and Mroz
maintain that the adjusted-R2 in the first stage should be higher than 0.1. and that when a
large number of the variables are in both stages of the equations (75 percent or more), the
adjusted-R? be higher than 0.3 (1995). I have a high amount of overlap, so I use .3 as the
benchmark.. In the overidentified system the adjusted-R2 values are .40 and .395 in waves 1
and 2 respectively. In the exactly identified system, the adjusted-R2 value is .393 in both
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In summary, a child’s gender is the exactly identifying instrument in Wave 1, and the
Finally, I check for identification of the system using a less direct approach. I run
two-stage least squares of health outcomes on informal care, accounting for the complex
survey design. I expect, controlling for all other factors, that informal care should have no
effect on the two measures of health outcomes—the number of diseases a parent has and
number of ADL’s or IADL’s a parent reports needing help with. If informal care
significantly affects a parent’s health outcomes, I expect the sign to be positive. Expecting a
positive sign is counterintuitive at first, because we may think of an informal caregiver’s role
as nursing a parent back to health. But for this age group, receipt of informal care is likely a
signal that a person’s health is in decline. This notion is supported by Weissert (1988).
Referring to informal care of the elderly, he points out that “physical and mental functioning
in the elderly is very difficult to maintain or bring back, but that contentment, on the other
that measurement error—from the fact that the parent reports informal care from the child, or
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where IC is informal care and parent, child, and instruments are the variables already
described. The first health outcome measured in equation 3.6 is the total number of ADL’s
and IADL’s that a parent reported needing help with. The mean number of activities is 1.25
but the distribution is skewed, so I take the natural log of it in the estimation. This variable is
highly correlated with informal caregiving, however (.71 for Wave 1 sample, .68 for Wave
1), which means that I could find a spurious relationship between the two variables even if
there is none. Hence, I measure a second, more objective health outcome, a composite of
disease indicators. I sum up all the following diseases that a parent experienced in the last
year: heart attack, angina, stroke, hip fracture, fall, diabetes, lung disease, arthritis, and
incontinence. (Note that I omit them from the right hand side parent variable vector) The
mean number of diseases in the sample is 1.5. A priori I expect informal caregiving to have
no effect on a parent’s disease state. There is little reason to expect a child could affect a
parent’s disease state unless it is simply that the child suspects a parent has a certain disease
and makes the parent go in and get diagnosed. I take the log of the health outcomes because
the distributions are skewed. I also add 1 to the health outcome variables for zero cases.
I ran two-stage least squares of health outcomes on informal care, controlling for
endogeneity of informal care. I ran this on both the Wave 1 and Wave 2 samples. Informal
care had no effect on ADL’s or IADL’s that a parent needed help with in either wave (more
detailed results available upon request). This is particularly reassuring since the measure for
caregiving is close to the health outcome, and that is "number of ADL’s and IADL's that all
For the preferred health outcome measure, number of diseases, I also find that
informal care has no statistically significant effect on the number o f diseases a parent has in
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either wave. This finding helps to bolster the use of the identifying instruments in the
informal care equation. While these instruments do a good job of predicting caregiving, they
do not help at all in predicting other health outcomes. Hence, measurement error does not
I conclude from these tests that my instruments are strong based on their explanatory
power and the first-stage adjusted-R 2, that informal care is endogenous to elderly health care
utilization in some cases, both due to reverse causation and due to unobserved individual
heterogeneity, that in many cases the exclusion restrictions are valid, and that measurement
While I do not find informal care to be endogenous in all cases. I feel that there are
theoretical reasons which warrant use of simultaneous equation methods for all of the
utilization types. I feel I was unable to detect endogeneity in many cases because of the lack
of a statistical relationship between informal care and formal care. Mroz's recommendation
that a more liberal criteria of a = 25-50 percent be used in endogeneity tests allows for the
Given that I have a relatively simple system of equations, the main penalty of using
two-step estimation compared to DFM is a loss in precision of the estimates (Mroz, 1999). If
the two-step estimators are precise, then DFM holds little advantage over two-step estimation
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because two-step estimation is unbiased if the error distribution assumptions are correct. I
have a relatively large sample size, between 2,500 and 3,000; strong instruments but a large
level o f overlap in the first and second stage variables because the system is exactly identified
(97 percent o f the variables in the first stage appear in the second stage for the exactly
identified model while 89 percent do for the over-identified model); and, an adjusted-R2 of .4
for the first stage and a pseudo-R2 o f about .2 for the second discrete stages. Hence, under
these conditions I should not experience a great loss of precision using two-step estimation.
In fact, according to David Guilkey, a leading expert in discrete factor methods, if I saw
identifying endogeneity for select types of formal care, I find that the correlation between the
error terms in the first and second stages is low, at around .0142. When error correlation is
from two-step estimation, so I estimated the Wave 1 home health care model using discrete
factor methods. I used LEO, a FORTRAN discrete factor analysis program written by a
graduate student at UNC. Based on Monte Carlo evidence (Mroz, 1999), I expected to need
about 4 points o f support to see improvements in the precision of the estimates in DFM
First, I replicated the two-step estimation results obtained in Stata using one
and p c). After altering the starting values, holding certain coefficients constant and
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estimating the system iteratively, I also obtained consistent results using one pc parameter
and two p; parameters. Consistent means results which showed a large improvement in the
value of the likelihood function over the previous one (based on a pseudo-likelihood ratio
test), and where the norm of the first partial derivative was zero (.000087). These conditions
Adding an additional pj, however, does not lead to a consistent answer to the
maximization problem, despite using all of the different estimation tools common to this
method of estimation. The pj and constant term on the continuous equation (of informal
care) mirrored each other, at -4.36 and 4.36 respectively, and the norm of the first partial
derivative never fell below four. Holding the discrete equation constant and estimating the
continuous equation led to coefficients of -26.53 and 26.55, respectively, an indication that it
was truly the continuous equation which was causing the problems. I also tried holding pj at
one point of support and adding cluster-level points o f support only, but the same problem
occurred. With this approach the constant and the pc term mirrored each other. Nothing that
I tried bumped the constant and heterogeneity term away from each other to allow for a local
maximum to be found. Because I could not reach a local maximum, the likelihood value was
approximately equal to the model with one less point of support and one less probability
weight. While not instructive because I knew that I was not even at a local optimum, a
OMEGA, in order to estimate non-linear heterogeneity parameters because the linear ones
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were not working (meeting with Professor Guilkey, September 30,2000). Based on the
relatively precise estimates that I obtain using traditional two-step estimation, and based on
the high time costs of estimating my model using OMEGA, I deal with endogeneity using
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CHAPTER FOUR
Overview of chapter
Only one nationally representative sample exists to date with extensive information
on the elderly who are most apt to need informal care, the oldest old, and their children, who
are most apt to provide informal care after a spouse. In this chapter I describe the data set,
explain the sample selection criteria, and provide definitions and descriptive statistics of
The Asset and Health Dynamics Among the Oldest Old (AHEAD) Survey
I use the 1993 and 1995 waves of the Asset and Health Dynamics Among the Oldest-
Old Survey (AHEAD), conducted by the University of Michigan for the National Institute on
representative sample of the oldest-old, defined as persons over age 70 in the United States.
The data set includes respondent-level and household-level weights to adjust for complex
survey design. I use the respondent-level weights to account for differences in the probability
residents o f the state of Florida were sampled at about 1.8 times the probability of the general
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population (AHEAD, 1998). In addition, AHEAD over-samples persons over 80 years of
age. AHEAD staff has already made post-stratification adjustments to match sample
demographic distributions with known 1990 Census totals (AHEAD, 1998). I use
AHEAD contains extensive information about health care utilization of the oldest-old.
In addition, there is information about a parent’s health status, functional status, housing,
employment, income, net worth, trusts, asset transfers among family members, and health
The AHEAD survey is conducted every two years. It included 8,222 elderly
respondents in 1993 and 7,027 respondents in 1995. None of the respondents were
institutionalized in 1993, but subsequent waves follow respondents into nursing homes if
necessary. Since the 1993 wave was only of the non-institutionalized, it is important to note
that the surveyed population is somewhat biased towards healthier elderly individuals
caregiving behavior of children—by task, by hours of care provided, and by whether the
caregiver was paid or not. This is reported by the parent or by proxy respondents for the
elderly respondent. Besides child informal care information, there is information about a
child’s marital status, number of offspring, a child’s employment status, income, transfers to a
parent, distance from a parent, and other variables. There is also information about the
child’s spouse, which I am unable to use due to prevalence of missing values. Not
surprisingly, missing data on children is a problem for portions of the sample, especially
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There have been criticisms in the literature of AHEAD’s informal care measure. In
particular, Pezzin and Schone (1999c) report that the AHEAD survey underestimates the
incidence of both formal and informal care due to the way caregiving questions are asked for
ADL’s versus IADL’s. In the case of IADL’s the respondent may list up to two persons who
help the respondent the most, whereas in the case of ADL’s only the one person who helps
the most is listed. Since these helpers could be home health care providers (hence formal
care) or children (hence informal care) they claim both are underestimated in the survey.
In addition. Wolf and colleagues (1997) point out that while the AHEAD baseline
survey does not capture all child caregivers consistently, such as those who provide few hours
of care, the data yield a more comprehensive picture of family caregiving than heretofore
Because married and single elderly differ in many respects (Stone and Short, 1990
citing Horowitz 1985), I limit the analysis to single elderly with living offspring, the majority
of whom are women. The single elderly may be widowed, divorced, separated, or never
married. Further, I classify as single those individuals who are married but whose spouses do
not live in the household, since they resemble the single elderly closely in their potential for
While I use two waves from AHEAD, I do not create a panel of data in the traditional
sense. I first draw a sample of the single elderly from Wave 1 of AHEAD based on specific
selection criteria. Using this sample I estimate informal care’s effect on utilization in Wave
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1. Then, using all of the same people who were interviewed a second time in Wave 2 ,1 look
analysis on informal care and parent characteristics in Wave 1 to predict separately utilization
in wave one and two. This design was dictated by delays in the release of child-level
variables in Wave 2, which I use both for the informal care measure and for the instrumental
variables, but there are some advantages to my approach. Using informal care in Wave 1 to
predict formal care in Wave 2 controls for temporal endogeneity. In addition, the unbalanced
recall periods on utilization in the two waves makes it difficult to combine the two periods.
The sample of single elderly was reduced due to missing values on important
variables. For missing values on dependent variables, the observations were dropped.
Typically, for those with missing values, there were missing values on some utilization types
but not others. Instead of dropping the respondent if any of the five utilization types was
missing, I only omitted them for the specific utilization type that was missing. So the sample
actually differs slightly by utilization type in the analysis, but not by more than 5 or 10
observations from the one reported here in most cases. The exception is doctor’s use in Wave
For missing explanatory variables, I was able to resolve some by checking Wave 1
values against Wave 2 values in order to assign values to time invariant variables. For values
which could not be assigned (mainly child-level variables), I either created a missing variable
or I dropped the observation. For example, for individuals with long-term care insurance
status missing, I replaced the missing value with a zero, and changed the long-term care
insurance missing variable to a 1. This allowed a check for whether missingness was random
or not rather than simply throwing out observations with missing explanatory variables.
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The following table shows the different attributes that a respondent had to have in
Single in Wave 1 x x
Living adult offspring in Wave 1 x x
Seventy or above in Wave 1 x x
Interviewed in Wave 1 and 2_________________________ x_
Total number o f single elderly 2,985 2,444
70 years or older, and have living offspring above age 18. The table below. Table 3. shows
the reduction of the sample from the original number, 8,222 to the final one used in Wave 1.
A little less than half o f the respondents were single in Wave 1. A handful of
respondents were not age-eligible (24) and a little under 700 had no children or no age-
eligible children. Finally, 27 respondents were dropped due to missing values on key child-
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level variables: child’s gender, marital status, number of siblings, and number of offspring.
This represents under one percent of the sample, so dropping these due to missing values
should not bias the sample. The final number of single elderly analyzed in Wave 1 was
2,985.
to be single in Wave 2,70 years or older in Wave 1, interviewed in both waves, and have
living offspring in Wave 1 (see Table 2). The respondents had to be interviewed in both
waves because the informal care and child information comes from Wave 1 while the
From the 8,222 original respondents in Wave 2, only 7,027 were interviewed two
years later. Assuming that the majority of those missing in Wave 2 died, my sample in Wave
informal care by children and the amount of utilization occurring for the second wave.
Comparisons of descriptive statistics (not reported here) confirm that the individuals who
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were absent from Wave 2 had more functional limitations and received more informal
caregiving than those who were alive in both waves. So my estimation o f informal care’s
informal care activity in the U.S.. This is potentially exacerbated by only being able to use
From the original number of 7,027, more than half of the Wave 2 respondents were
disqualified because they were married in Wave 1. About 20 were dropped because they
were not age-eligible in Wave 1. I use Wave 1 as the criteria so that we do not have younger
individuals entering the Wave 2 sample (new widows of age-eligible males from Wave 1)
which could further bias the sample towards the healthy. About 510 respondents were
dropped because they were not interviewed in Wave 1. This was overwhelmingly due to
being a long term nursing home respondent during Wave I interviews. I dropped five
individuals who had missing information on all of the dependent variables for utilization.
About 108 of those remaining had no living offspring in Wave 1 and had to be dropped.
Finally, I dropped respondents who only had children under the age o f 18, and children with
missing values on important child-level variables. The final sample for Wave 2 totals 2.444
respondents.
As mentioned in the Methods section (Chapter 3), I use five different elderly health
care utilization measures as the dependent variables in five statistical models: home health
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care utilization, nursing home utilization, in-patient hospital utilization, outpatient surgery,
and doctor’s visits. I look at utilization in two different time periods, in 1992-93 and 1993-
1995. Table 5 reports summary statistics on the formal care variables for Waves I and 2.
These descriptive statistics are weighted by the probability of being selected into the sample.
It is important to note that the recall period for Waves 1 and 2 were not uniform. In
Wave 1 respondents were asked about utilization in the past 12 months, while in Wave 2 they
were asked about utilization since the interviewer’s last visit (giving a date to anchor the
recall period), which is a two year recall period in general. In repeating the questions here I
report from Wave 1, but Wave 2 has identical questions except for the recall period.
For home health care, I use a discrete measure, which is comprised of information
from several questions in the helper file of AHEAD about assistance with ADL's and
IADL’s. For example, respondents were asked, “Who most often helps you move across the
room?” or “Who most often helps you make phone calls?” One of the response options is
“organization or agency," and another is “other individual (non-relative)”. If the response was
“organization,” home health care is coded one for yes. If it was “other individual,” then only
if that individual was paid (either by insurance, the respondent, or on behalf of the respondent
by some other party) do I consider the help to be home health care. The home health care
measure is restrictive in that I only capture assistance with ADL’s and IADL’s, and do not
include highly skilled care. The advantage of this is that this type of home health care is the
type that informal caregivers are most likely to replace. The disadvantage is that I am not
encompassing all types o f formal home health care, such as physical therapy, RN-visits, and
so forth.
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T ab le 5. Form al care p attern s o f the single elderly in W ave 1 o f A H E A D com pared to W ave 2
H om e H ealth C are
A ny hom e health care v isits 2,985 .10 .30 0 I 2,444 .08 .28 0 I
N u rsin g H om e C are
A ny n u rsin g hom e stay s 2,985 .02 .14 0 1 2,444 .09 .29 0 1
N ig h ts in a n ursing hom e 53 4 5 .5 0 53.97 I 30 0 211 408.28 438.21
00
o
H osp ital C are
A ny in patient hosp ital care 2,984 .24 .43 0 1 2,418 .38 .48 0 1
T im es in hospital 707 1.59 1.25 1 20 903 1.95 2.53 I 75
O u tp atien t C are
A ny o u tp atien t su rg ery 2981 .14 .35 0 I 2,444 .20 .40 0 I
P hysician care
A ny v isits to th e d o c to r 2 ,9 8 0 .89 .31 0 I 2,337 .95 .22 0 1
N u m b er o f visits to th e d o c to r_______________________2 ,6 1 9 5.65 5.79 I_____50_________ 2,218 10.90 12.90_____ 1 250
_
S O U R C E : A sset and H ealth D y nam ics o f the O ldest O ld Survey, W aves I and 2.
There are questions on frequency of visits by a helper and the usual number of hours
of help on those days, allowing for an average hours per month o f home health care measure
to be calculated. However, I am not able to use this measure in my analysis. First of all,
missing values on hours o f help are prevalent. Second, hours were recorded only for
individuals receiving help more than once a week. In Wave 1.10 percent of the sample had
home health care use while in Wave 2, 8 percent did (see Table 5).
For nursing home care there are more straightforward discrete and continuous
measure of use. A respondent was asked, “During the last 12 months, have you been a
patient overnight in a nursing home, convalescent home, or other long-term health care
facility?" In addition respondents were asked about number of nights and number of times
they had such use in the last 12 months. I use number of nights as the continuous measure,
since it is more reflective of severity of disability than number of times in a nursing home.
Nursing home care is likely to be homogenous, although it is unclear what other types of
“long-term health care facilities” were included, for example, assisted living facilities or
board-and-care homes. Since the definition is limited to “health care" facility, retirement
homes and group homes are unlikely to be included. In Wave 2, there are new questions on
many different types o f long-term care facilities, including assisted living facilities, so
nursing home use may truly be limited to nursing home and assisted living facilities in Wave
2.
surprising that about 2 percent o f the sample used nursing homes in Wave 1, while a much
higher proportion, 9 percent, did in Wave 2 (Table 5). The stays were also much longer in
Wave 2 than in Wave 1, at 408 nights and 45 nights respectively. The mean number of
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nights is extremely high in Wave 2 because of the large number of persons who were in the
nursing home for the entire two year recall period. Depending on the date of the interviews
from Wave 1 to Wave 2, a respondent could have been in a nursing home for a maximum of
1,098 days in Wave 2. In Wave 1 the respondent had to be at home to be interviewed, hence
Regarding inpatient hospital utilization, AHEAD asked, “In the past 12 months, have
you been a patient in a hospital overnight?", as well as, “How many different times were you
a patient in a hospital overnight in the last 12 months?" I also could have used a continuous
measure on nights of hospital use, but chose number of times because there were fewer
missing values and because nights in the hospital were not broken down by stay (AHEAD,
1998 ).
In Wave 1,24 percent o f the single elderly had any hospital visits, while in Wave 2. a
much higher 38 percent did (recall the unequal recall periods for the two waves). Number of
visits to the hospital averaged 1.59 in Wave 1, and 1.95 in Wave 2 (Table 5).
The measure of outpatient surgery is a discrete measure. The survey asked, “(Not
counting overnight hospital stays), during the last 12 months have you had outpatient
surgery?" In Wave 1 ,14 percent received outpatient surgery, while 20 percent did in Wave 2.
Finally, I analyze doctor’s visits in the past year and past two years for Wave 1 and
Wave 2 respondents. In Wave 1, respondents were asked “During the last 12 months, have
you seen a medical doctor about your health?" If so, the next question was, “How many
times have you talked to a medical doctor (about your own health)?” Unfortunately, in Wave
2 the respondents were only asked, “How many times have you seen or talked to a medical
doctor about your health, including emergency room or clinic visits?" Because there is not a
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discrete lead-in question, the prevalence of missing values is high. The recall period of 2
years is simply too long for people to estimate how many visits they may have had since
going to the doctor can be a common event for the oldest-old. In Wave 2,4.2 percent had
missing values on doctor’s visits compared to only 0.2 percent in Wave 1, an increase of
2,000 percent. Overall, 89 percent of respondents had doctor’s visits in Wave I, while 95
percent did in Wave 2. The average number of visits was 5.65 and 10.90 respectively (See
Table 5).
I explore both a discrete and continuous measure of informal care in the utilization
models to see which form adds the most predictive power. The discrete measure shows
whether any child provided any informal care. The continuous measure is the total number of
1/ADL’s that all children in the family assisted with. I also explored using total hours of care,
but there were too many missing values and it was not as robust a measure as number of
1/ADL’s. I decided after preliminary analysis to use the measure of total number of I/ADL's
that a parent received from all offspring rather than the discrete measure, because it best
Some evidence exists that primary informal caregivers provide all but 11.5 percent of
all informal care, with this being provided by secondary or third caregivers (Christianson,
1988). This is even more extreme in my data set, as all but 3.5 percent of all informal care by
children came from one child (part o f this was due to the way the measure of caregivers was
limited). The remainder came from two children (3.32 percent) or three children (0.2
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percent). Nonetheless, I define the quantity o f informal care from all child sources in the
analysis. By aggregating across all children instead of measuring care from only one child, I
do not lose the 3.5 percent of care provided by secondary and tertiary caregivers.
Even though I am able to aggregate informal care from all children, because the unit
of observation for the utilization models is the parent, I needed to have only one informal
caregiving equation with one set of child-level instruments per parent. This is a problem
when there is more than one offspring per parent. It is not possible to include all of the child
caregivers as separate observations in the model due to the endogenous nature o f informal
care, and the lack of unique identifying instruments for more than one first-stage informal
care equation. I could not identify the system if I included two informal caregiving variables
in the utilization models, say “primary caregiver" and “secondary caregiver" because the same
instruments would be relevant for both. I explore achieving this two different ways, first by
selecting a primary caregiver from all of the children, and second by averaging the child-level
characteristics.
In the first approach, I develop a model from the sample of all children o f the single
elderly to select the child most likely to provide care to the parent. This model uses many of
the same variables in the informal care equation (equation 3.2) except that it is a logit model
predicting the probability of providing any care to a parent. Using the coefficient estimates
from the selection model, I created predicted probabilities of the likelihood of providing any
informal care. The child in a family who had the highest predicted probability o f providing
care was selected as the primary caregiver and included in the main samples. I did this
separately for Wave 1 and Wave 2. If the child selected based on the predicted probability
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provided no care but another child provided care, then the predicted probability score was
their attributes to use as instruments. This is done in the intra-household decision making
literature when parent-level data and child-level data must be matched to examine parent-
level outcomes. Hence, whereas one of the child-level variables in the primary caregiver
“average age of all of the children." To give an example of the difference in dichotomous
child-level variables in the two approaches, in the primary caregiving model there is a
variable “live more than ten miles from the parent." whereas in the aggregate caregiver
analysis this variable is measured as “percent of children living more than ten miles away
from the parent.” I chose the primary caregiver approach over this one because so much of
the care was provided by only one caregiver, because it was easier to interpret the
A comparison of the characteristics of all children of the single elderly in the sample
(tV=9,136), and the children selected as primary caregivers (iV=2,985 in Wave 1 and W=2,444
in Wave 2) appears in Table 6. While 9 percent of all children provided any irformal care to
a parent, 23 percent o f parents received informal care from at least one child in Wave 1. In
Wave 2,22 percent of parents received some informal care. Those with positive informal
care received help with 2 1/ADL’s on average in Wave 1, and 1.86 in Wave 2.
Looking at the child-level instruments used (in bold in Table 6), it is clear that
daughters are more likely than sons to provide informal care. Seventy-two to seventy-three
percent o f the primary caregivers selected were daughters. Informal caregivers were also less
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Caregiving activity
Gave any help with l/ADL’s .09 .44 .23 .42 .22 .41
Number o f I/ADL’s helped with if any 2.14 .28 2.00 1.57 1.86 1.40
Identifying instruments
Daughter .50 .50 .72 .45 .73 .44
Married .68 .47 .58 .49 .58 .49
Number of children 2.23 1.76 2.00 1.59 1.99 1.57
Missing value on number o f children .03 .16 0 0 0 0
Number of siblings n.a. n.a 2.25 2.40 2.26 2.31
Annual Household Income
Income between $0-20,000 .16 .37 ..25 ..43 .23 .42
Income between $20,001-30,000 .11 .31 .12 .33 .12 .32
Income between 30,001-50,000 .19 .39 .18 .38 .19 .40
. Income over $50,000 .18 .38 .15 .36 .16 .37
Income between $0-30,000 .03 .16 .04 .19 .04 .19
Income over $30,000 .05 .22 .03 .16 .02 .15
Income between $0-50,000 .04 .20 .03 .16 .03 .17
Income is missing .25 .43 .21 .41 .21 .40
Other demographic characteristics
Step child .05 .22 .025 .15 .02 .15
Age 49.34 9.12 49.41 9.47 48.86 9.45
Age missing .04 .19 .02 .13 .01 .11
Child works .73 .44 .69 .46 .71 .46
Missing value on work .05 .21 .02 .14 .01 .12
Child lives at least 10 miles away .68 .47 .67 .47 .66 .47
Transfer behavior
Received $5,000+ fr. parent in last 10 yrs. .09 .29 .13 .34 .13 .34
Received $500 or more from parent in last year .10 .30 .16 .37 .16 .37
Owns deed to parent’s house .03 .17 .04 .19 .04 .20
Gives parent financial assistance .02 .14 .03 .16 .03 .16
Parent asks child for advice .23 .42 .31 .46 .30 .46
NOTES; Probability weights used to calculate means. Bold variable descriptions indicate identifying instruments used.
SOURCE: Asset and Health Dynamics of the Oldest Old, 1993, 1995.
likely to be married than the sample of all children, at about 58 percent versus 68 percent.
Primary caregivers also tended to have slightly fewer children (1.99-2.00) than the sample of
all children (2.23). The last instrument used, number of siblings, was a parent-level variable,
There are other child-level variables in AHEAD that help characterize informal
caregivers. Primary caregivers averaged 49 years of age, about 69-71 percent of them
worked, and about 66-67 percent o f them lived more than ten miles away from their parents.
Surprisingly, this last statistic does not differ much at all from non-caregivers. Looking at
other distance thresholds may be more indicative (1 hour driving time or longer). Not
surprisingly, step children are much less likely to be the primary caregiver, at 2.5 percent
The income measure is total household income for the child and a spouse, as reported
by the parent. Because continuous income values were not reported for a significant
proportion of the children, I was only able to explore using categorical controls for the child’s
income. There are many missing values for income, which is not surprising since the elderly
parent reported income of the child. In both waves 21 percent o f the primary caregivers had
missing income values, while income was missing for 25 percent o f all children. McGarry
and Schoeni surmised that a missing income value may indicate that the parent and child do
not have a close relationship, hence the parent is unable to report a value for the child (1995).
There may be other reasons as well, however, such as a proxy respondent not knowing, or a
Primary caregivers are more likely to be in the $0-520,000 income range than all of
the children (23-25 percent). However, they are about equally likely as their siblings to have
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income over $50,000 a year (19 percent). Note that some categories are upper and lower
bounded while other ones cover a wider range. It is difficult to know where in the distribution
the children are when the parent reports $0-50,000, making the income measures somewhat
imprecise in all.
Looking at transfer behavior between children and parents, we see that while 9
percent of children received $5,000 from their parent in the past 10 years, 13 percent of
primary caregivers did. A similar pattern exists for smaller transfers. About 10 percent of all
children received $500 from a parent in the past year, while 16 percent of caregivers did.
Sometimes parent’s may transfer property instead of cash to their children. However,
here we see that few children own the deed to their parent’s house, at 3-4 percent. Looking at
transfers from children to parents, a similar pattern exists. Few parents reported receiving
financial assistance from their children in the past year, at about 2 percent for all children and
only 3 percent for caregivers. Finally, it is not surprising that about 30 percent of parents
report asking primary caregivers for advice on important decisions while only 23 percent of
The formal and informal care models control for parent-level variables that
sociologists, demographers, aging experts, and economists have determined affect health care
utilization of the elderly. The parent-level summary statistics are listed in Table 7.
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T able 7. Factors driving single elderly p aren t’s dem and for inform al caregiving, w ave 1 (A/=2,985)
Standard
V ariable description M ean D eviation M in M ax
(N = 2,985)
H ealth B eh av io r
C u rren t cigarette smoker .10 .30 0 1
Form er cigarette smoker .34 .47 0 1
F eels sho u ld drin k less alcohol .11 .31 0 1
S o m ew h at im portant .2 1 .40 0 1
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T able 7. Factors d riving single elderly parent's dem and for inform al caregiving, wave I, continued.
Standard
V ariable description M ean Deviation Min Ma
(V=2,985)
Insurance status
M edicare P art A .97 .16 0 1
M edicare P art B .93 .26 0 1
M edicaid .14 .35 0 1
M issing M edicaid inform ation .005 .068 0 1
O th e r private insurance .70 .46 0 1
M issing o th er insurance inform ation .010 .097 0 1
L ong-term care (L T C ) insurance .13 .34 0 1
M issing LTC insurance inform ation .09 .28 0 1
C are
R eceive any inform al care .25 .43 0 1
N u m b er o f I/A D L ’s caregiver(s) help w ith 2.00 1.57 1 9
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First, to give an idea of the general health status of the elderly in the sample, we see
that about 36 percent reported needing help with physical functioning tasks, or ADL’s, while
33 percent need help with cognitive tasks, or IADL’s. For those who needed help, on average
they needed help with 2.3 ADL’s and 2 IADL’s. These variables are highly correlated with
the measure of caregiving, “total number of ADL’s and IADL’s a parent receives help with
Instead, the health of the single elderly is controlled for using several indicators.
First, I control for self-assessed health status. On average the single elderly in my sample
rated their health status as “good” (3.1). A score of “5” means poor health and a “ 1” means
excellent. I also control for self-rated corrected eyesight, where the mean respondent
Health shock controls include: heart attack (7 percent), stroke (11 percent), hip
fracture (6 percent), and falls (28 percent), all o f which had to occur in the last year. I also
control for health conditions such as diabetes (13 percent), arthritis (29 percent), incontinence
(24 percent), high blood pressure (53 percent), lung disease (12 percent), and cancer (14
percent). For these, the recall period is generally vague. For example, for cancer the wording
is “Has a medical provider ever told you that you have cancer?” Others ask about the last
five years.
There are a limited number of health behaviors in AHEAD that I use. About 10
percent o f the single elderly were current smokers, while a much larger 34 percent were
former smokers. About 11 percent of respondents felt they drink too much alcohol.
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In terms of the demographic profile, the average respondent was a white, urban-
dwelling woman who was 79 years old in 1992-93, had less than a high school education (10
AHEAD respondents are weighted to reflect the ethnic and racial make-up of the
elderly population in the U.S., and using the probability weights my sample reflects this
another non-white race, and 5 percent were Hispanic. Only about 7 percent of the
respondents reported working at the time of the interview, which is not surprising given the
mean age and the gender composition of this cohort. The mean income was $20,000 and the
Health insurance characteristics show the near universal coverage of Medicare, with
97 percent of the respondents receiving Medicare Part A, and 93 percent receiving Medicare
Part B. About 14 percent had Medicaid. Nearly 70 percent purchased some other form of
private insurance (could be Medigap), while about 13 percent had long-term care insurance.
Long-term care insurance information was missing for a significant number of respondents (9
Proxy respondents were used for about 10 percent of the single elderly. Missing from
the model are depression or cognition indicators, which have been found to be important in
other informal care studies. Because cognitive scores and depression scores were compiled
differently for those with proxy respondents and those without, I could not compute a
cohesive measure for these characteristics that was not too highly (less than 0.7) correlated
with proxy. Leaving these out, it is up to the proxy variable to explain imperfectly depression
or impaired cognition.
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Finally, we see at the bottom of Table 7 that 25 percent of all parents received
informal care, while in the table of child caregivers, (Table 6) it shows that 23 percent of all
children provided care. The discrepancy is explained by the fact that I attribute care from
grandchildren and other dependents who are “like” children to be the same as “child-
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CHAPTER FIVE
Overview of chapter
In this section I present the main results on how informal caregiving of the single
elderly by their children affects formal care utilization. My econometric models confirm that
informal care of the elderly can significantly reduce many types of formal care use. First I
provide a detailed profile o f the home health care and nursing home models, along with some
realistic simulation scenarios on how changes in informal care provision would affect home
health care use and nursing home use in the immediate and longer-term. I also present
simulation results for other key variables. Next I summarize the findings for hospital use.
outpatient procedures, and doctor’s visits, for which informal care has a less consistent causal
relationship. Then I discuss some sensitivity tests on the robustness of the utilization model
results.
I end the chapter by discussing the results of the first-stage estimation, “What
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How does informal care affect formal care of the single elderly?
Informal care has a great ability to replace home health care and nursing home care.
Informal care had less of an effect on acute or routine care, which is what I expected, since
this care is much less like informal care. Table 8 shows the informal care coefficients for all
five different utilization types, differentiated by method (one-step or two-step estimation) and
by timing of utilization (Wave 1 or Wave 2). The other parent-level controls are suppressed
There are major differences in the results across the three primary domains of the
analysis—differences (1) between one-step and two-step estimation methods, (2) between
Wave 1 and Wave 2, and (3) between the discrete and continuous measures of formal care.
First, for all utilization types there are stark differences in the results between one-step
estimation and two-step estimation, which controls for endogeneity of informal care— signs
switched from positive to negative or the reverse, and p-values switched from insignificant to
significant or the reverse. Standard errors also increased when controlling for endogeneity, as
expected.
Recalling the specification test results from Chapter 3 ,1 detect endogeneity between
informal care and other long-term care, namely, home health and nursing home care, but not
between informal care and acute and routine care. There was positive endogeneity bias in all
o f the models for which endogeneity was detected. For example, if endogeneity had not
been controlled for any nursing home use, we would have concluded that informal care
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T ab le 8. E ffect o f inform al care on utilization patterns o f the single elderly, by an aly sis type, W ave I and W ave 2
H om e H ealth C are
A n y h o m e health care visits 2,985 .043 —5.17**§ 2,444 .153** -.79
(.057) (2.09) (.076) (1.20)
N u rsin g H om e C are
*
*
00
cn
coo
A n y n u rsin g hom e stays 2,985 .267** 2,444 .147* -2.87**§
1
(.104) (4.13) (.076) (1.46)
N atu ral log o f nig h ts in a n u rsing hom e 53 .092** -.04 211 .124 1.64
(.045) (3 8 ) (.077) (5.5)
H ospital C are
A ny inpatient hospital care 2,984 .082 .44 2,418 .061 -.66
(.052) (.47) (.062) (.73)
N atu ral log o f tim es in hospital 707 .000 .05 903 .031 -.06
(.017) (10 ) (.024) (.22)
O u tp atien t C are
A n y o u tp atien t surgery 2,981 .066 -.02 2,444 -.25*** .42
(.065) (58) (08) (98)
P hysician C are
A n y visits to th e d o cto r 2,980 -.048 .47 2,337 -.14 2.44
(.102) (.65) (.18) (1.87)
N atu ral log o f visits to th e d o cto r 2,619 -.029* -.08 2,218 .024 -.41
(017) (.15) (.025) (31 )
O th e r p a re n t-le v e l co n tro ls used? Y es Y es Yes Y es
C o n tro ls fo r en d o g en eity ? No Y es Partially Y es
N O TES: * S ignificant at th e 10 percent level. ** S ignificant at the 5 percent level *** S ignificant at the I percent level.
§ Indicates that en d o g eneity w as detected. A ll estim atio n s use probability w eights and account for th e design effect.
(P = .267) to nursing home care, rather than a net substitute (P = -8.3).
Second, informal care has a generally weaker effect on formal care by Wave 2, which
is expected because we do not know whether informal care persisted into the second wave.
Also, using informal care in Wave 1 to predict utilization in Wave 2 eliminates endogeneity
bias in the case of home health care but not nursing home care.
Third, in all but one case, informal care has no effect on any of the continuous
measures of formal care. In general, once a particular type of care is sought, informal care
Im m ediate effect
Informal care significantly reduced the likelihood of any home health care in Wave 1
(column 2 of Table 9) after controlling for endogeneity. Only having a proxy respondent had
a stronger (and counter-balancing) effect. Because I detected endogeneity, here I discuss the
Having poorer health led to significantly more home health care use for many of the
dimensions of health measured in the model. Having lower self-rated health status and
poorer eyesight increased the probability of home health care use significantly, as did the
number of days a person spent in bed in the past month. In addition, many acute illness
episodes increased the chance of home health care use, whether they occurred in the last year
(major fall, incontinence, diabetes) or ever (stroke or TIA, fractured hip). Of these, stroke,
incontinence and hip fracture led to the largest increases in the likelihood of home health care
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T ab le 9. O ne an d tw o -ste p estim ation o f inform al care and other characteristics’ effect on any hom e
health care, both im m ediately and two years later (W ave 1 and W ave 2 o f A H E A D )
In fo r m a l c a r e /P r e d ic te d In fo rm a l ca re -5 .1 7 * * 0.1534**
(2.09) (0 .0762)
H e a lth S ta tu s In d ic a to rs
Self-rated health( ^ e x c e lle n t, 5=poor) 0.531*** 0.3364***
(0.157) (0 .0 9 0 3 )
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T able 9. O ne an d tw o -ste p estim atio n o f inform al care and o ther characteristics’ effect on any hom e
health care, bo th im m ediately a n d tw o -y e a rs later (W ave 1 and W ave 2 o f A H E A D )
M ale -0 .8 1 2 * * * -0 .7 6 4 * *
(0.238) (0.294)
R ace (w hite is reference)
B lack 0.180 0.440*
(0.247) (0.244)
O th e r race 0.063 -0 .2 3 2
(0.387) (0.734)
Y e a rs o f e d u c a tio n c o m p le te d -0 .0 1 2 9 0.0257
(0.0299) (0.0316)
R esp o n d en t w orks -0 .5 7 4 -1 .6 7 3 * *
(0.572) (0.783)
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Table 9. O n e and tw o -s te p estim ation o f informal care and o th e r characteristics’ effect o n any home
health care, b o th im m ediately a n d tw o -y ears later (W ave 1 and W ave 2 o f A H E A D )
V ariable D e sc rip tio n ________________________ C oeff. / (SE ) _____________ C oeff. / (SE ) ______________
In c o m e a n d w e a lth
H ousehold incom e (divided by $10,000) 0.1061 0.0325
(0.0769) (0 .0322)
O th er private insurance -0 .8 3 0 * * * -0 .1 8 2
(0.274) (0.229)
P r o x y f o r k n o w le d g e o f s e rv ic e s -0 .0 3 7 6 0.0572
(c h ild 's e d u c a tio n in y e a rs) (0.0472) (0.0335)
In te rc e p t -2 4 .8 8 * * * -1 0 .5 0 * * *
(4.89) (1.28)
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use. Looking at health behavior, being a former smoker increased the chance of using any
home health care (p<.10), as did a person feeling that they should drink less alcohol (/?< 01).
Being older and being somewhat religious increased the probability of any home
health care use, while being male and residing in a rural area significantly decreased the
chance. Race and ethnicity (ethnicity limited to being Hispanic) did not change home health
care use behavior, nor did a parent’s education or her work status.
People with a higher net worth were slightly less likely to consume home health care,
but this result was only statistically significance at the 10 percent level. Even so, this
provides little evidence of a bequest motive because elderly with higher net worth also
received less informal care from children (Table 14). It may be that wealthier elderly
consume less of both types o f care due to wealth-specific differences in health status that I
Among the health insurance characteristics, having Medicaid increased the chance of
home health care use significantly, while having other private insurance (Medigap or other
types) reduced the chance by about the same magnitude. Long-term care insurance did not
Finally, having a proxy respondent increased the likelihood of home health care use
I did not detect endogeneity between informal care and home health care use two
years later. Since unobserved individual heterogeneity does not appear to cause endogeneity
bias in this case, I present the one-step results here (column 3, Table 9).
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The main difference two years later is that having received informal care in Wave 1
significantly increased the likelihood o f home health care use in Wave 2. This finding is
difficult to interpret. My initial interpretation was that parents who received informal care in
the first wave simply needed more absolute care in the second wave due to declines in health
that I did not control for (by only using health characteristics in the first wave). That is,
receiving informal care in Wave 1 acts as a signal that a parent’s health is beginning to
decline. I attribute this decline to receipt of informal care when it is more likely due to
declines in health status. However, looking at mean levels of home health care across the
two periods, the chance of having any home health care use fell from Wave 1 to Wave 2 (fell
from .10 to .08), so functional status may not be declining for those who were still living in
Wave 2.
Due to data limitations we do not know what happened to informal care when W'ave 2
utilization occurred. Informal care in the first period is used first as a way to break the
temporal endogeneity between informal care and utilization, and second, to serve as a proxy
for Wave 2 informal care. However, we do not know whether parents who received
informal care in Wave 1 also received it in Wave 2. Because of this it is not easy to discern
why informal care increases the chance for home health care consumption. It could be
because caregivers were burning out and no longer providing care. On the other hand,
regardless of whether informal care decreased or increased by Wave 2, it could have been
because parental health was declining in a significant way that I did not capture, hence
parents needed more absolute care in the second wave. Recognizing that informal care from
the first wave is an inexact measure of informal care two years later, it seems likely that the
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latter explanation is valid, but it is not possible to draw strong conclusions about why this
result occurred.
With a few exceptions, the other controls displayed a weaker influence on the
likelihood of home health care use two years later. A few exceptions are worth noting. First
recently experiencing angina and arthritis become significant in predicting Wave 2 home
health care use: angina decreased, while arthritis increased the chance of any home health
care use. Having a major fall in the past 12 months or a stroke ever still increased the chance
of home health care use, but to a lesser extent. This shows that there are long lasting health
Residing in a rural area now (p<.10) increased the likelihood of any home health care
use, while working significantly reduced the chance for home health care, which was
Using the parameter estimates from the home health care model. I simulated what
would happen if all persons in the sample received set decreases and increases in informal
care. Receiving even small increases in informal care can reduce home health care use
considerably in the short-term. Further, the modest increases in home health care in Wave 2
caused by informal care are overwhelmed by the reductions in Wave 1 so that the cumulative
effect is still negative. Hence, informal care is a net substitute for home health care over the
It is not reasonable to simulate all persons receiving help with 4 ADL’s or 5 ADL’s,
since the mean level o f assistance was around 2 for the 22-23 percent o f the sample who
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received any informal care. Therefore, I set the quantity of informal care provided at the 25th
percentile to the 90th percentile of informal care found in the sample. This translates to a
range of assistance o f about 0.3 I/ADL's to about 2 1/ADL’s for all persons in the sample
These modest changes in informal care supply may correspond loosely to two
possible scenarios in the future. First, we may see a reduction in informal care supply
relative to demand due to smaller numbers of potential caregivers. This could result from
lower fertility rates and a smaller number of potential child caregivers per elderly parent,
delayed child bearing in the U.S. which creates conflict between child care and elder care
On the other hand, we may see an increase in informal care if any of the current public policy
proposals to support caregiving are enacted, such as tax credits or tax exemptions for
respite care (Gore, 2000; Bush, 2000). While not based on actual projections of informal
care supply and demand, which are not readily available, each scenario has direct
implications for the use of home health care, and corresponding implications for the cost of
In Wave 1, mean home health care use was 10 percent. If all persons received the 90th
percentile of informal care, home health care use would be 5 percent (Table 10). Receiving
the 75th percentile quantity increases the likelihood of any home health care use by 262
percent, to 18 percent. Finally, receiving only the 25th percentile level care leads to a 38
percent likelihood of any home health care use (an increase of 108 percent over the 75th
percentile).
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T a b le 10. S im ulated risk o f ho m e health care use and nu rsin g hom e use given different levels o f inform al care, W ave I and W ave 2
Wave 1
Wave 2
N o te: C alcu latio n o f risk s are from sim ulations based on th e full estim ation o f the m odel. O th er param eter e stim ate s w ere held
constan t. F or hom e health care in W ave 1 tw o-step IV estim ates are used, for W ave 2, the Pseudo-M L E resu lts. For nursing
hom e care, tw o -step IV resu lts are used for both W aves. A ccounts for com plex su rvey design o f A H E A D .
\
In Wave 2, mean home health care use was 8 percent. There are smaller relative changes in
Wave 2, with informal care now increasing the likelihood of any home health care use (Table
10). Receiving the 25th percentile of informal care translates to a 7.4 percent predicted
probability o f home health care use, while receiving the 90th percentile level of care leads to a
9.6 percent predicted probability of home health care use. This represents an increase of
about 29 percent from the highest to lowest percentile simulated, and is dwarfed by the
decrease we see in Wave 1 for the same care levels simulated, of over 600 percent.
Taking the weighted average over the entire study period (1992-1995), people who
received informal care at the mean level of 2 VADL’s had an overall reduction in the
likelihood of any home health care use in Waves I and 2 of 72 percent (overall predicted
probability for Waves 1 and 2 is .07 versus .25) despite the increase in Wave 2.
Simulations also show that having poor health, being female, having a proxy
respondent, and being older increased the likelihood of home health care (Table 11). The
Wave 2 simulations were similar but had slightly smaller relative changes, and some
Informal care is a net substitute for nursing home use, both immediately and two years
later. Informal care is a net complement for the number of nights spent in a nursing home in
Wave 1 when not controlling for endogeneity (Table 8). Even though I did not detect
endogeneity between informal care and nights in a nursing home use, from the questionnaire
design we know that nursing home care preceded informal care in most cases. Only non-
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Table 11. Simulated risks of having any home health care use in Wave 1
More likely to have any HHC_______ By percent_______ Less likely to have any HHC
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institutionalized individuals were interviewed, so if nursing home care occurred it was
before the interview. Hence, I suspect that one step estimation is positively biased for nights
in the nursing home, and that these results are not valid. Instead, I highlight the results from
two-step IV estimation of the discrete measure of nursing home care (columns 3 and 5 of
Table 12).
Immediate effect
Informal care reduces the chance of any nursing home use when controlling for the
endogeneity of informal care (p<. 05). Receiving more informal care is the largest deterrent
from having any nursing home care over any other variable (column 3. Table 12). The
statistical power is low for nursing home use in Wave 1 (53 individuals out of 2,985 had any
Similar to home health care utilization, health factors are important predictors of
nursing home use, with poorer health leading to an increased likelihood of any care. Having
poor self-rated health or poor eyesight both increase the chance of nursing home use. Among
health conditions, ever having a stroke or a hip fracture, and having a major fall or arthritis in
the past 12 months increased the chance of any nursing home use. In addition, being diabetic
increased the likelihood of use. Of the health behaviors measured, being a current cigarette
Being older increased the chance of nursing home use, but other demographic
characteristics did not matter. A parent viewing religion to be somewhat important in her life
increased the chance of nursing home use relative to people who viewed religion to be very
important.
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Table 12. E stim atio n o f inform al care and o th er characteristics’ effect on any nursing hom e use, both
im m ediately an d tw o years later (W ave 1 an d W ave 2 o f A H EA D )
In fo rm a l c a r e /P r e d ic te d I n fo r m a l ca re 0.267** -8 .3 1 * * 0.1471* -2 .8 7 * *
(0.104) (4.12) (0.0764) (1.46)
H e a lth S ta tu s I n d ic a to r s
S elf-rated h e a lth (l= e x c e l!e n t, 5=poor) 0.086 0.630** 0.2497*** 0.456***
(0.142) (0.294) (0 .0873) (0.132)
Lung disease e v e r -0 .1 7 4 -1 .0 5 6 -0 .0 0 2 -0 .3 4 3
(0.542) (0.649) (0 .2 7 7 ) (0.308)
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T able 12. Estim ation o f inform al care and o ther characteristics’ effect on any nursing hom e use, both
im m ediately and tw o years later (W ave I and W ave 2 o f A H EA D )
H e a lth b eh a v io r
C urrent cigarette sm oker -2 .1 9 * * -2.54** 0.438 0.206
(1.04) (1.06) (0.299) (0.319)
M ale -0 .2 9 7 -0.691 -0 .1 3 2 -0 .0 7 6
(0.509) (0.546) (0 .257) (0.252)
Race (w hite is reference)
Black -0 .0 8 0 0.438 -0 .2 5 5 -0 .4 3 3
(0.468) (0.467) (0.262) (0.276)
R e sp o n d e n t w o rk s 0.227 0.403 -0 .5 2 4 -0 .5 0 2
(0 .667) (0.679) (0 .561) (0.565)
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T ab le 12. E stim ation o f in fo rm a l care and other ch aracteristics’ effect on any nursing hom e use, both
im m ediately and tw o y ears la te r (W ave 1 and W ave 2 o f A H E A D )
*significant a t th e 10 p e rc e n t level
** significant a t th e 5 p e rc e n t level
*** significant a t th e 1 p e rc e n t level
NOTES: N u m b e r o f o b serv atio n s is 2,985 for W ave 1 sam ple, 2,444 for W ave 2.
A ll e stim a tio n s u se probability w eights and a c co u n t fo r the design effect.
SOURCE: A sset a n d H e a lth D ynam ics A m ong the O ld e st O ld, W aves 1 and 2 .
Ill
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Having other private insurance significantly reduced the chance of nursing home use,
while having long-term insurance had no influence. Finally, as in the case of home health
care, having a proxy respondent produced the largest increase in the likelihood of any nursing
When using two-step IV estimation in Wave 2, informal care still reduces the chance
of any nursing home use, but less than in the shorter-term (Table 12, column 5). Again,
because I used informal care in Wave 1, it is difficult to discern whether informal care
persisted in Wave 2. However, even if we assume that none of the informal care persisted, it
is clear that having informal care two years earlier acted a strong deterrent from having any
The other coefficients that affected nursing home care mirrored those in the first
Wave, although at lower magnitudes. Some notable exceptions were that arthritis no longer
affected use, but having incontinence increased the chance of nursing home use. Since
having a major fall in predicting nursing home use two years later. This reflects what
geriatric nurses have said about incontinence. Besides major accidents, it is the condition
which best foreshadows nursing home entry for the single elderly (UNC Aging seminar
series, 1999).
Looking at heath behaviors, being a former cigarette smoker now increases the chance
o f nursing home care, while being a current smoker no longer matters. Religious convictions
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cease to be important but net worth becomes important. The higher one’s net worth, the
lower the probability of any nursing home use two years later (p<. 10).
I performed the same simulations for nursing home care as I did for home health care
to see how set changes in informal care affect nursing home use (right hand side of Table 10).
In Wave 1 the mean level of any nursing home care was a mere 2 percent, while in Wave 2 it
was 9 percent.
In Wave 1, persons receiving the 90th percentile of informal care had a 3.6 percent
chance of any nursing home use, while person’s receiving very small quantities of informal
care (as measured by the 25th percentile) had nearly a 30 percent chance. Moving from the
90th percentile to the 75th percentile had the biggest effect, increasing the relative chance of
any care by 276 percent (predicted probability of .13), while moving from the 75th percentile
to the median level o f care created a smaller relative increase (51 percent) in the predicted
probability to .20.
In Wave 2, informal care had a smaller coefficient but more people had nursing home
use, so we saw a simulation pattern similar to Wave 1. People receiving high quantities of
informal care (at the 90th percentile) had a 2.8 percent chance of any nursing home care,
while 75th percentile recipients had about 11.5 percent chance. Moving to median levels of
care, recipients had about a 18 percent likelihood, while those with the smallest quantity
Looking at changes over the entire study period, informal care reduced the likelihood
of nursing home care by 88.7 percent for people who received mean levels of care (weighted
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predicted probability for both waves of .05 versus .48).
Besides caregiving, having a proxy respondent, poor health, and being older all
increased the risk of nursing home use in Wave 1 based on other simulation results (Table
13). Having no other health insurance besides Medicare increases the chance of nursing
home care by 58 percent over those who have other insurance, which is surprising since
Medicaid has more comprehensive coverage of nursing home care than Medicare.
Informal care displays less o f a link with acute or routine health care use. Informal
care reduces the number of doctor's visits in the short-term and the risk of outpatient surgery
two years later, but as no influence over hospital use or quantities of acute and routine care.
Endogeneity was not detected between informal care and number of doctor’s visits in
Wave 1. Informal care slightly reduced the number of doctor visits (p<.05) in the one-step
estimation. Elderly persons who received help with 1 I/ADL had 2.9 percent fewer visits to
the doctor in a year than those who did not (Table 8), while people who received help with 2
While the reduction in visits is small, it is still not easy to interpret. A parent who
receives assistance with I/ADL’s would be expected to need more doctor’s care because they
are generally more infirm than parents not receiving care. Similarly, with a child monitoring
a parent closely, we might expect problems to be detected faster (such as repeatedly high or
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Table 13. Simulated risks of having any nursing home use in Wave 1
Note: Calculation o f risks are from simulations based on the full estimation
of the models. Other parameter estimates were held constant. For nursing home
care, two-step IV results are used for both Waves. Estimation accounts for
complex survey design of AHEAD.
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low glucose levels for a diabetic for example) or more visits for preventive care since the
child can help with the scheduling of appointments and /or provide transportation. This
Perhaps having an informal caregiver reduces the number of visits to the doctor by
helping to reduce the parent’s risks o f accidents or by helping to manage better a parent’s
medications or other daily medical care. On the other hand, this finding may have nothing to
do with physical health. An informal caregiver may simply help reduce a feeling of social
isolation common to the single elderly, which may alleviate the need to visit the doctor to
endogeneity for doctor’s visits, but that instrumenting for informal care led to imprecise
estimation of the standard errors. Hence, informal care had no effect on doctor's visits in
Wave 2. It is possible that problems of recall could bias the findings towards zero. Doctor’s
visits are fairly common for the elderly, so it is difficult to recall with accuracy a common
significantly reduced the chance of outpatient surgery two years later (p<.01). For example,
if a person received informal care in Wave 1, they had a 14 percent likelihood of any
outpatient surgery two years later. For those with no informal care, they had a 20 chance, a
43 percent increase in the predicted probability. Unfortunately we do not know what kinds of
procedures these were in order to further assess this finding. It would be interesting to know
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whether these were surgeries due to accidents, chronic conditions, or new diagnoses. If they
were primarily surgeries from accidents or chronic conditions, it may mean that having an
informal caregiver both reduces the risk o f accidents and allows for better management of
daily medical care for chronic conditions. An indication of the types of outpatient surgeries
performed comes from a sub-sample o f the National Survey of Ambulatory Surgery (1994)
I ran sensitivity tests on the sample selection criteria, the home health care measure,
and the health status measures in order to check the robustness of my results.
The utilization analysis covers two waves of data, with informal care measured only
in the first wave. An elderly respondent had to be single in Wave 1, the period in which they
received informal care, to be included in the sample. This criteria could have introduced a
different dynamic in the Wave 2 analysis if getting remarried in Wave 2 created substitution
from children informal caregivers to spousal ones. I did not control for being remarried in
the main analysis. I test for potential bias by examining the first stage regression on the
Wave 2 sample both with and without a control for ‘'married in Wave 2.” I found that being
married in Wave 2 did not affect informal care behavior of children (p < 0.310 in the over
identified model and p < .294 in the exactly-identified model). The effect of being married in
the second wave on utilization in the second wave was marginally significant in only two
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cases, the two-step IV estimation of doctor’s visits, and the one-step estimate of nights in a
nursing home. Newly married persons had slightly fewer doctor’s visits (p<. 098) and spent
more nights in a nursing home (/t<.079). Because informal care did not significantly
influence times to the doctor in Wave 2 ,1 am not overly concerned with this finding.
Informal care also had no influence on the nights in a nursing home in Wave 2
(r=l .61). When I added a control for being newly married, informal care was still not
significant at the 10 percent level (t = 1.62). Still, this does not address the concern that
spousal caregivers may be replacing and hence diluting the effect of child caregivers. In fact,
when newly married individuals were removed from the sample, informal care had a stronger
effect on nights in the nursing home (r= 1.643), but just shy o f significance at the 10 percent
level. This result reflects some bias by including married individuals in Wave 2, but also
ensures that the bias is insignificant because it does not affect the main results in Wave 2. I
The home health care measure is a derived variable from AHEAD’s helper file, and is
limited to paid assistance with I/ADL’s. While the same home health care provider who
helped with I/ADL’s may also have helped with skilled caregiving tasks, limiting the
definition in this way means that some skilled home health care is missed. Including skilled
care would have provided a more complete measure of all of the home health care provided
to the elderly, but it also would have changed informal care’s ability to substitute for home
health care.
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There is a question in AHEAD which states, “During the last 12 months did a
medically-trained person come to your home to help you?” This would have imperfectly
captured skilled home health care if incorporated into the home health care measure. I did
not incorporate data from this question into my home health care measure for two reasons:
1.) The question is vague. It is not clear whether such a visit was by a home health care
know whether this person was paid or not, which is the only indicator I had to determine
whether individual assistance was home health care or another source of informal care. 2.)
Even if I assume that all of the people who answered yes to this question were referring to
paid home health care visits, I would not expect informal care to affect this type of home
health care in the same way. I do not even know from the data whether they are two different
types o f home health care, or simply I/ADL assistance from a medically trained individual.
Looking at cross-tabulations, I find that some people who had a visit from a
individual with I/ADL’s (what I call home health care), but that the correlation was not very
high, at 0.35 for Wave 1 and 0.37 for Wave 2. From this I assume that at least for a large
proportion of people, these are two heterogeneous types of home health care.
Hence, I would expect informal care to replace unskilled home health care (which I
found) and to complement skilled home health care. I test this empirically by running a logit
model of skilled home health care on informal care. I find that, not controlling for
endogeneity, informal care significantly increases the use of skilled home health care. I do
not find evidence of endogeneity. Controlling for endogeneity, informal care does not affect
skilled home health care significantly. Turning to Wave 2 utilization, I find that, like
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unskilled home health care, informal care increased skilled home health care use by about the
same magnitude.
I also explore combining the two measures, so that receiving either unskilled or
skilled home health care is coded as "1.” I find that informal care no longer significant
changes Wave 1 home health care use after controlling for endogeneity. In Wave 2, informal
care increases home health care by slightly more than the unskilled measure does in the one-
step estimation.
These findings confirm that combining the two measures into one would incorporate
two heterogeneous types o f care, leading to offsetting effects of informal care in the short
term. For this reason, and the fact that the question on medically-trained visits was vague, I
There is a debate in the health economics literature that including health status in
outcomes models introduces endogeneity bias, which I discussed in the methods chapter
(Chapter 3). In the case o f informal and formal care, if current health status is correlated with
an unobserved preference for care, and this unobserved preference for care is correlated with
informal care as well, the policy variable could be biased. I check for this indirectly in two
ways. First, I check the correlation between the health status measures and informal care. I
find that there is between .004 and .34 correlation between the most recent health status
measures and informal care. This does not ring any alarms that health status and informal
care are too closely associated. Second, I re-ran the models without the health status
measures that occurred in the last year or less (self-rated health, self-rated eyesight, number
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of days in bed in the past month, major fall in past year, angina recently, arthritis past 12
months, and incontinence past 12 months). Essentially, the coefficient estimates on informal
care or instrumented informal care show stronger effects on formal care use without these
measures included. For example, for the two-step estimate of informal care, it moves from -
5.17 to -5.33. Most of the significance stays the same, although informal care has a positive
effect on hospital use when we do not control for current health status. This means that
hospital use that was originally attributed to a recent health shock such as a major fall, now
gets attributed to having had informal care. Instead of controlling for endogeneity bias by
excluding the most current health status measures, it appears that I am instead introducing
omitted variable bias. Omitting these variables leads the models to overstate the effect of
informal care on subsequent home health care use, when in fact it is these health status
measures that are driving some of the formal care use. For this reason and because of the low
level of correlation between informal care and recent health status measures, it is valid to
include recent health status measures as well as past health status measures.
To control for the endogeneity o f informal care, I used two-step estimation procedures
which required that the informal caregiving model contain only those child-level variables
which passed tests of over-identification in the larger system. In addition to examining these
models, it is interesting to examine less restrictive models of informal care to see whether
they better predict informal care behavior of children. In this section I present two such
models, the first o f which contains all variables listed in equation 3.2. The second model
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removes potentially endogenous variables from the estimation. In the third and fourth, I
present results from the models used in the main analysis, both the over-identified and the
exactly-identified specifications.
Both child and parent attributes determine a child’s informal care behavior, as
hypothesized. The same parent-level attributes were significant in all four of the models in
Table 14, and were of similar magnitude. The differences came from child-level variables,
Child attributes.
In the first model (see Column 1, Table 14) only two child characteristics affected
informal care behavior significantly, the number of siblings that a child had, and an indicator
of whether or not a parent asked the child for advice on major decisions. Each additional
sibling increased the number of I/ADL’s that a child helped with by .042 {p<.01). Given that
the mean number was 2 for those receiving informal care, this represents a relatively minor
increase, only 2 percent. Nevertheless, it echoes what Pillemer and Suitor (1996) found,
which is that having more siblings increases the willingness of a child to provide care.
Asking a child for advice increased the provision of informal care by much more, at .32
(/K.01). This represents a 15 percent increase in I/ADL’s. I suspect that this variable is
endogenous, so I do not use it or other transfer variables in the next model (see Column 2). I
also exclude a child’s work status and distance from a parent because Stem found them to be
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Table 14. Survey regression o f informal care (total ADLs and IADLs helped with) on child and parent
characteristics, Wave 1, (page 1 o f 4)
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Table 14. Survey regression o f informal care (total ADLs and IADLs helped with) on child and parent
characteristics, wave 1 (page 2 o f 4)
Parent-level variables
Heart attack last 5 yrs (MI included) -.047 -.042 -.039 -.042
(.090) (.092) (.092) (.093)
Angina or chest pains recently -.012 -.014 -.012 -.011
(.072) (.073) (.073) (.073)
Stroke (includes TIA's) ever .270*** .30*** .30*** .29***
(.080) (.082) (.082) (.083)
M ajor fall past 12 months .098** .108** .108** .103**
(.042) (.043) (.043) (.043)
Fractured hip ever 212** 22** 22** 222**
(.10) (.10) (.10) (.101)
Diabetic now .044 .047 .047 .057
(.055) (.056) (.056) (.056)
Cancer ever -.029 -.038 -.038 -.042
(.051) (.052) (.052) (.052)
Lung disease ever -.088 -.098 -.095 -.092*
(.054) (.055) (.055) (.055)
Arthritis past 12 months 0.004 .006 .008 .008
(.040) (.041) (.041) (.041)
Incontinence past 12 months 212*** 232*** .232*** 238***
(.050) (.050) (.050) (.050)
High blood pressure ever .024 .017 .017 .020
(.034) (.035) (.034) (.035)
H ealth behavior
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Table 14. Survey regression o f informal care (total ADLs and IADLs helped with) on child and parent
characteristics, wave 1 (page 3 o f 4)
D em ographic characteristics
Incom e a n d -wealth
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Table 14. Survey regression o f informal care (total ADLs and IADLs helped with) on child and parent
characteristics. Wave I, (page 4 o f 4)
Insurance characteristics
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The model in Column 2 includes all exogenous child-level variables expected to
affect a child’s informal care behavior. Again, number of siblings affects informal care
behavior by about the same amount as just described. None of the income measures were
significant, which was unexpected, because income is a good measure of the opportunity cost
o f a child’s time. Measurement error on a child’s income may be prohibitively high since
The over-identified model has only one significant child-level variable (see column 3
of Table 14), number of siblings (/?<.00l). A child’s gender in the exactly identified model
absorbs the explanatory power that number of siblings provided in the over-identified model,
becoming significant when it appears alone. The increase, while significant at the 5 percent
level, is small, as daughters help with .075 more I/ADL’s than sons (Column 4, Table 14).
Parent attributes.
Because the effects o f the parent-level attributes on informal care behavior were
nearly uniform across the four specifications, I discuss the results from the exactly-identified
model here (shown in Column 4 o f Table 14). Looking at the health measures, both self
assessed health and eyesight have small but statistically significant increases on amount of
informal care. The poorer the person views his or her health or eyesight, the more I/ADL’s a
parent will receive help with. The magnitudes are small, however, at .061 and .077,
respectively. Moving from excellent health (score o f 1) to very poor health (score of 6)
would lead to help with only a third more I/ADL’s (5x.077=.39). The number of days a
parent spent in bed in the past month also increased the quantity of informal care provided.
A person who spent all 31 days in bed received help with 1.5 more I/ADL’s than a person
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who spent zero days in bed (3 lx.0474), which is more than a 75 percent increase from the
The more objective disease measures, stroke, a fall, fractured hip, and incontinence all
increased informal care provision. If a parent ever had a stroke they received help with .29
more I/ADL’s from children than persons who did not. People experiencing incontinence
recently, or a hip fracture ever received help with between .22 and .29 more I/ADL’s than
those who did not, about a 10 percent increase from the mean. People who had a major fall
in the past year received less of an increase in informal care, at .10 I/ADL's.
Turning to demographic attributes of the parents, only age showed a small increase in
informal care provision (p<.01). Each additional year of age (from 70 on) leads to help with
.03 more I/ADL’s. This means that 85 year olds receive help with .45 more I/ADL's than 70
year olds.
Single elderly in rural areas received help with .11 fewer I/ADL’s than their urban
counterparts (p<.01), which is contrary to what I expected. I had hypothesized that living in a
rural area would increase reliance on informal care compared to urban people since access to
formal care in rural areas can be limited. Out-migration of children may explain this finding.
Parents who viewed religion to be not at all important to them received help with .14 fewer
Income and net worth had miniscule offsetting effects on informal care behavior. One
additional thousand dollars o f income led to a 0. 00267 increase in I/ADL’s. On the contrary,
a $10,000 dollar increase in net worth led to a -0.0002 decrease in I/ADL assistance.
Increasing both by income and net worth by one standard deviation led to a net change in
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I/ADL assistance of 0.014 ($25,527x0.00000267+ $271,372x-0.0000002). This provides
Possessing private health insurance besides long-term care insurance reduced the
quantity of informal care provided (/K.10). No other insurance attributes were significant.
The proxy for knowledge of services, a child’s education in years, slightly reduced the
quantity of informal care. This means that children with more education were more efficient
at finding formal care services for their parents. Still, the resulting decrease is miniscule,
with one more year o f education leading to a .019 fall in number of I/ADL’s assisted with.
The most overwhelming of all of the parent-level variables is whether or not there
was a proxy respondent. A parent received help with 1.32 more I/ADL’s than a parent who
Discussion.
It was surprising that so few child-level variables were significant, especially a child
working and a child living at least 10 miles away, which Stem found to be significant when
treated exogenously (Stem, 1995). In my sample, the percentage of children living 10 miles
away and the percentage o f primary caregivers living 10 miles away did not differ, hence, this
distance threshold was not a prohibitive factor in being able to provide care. However,
endogeneity may bias the work coefficient towards zero. That is, if a child has already
adjusted her work situation to adapt to a parent’s caregiving needs, this coefficient would
show a less negative effect than with no endogeneity. It is also likely that the child-level
instruments such as income and age are highly correlated with the same variables at the
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It is also interesting that, while I was limited in my choice of child-level instruments
because of the larger system of analysis in this dissertation, the more restrictive informal care
models perform equally well as those with many more child-level controls. The adjusted-R2
values hover around .40 for all models (see bottom of Table 14). This is likely due to the
exhaustive number o f parent-level controls included, which may have overwhelmed any
unique child attributes. In fact, when parent-level variables that are likely highly correlated
with child variables were omitted from the model, I find only one more unique child variable,
a child’s age.
It is reassuring that direct (days in bed, stroke, falls, incontinence) and indirect
(proxy) measures o f a parent’s health and functional status are the most important factors in
children incorporate a parent’s health status directly into their utility maximization
framework. A child’s optimizing behavior between leisure, labor and informal care provision
With the exception of the extreme case which compares a parent who spent zero days
in bed in the last month to a person who spent the entire month in bed, all of the direct
We cannot infer from these results that parent-level attributes are more important
than child-level attributes in determining informal care behavior of children, because the
model is based on parent-level data, but it is interesting that a model which controls for many
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Extensions
There are several extensions o f this dissertation work that I will pursue, both on child
informal care behavior and the effects o f informal care on formal care.
I plan to estimate the model using discrete factor analysis and non-linear
heterogeneity parameters. This will be useful to confirm that the loss in precision from two-
step TV estimation is low. When informal care data from Wave 2 of AHEAD becomes
available, I would like to revisit the research question using informal care in Wave 2 to
predict utilization in Wave 2. This will allow for a panel data approach using time fixed
effects, and will eliminate the uncertainty surrounding informal care in Wave 2.
In addition, I would like to explore further the finding that informal care affects
outpatient surgery drastically two years after the receipt o f informal care. I will do this using
CDC data on outpatient procedures and will determine what types of outpatient surgeries
these are. I also plan to work with Dr. Edward Norton in examining how informal care
affects public health care expenditures using Medicare claims. This will clarify whether the
I also have a nascent research idea to explore. There are three main factors that cause
adult children to cease providing informal care to a frail parent: increasing frailty o f the
parent, caregiver burnout, and the adult child being no longer able to manage competing
demands. Looking at this in a qualitative study would help to analyze current policy
proposals to support informal caregivers such as tax breaks and the newly adopted National
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Caregiver Support Program as a part of H.R. 782 (Clinton, 2000). The main focus will be to
find out what types of interventions would be useful to allow caregivers to keep caring for a
parent, and when in the care path these interventions should occur. Also, if a child stops
caring for a parent I want to assess the main reasons for stopping.
In future work I will examine the decision to provide care and the quantity of care
provided in a two-step model. I will also try to develop a conceptual framework of the intra
family child caregiving decision, and empirically examine all children rather than just the
primary caregivers, controlling for clustering at the family level. In addition, I will analyze
this question measuring informal care as IADL assistance only, since researchers have found
that children help more with LADL’s than ADL’s (Pezzin and Schone, 1999a).
In addition, I will use forecasts from the literature on future informal care demand and
supply, and design some policy simulations based on these, to analyze what current proposals
by the presidential candidates on support for caregivers would do to informal care demand
and supply.
I would also like to examine issues surrounding the quality o f informal care,
especially in light o f the trend for family caregivers to provide highly skilled care that they
may not be qualified to perform. This is particularly relevant for the informal care of young
dependents. Quality o f informal care has not even begun to be addressed in the literature.
Less difficult to test but equally important is that I would like to explore the common
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CHAPTER SEX:
Conclusion
I have carefully controlled for reverse causation and other sources of endogeneity in
assessing how informal care affects the health care utilization of the single elderly. I
analyzed a comprehensive list of formal care types, including home health care, nursing home
Informal care by children reduces home health care use in the short-term and
increases it two years later. Elderly persons who received informal care were 87 percent less
likely to have any home health care use in Wave 1 than people who did not (predicted
probability of is .05 versus .40). Two years later, people who had received informal care in
Wave 1 were 30 percent more likely to use any home health care than those who did not
(predicted probability is .10 versus .07). Despite the increase in Wave 2, informal care is a
net substitute for home health care over the entire study period (1992-1995). Weighting by
the sample sizes, people who received informal care had an overall reduction in the
likelihood o f any home health care use in Waves 1 and 2 of 72 percent (overall predicted
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Informal care by children can also delay entry into nursing homes by reducing the
probability of any nursing home use. This is true both immediately following the receipt of
informal care and two years later. People who received informal care at conventional levels
(2 I/ADL’s) in Wave 1 were 88.7 percent less likely to have any nursing home use in Wave 1
than people who did not (predicted probability of .028 versus .252). Two years later,
informal care recipients were also 88.8 percent less likely to have nursing home use than
people with no informal care (predicted probability of .036 versus .318). Looking at changes
over the entire study period, informal care reduced the likelihood of nursing home care by
88.7 percent (weighted predicted probability for both waves of .05 versus .48). Once in a
nursing home, informal care had no influence on the duration of the stay after controlling for
endogeneity.
Informal care played a less definitive role in determining other types of formal care.
Informal care reduced the chance of doctor’s visits in the short-term and reduced the chance
of outpatient surgery two years after the receipt of informal care, but had no effect on hospital
use or the continuous measures of care after controlling for endogeneity. Elderly persons
who received informal care at mean levels had 5.8 percent fewer doctor visits in a year than
those who did not. Furthermore, elderly persons who had informal care in Wave 1 were 43
percent less likely to have an outpatient procedure two to three years later (predicted
probability of .14 versus .20). Informal care played no role in the use of acute hospital care.
parent’s health that is the most important determinant of a child’s provision of informal care.
While being a daughter and having a large number of siblings both increased informal care
provision, these factors were overwhelmed by the multi-faceted measure of a parent’s health.
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This is different from other studies, which found many child-level characteristics to be
important predictors of a child’s behavior (Pezzin and Schone, 1999a; Boaz, 1999). The
importance of a parent’s health lends credence to the conceptual model, which assumed that a
parent’s health status enters the child’s utility maximization function directly.
Further, a parent’s wealth plays a very small role in a child’s decision to provide
informal care, which debunks the bequest motive, and provides support that children are
altruistic. The utility gained from providing informal care does not come from expected
It is interesting that the number of siblings a child has increases the likelihood of
providing care. If there are other siblings available to help with informal care duties, a child
provides more informal care. It could easily have been the reverse, that is. with more siblings
a child may provide less care because other siblings take up some slack. But we know that it
is rare to have more than one child caring for a parent. Therefore, having more siblings may
affect a primary caregiver’s behavior purely through the option value that more siblings
provide.
Lastly, confirming what has already been found in the literature, I find that most
primary caregivers of the single elderly are daughters, but that daughters provide only slightly
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Methodological conclusions: hypothesis three.
care affects elderly health care utilization. Endogeneity of informal care was most persistent
in the home health care and nursing home care models, although it was also detected in the
Wave 2 measure o f doctor’s visits. In these cases endogeneity bias made coefficients more
positive than they otherwise would have been. Even though I did not detect endogeneity for
all types of formal care, there are theoretical reasons to control for undetected endogeneity,
ranging from the peculiarities of the survey instrument to the reverse causation inherent in
informal and formal care. In fact, relaxing the significance criteria on the Durbin-Watson Hu
endogeneity tests from 5 percent to 25 percent, as suggested by Mroz (1999), allows more
endogeneity to be detected. This looser criteria encompasses any doctor’s visits and times to
the doctor, while relaxing the criteria to 50 percent encompasses all formal care types but
outpatient surgery.
variables estimation and discrete factor analysis. I was unable to estimate the model using
linear heterogeneity parameters in discrete factor analysis. However, I find that using two-
step IV estimation with child-level identifying instruments is a fairly precise way to address
endogeneity given the characteristics o f my sample and models. I have a large number of
observations, strong instruments, and high explanatory power in the first-stage regression.
Using lagged informal care to predict utilization in Wave 2 is also an effective way to
break the temporal endogeneity that was detected. This approach, however, does not control
for the endogeneity from unobserved individual heterogeneity, which was persistent in the
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Wave 2 nursing home model. Not correcting for endogeneity would lead to biased inference
about the relationship between informal care and health care use of the elderly.
Finally, in this work I have run careful specification and sensitivity tests to ensure that
the main findings are valid. Along with standard endogeneity and exclusion restriction tests,
I test for measurement error in the informal care measure, for any bias in Wave 2 stemming
from the sample selection criteria, and the appropriateness of the home health care definition.
Policy implications
The policy significance of this study is clear. It is commonly recognized that family
caregivers provide a vast quantity of long-term care to the elderly in the United States. The
National Family Caregiver’s Alliance (2000) estimates there are about 25 million family
caregivers in the U.S. today (only about 24 percent of those care for parents). The demand
for informal care over the next 30-50 years is projected to increase exponentially, as the last
of the baby boomers turns 65 in 2030. This will coincide with fewer caregivers available due
to Americans having smaller families, as well as increased competition for a daughter’s time
as she juggles work, child rearing, leisure, and parent care responsibilities. Many other
studies along with this one have examined the tradeoffs adult children make between work,
child rearing, and/or caring for an elderly parent. This study, however, goes beyond targeting
factors that affect a child’s decision to provide informal care to an elderly parent.
This study is the first to use a nationally representative sample of the oldest-old and
appropriate statistical methods to quantify precisely how informal care affects formal care
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use. Receiving informal care can save Medicare money by reducing home health care use
and can save federal and state Medicaid dollars by delaying entry into nursing homes. On a
much smaller scale, informal care replaces some doctor’s visits in the short-term and reduces
the risk of outpatient surgery two years after receiving informal care, which can also save
proponents, and other stake holders analyze current policy proposals to support caregivers.
For the first time ever the presidential candidates outlined specific proposals to support
informal caregivers. Vice-President Gore proposes to give family caregivers a $3,000 tax
credit to help defray the costs of long-term care (Gore, 2000). Governor Bush proposes to
offer a tax exemption, currently valued at $2,750 per care recipient, for family caregivers who
care for elderly parents in their home (Bush. 2000). In addition. Gore proposes to launch a
National Caregiving and Family Support Initiative. This would support adult day care, home
These proposals differ sharply in their scope and cost. Bush’s tax exemption plan is
more modest because it benefits only caregivers and parents who co-reside, and caregivers
who already claim a parent as a dependent would not benefit. Gore’s tax credit plan would
cost more and affect more people because a caregiver need not live with her parent. Finally,
Gore’s Caregiver Initiative would be the most costly and far reaching program. It is
estimated to cost $30 billion over 10 years, and would encompass all family caregivers who
desire occasional respite care and help with the coordination of long-term care services
(Gore, 2000).
Consequently, these proposals also differ in how they would affect the supply of
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informal care. The monetary benefits of the tax relief programs target the children who
provide care. Yet from a child’s perspective, which I confirm in my econometric model,
money is not a large motivator behind providing care. Children who provide care for a parent
gain utility from intangible factors. These could range from relief that a parent can remain in
her own home as she desires, to satisfaction at being able to repay a parent for all of the effort
it took to raise the child, to happiness associated with a closer relationship with a parent.
Less idealistically, these intangible benefits may arise from alleviating a child’s feelings of
guilt or the knowledge that an obligation has been fulfilled. Despite the importance of
intangible benefits to children, however, economic constraints truly may be preventing some
daughters who work from providing care, so at the margin providing monetary compensation
A much more poignant issue to child caregivers, however, is that they often
experience high levels of stress and feelings of isolation. This can lead to depression,
potentially lower quality informal care, and ultimately, a cessation of care and a substitution
o f formal care. By allowing caregivers to use occasional respite care. Gore’s Caregiver
Initiative may prevent burnout and/or improve a caregiver’s own health so may increase
informal care over time. In addition, this initiative may reduce caregivers’ feelings of
isolation by officially recognizing the role of the family caregiver in the larger health care
system, helping to increase supply of informal care. On the other hand, because Gore’s
initiative includes incentives for formal care as well, such as the respite care mentioned and
other types o f long-term care, the net effect on informal care supply is unclear. Informal
caregivers could simply provide less informal care over a longer period of time, leading to no
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From a parent’s perspective, programs providing monetary benefits to caregivers may
help a parent feel like less o f a burden to a child. To assess how elderly parents might view a
program increasing the availability of respite care and other formal care such as the one
proposed by Gore (2000), some assumptions have to be made: a parent’s first choice is to be
fully independent. If full independence is not possible, then a parent prefers to stay in her
own home and have a child care for her. If that is not possible, a parent would prefer having
a paid caregiver in her home to moving into an assisted living facility or a nursing home. If
these assumptions are correct, a parent may be resistant to participating in a respite care
program. However, if participating ultimately means that a child will continue caring for her
and she can remain in her own home, it may be much better perceived. Similarly, occasional
respite care may improve a parent’s overall quality of care by allowing a child to re-energize
If informal care truly does provide the type of care that the elderly prefer, ensuring
that informal care supply from children meets demand can improve the utility of the elderly
parent. While I confirm in this dissertation that informal caregivers do not affect the physical
health outcomes o f parents, there may be large mental health gains from having informal care
versus formal or nursing home care. This, in turn, can improve the quality of life of the frail
elderly.
With all o f the intangible benefits of informal care to both child and parent that I have
described, focusing on the tangible outcome of subsequent formal care use may appear to be
limiting. It is imminently clear that caring for an elderly parent and/or arranging for formal
long-term care are inherently emotional tasks, and that there exist many emotional and moral
arguments to support caregivers. In fact, proponents of caregiving say that caregivers should
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be supported because of the valuable role they play in our society (NFCA, 2000). It is nearly
impossible to measure the societal value of caregiving, however, never mind objectively, and
However, proponents o f caregiving also say that informal caregivers save the
government money (NFCA, 2000; FCA, 2000) and many researchers have echoed this claim,
although direct measures o f these savings have been heretofore unavailable. By showing that
a concrete reduction in formal care occurs from informal care, I can begin to assert that
informal care does indeed save the government money. Further, depending on the cost and
the scope o f the program, initiatives which support informal caregivers may be more cost-
effective to the government than funneling money directly to Medicare and Medicaid, if they
ensure that informal care supply meets burgeoning demand. The next step is to look beyond
formal care use and assess carefully how informal care affects public versus private health
care expenditures.
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