Cash-for-care and its impact on older adults’ informal and formal long-term care use: evidence from continental European countries

Abstract

This study examines whether receipt of cash-for-care (CFC) benefits promotes or displaces family-based informal or, conversely, formal long-term care use. Utilizing cross-national data from four waves (2015–2021) of the Survey of Health, Ageing, and Retirement in Europe (SHARE) covering Austria, Belgium, France, and Germany, generalized linear models — accounting for variations in granting of these benefits — are applied. With CFC having become increasingly widespread in those traditionally conservative-corporatist welfare states in Continental Europe, this study provides novel insights into the role of CFC and its impact on care use, while also revealing persistent country-specific heterogeneity. The results provide robust evidence that CFC facilitates informal caregiving, especially in Austria and Germany. However, identification using plausible exogenous variation in the generosity in granting care allowances across waves, countries, and regions reveals that the same effect does not apply to formal care. In contrast, the findings suggest that CFC may discourage formal care use. Yet, significant cross-country differences emerge, with Germany standing out as the only country where CFC incentivizes both informal and formal care use – including their combination – while also mitigating potential unmet needs. Offering policy-relevant insights on how to address emerging challenges resulting of demographic aging, evolving care needs, and cost control, this study highlights the crucial role of the specific design of the CFC scheme, particularly with respect to access and benefit allocation, in shaping the care mix.