Who can see it coming? Demand‐side selection in long‐term care insurance related to decision‐making abilities
研究发现，教育和计算能力这两种决策能力在长期护理保险中产生不同的选择效应：教育导致逆向选择，而计算能力带来部分抵消的有利选择，且高决策能力者能做出更优的保险选择，加剧了选择效应。
Abstract Despite the growing demand for long‐term care (LTC), the uptake of private LTC insurance (LTCI) is low and even declining in the United States. One reason is the complexity of LTCI decisions. Researchers have therefore suggested to support decision‐making abilities. This paper shows, however, that such support would not unambiguously enhance functioning of the LTCI market. We analyze whether selection arises from two correlated but different decision‐making abilities at old age, education and numeracy, and interactions thereof with private information. Using historical data from the Health and Retirement Survey we find that education generates adverse selection, which is only partially offset by advantageous selection due to numeracy. In addition, individuals with greater decision‐making abilities make better LTCI choices, amplifying selection by education and numeracy. This points at a trade‐off between decision simplicity and selection in insurance markets and suggests other steps are needed to enhance the performance of private LTCI markets.