The Effect of Investment in Elderly Care on Hospitalization: Evidence from Norway

Abstract

In this paper we look at how investment in long-term care for elderly affects their hospital use. We use an action plan – the HPE – which increased the number of long-term care units in Norway by almost 60 percent. With an imputation-based event study methodology we exploit the variation in timing of the plan in different municipalities to establish a causal connection between more long-term care units and hospitalization. This is the main contribution of our thesis, and to our knowledge we are the first to estimate the causal effect of LTC on hospitalization in Norway. We find that municipalities investing in elderly care, by increasing their number of long term care units, saw an increase in hospitalization compared to those that did not. As a result, the cost of elderly care increases beyond what the investment implies. For the population aged 80 and above our estimates suggest that the number of bed-days in hospital per person increased by around 50 percent in the period following the HPE. The number of overnight stays increased by around 60 percent. These findings seem to partly be explained by a reduction in mortality rates. Our estimates are robust using several robustness checks.