Understanding choices adult children make to care for elderly parents should help policymakers

Business professor uses game theory to predict decisions for eldercare

The decisions that determine whether a disabled parent enters a nursing home, lives independently in the community or lives with an adult child, involve many emotional and financial variables. In the United States and in many other countries more and more people are facing the problem of caring for an elderly family member.

According to a 2005 U.S. Department of Health and Human Services report, nursing homes in the United States in 1999 cost an average of $47,000 per year, with costs rising each year. Choosing a course of care for an elderly family member is both a financial decision and an emotional one.

A business and economics professor at Washington University in St. Louis is using game theory to understand these long-term care decisions.

As the portion of elderly Americans is increasing, the number of likely caregivers is decreasing. Baby boomers had fewer children than their parents, leaving fewer adult children to care for them when they are elderly and disabled. Furthermore, trends in divorce and remarriage brought with them new dynamics in the care of biological and stepparents.

“We are moving into a world in which we’ll have a substantial increase in the disabled elderly population relative to the working-age population,” said Robert A. Pollak, Ph.D., the Hernreich Distinguished Professor of Economics in Arts & Sciences and the John M. Olin School of Business at Washington University. “Who will be responsible for their care?”

To learn how people will answer that question, Pollak — along with colleagues from the Medical College of Wisconsin and the Agency for Healthcare Research and Quality — have developed game theoretic models that can help us understand the choices people make.

The models recognize both the dynamic nature of physical and cognitive disability and policy variables such as Social Security and publicly provided nursing home and community-based care services.

“Social Security has allowed the healthy elderly to live independently, but once mom becomes disabled, she and her family face difficult choices,” Pollak said. “A major public policy concern is the extent to which government efforts to provide long-term care for the disabled elderly will cause family members to step back and let the government do it — that is, government efforts may ‘crowd out’ private efforts. The extent to which this will happen will depend, in part, on how government programs are structured and the incentives they provide to families.

“We don’t intend to make policy recommendations, but rather to understand better the choices families make. This understanding is vital if we are going to anticipate the effects of government policy on the care of the disabled elderly.”

Exploring incentives

Using game-theory models to study the strategic situation facing the parent and the adult children, Pollak and his collaborators attempt to predict what outcomes are likely based on the incentives facing each family member.

“An economist’s first instinct is to focus on bequests as incentives for care giving, but bequests are unlikely to provide the crucial incentives: most estates are small, and about 80 percent of estates are divided equally among children. Parents who do not evenly distribute inheritances report a variety of reasons for doing so.

“When there is co-residence, it looks as if one of the children provides virtually all of the care and the rest of the children contribute very little,” said Pollak. “The non-coresident children usually neither contribute financially nor spend much time caring for the parent. Once mom moves in with you, she becomes your responsibility. Your siblings know this, and mom, unless she is cognitively impaired, knows this, too. Everyone can see what the next move in the game is likely to be.”

Recognizing that their bargaining power will be weakened if mom moves in with them, adult children may avoid inviting co-residence with mom.

“Care of the disabled elderly is not just a U.S. concern,” Pollak said. “Europe and Japan, which have experienced below-replacement levels of fertility, face even more serious problems than the U.S. And the situation in China is especially interesting because of the one-child policy.”

Pollak, working with Liliana Pezzin, Ph.D., J.D., at the Medical College of Wisconsin, and Barbara Schone, Ph.D., at the Agency for Healthcare Research and Quality, received a grant from the National Institutes of Health to explore the factors that influence families’ long-term care choices.

Editor’s note: Professor Pollak is available for interviews. Washington University has a broadcast-quality ISDN line and VYVX fiber-optic video deliver in its on-campus studio. Television and radio can conduct live or pre-recorded interviews.