Microsimulation in a Cold Climate David Bell University of Stirling

Microsimulation in a Cold ClimateMicrosimulation in a Cold Climate

David BellUniversity of Stirling

OPERAOPERA

Older PEople’s Resource Allocation model

Addresses issues of population ageing

Design has been reactive rather than proactive

Partly due to funding issues

Consequence – coherence? – but closely linked to policy process

2ESRC Microsimulation Seminar Leeds 2nd July 2009

Structure of TalkStructure of Talk

Structure of OPERA

Applications

1. Local Income Tax – Burt Commission

2. Indexation of Social Security Benefits – Finance Committee

3. Modelling Home Care Costs – Audit Scotland

4. Dementia Satellite Model – Alzheimer’s Scotland

ESRC Microsimulation Seminar Leeds 2nd July 2009

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Structure of OPERAStructure of OPERA

Population• UK Households (Private/Non-Private?)• Subsets – region – local authority?

Main datasets• Family Resources Survey

(Boosted sample in Scotland)

• Survey of Personal Incomes

What to do about communal dwellings?


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Structure of OPERAStructure of OPERA

Accounting Relationships• Taxes and Benefits• Non-behavioural

• Home Care• Parameterised from external dataset

• Care Homes• Calibrated from key statistics• More data soon available


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Structure of OPERAStructure of OPERA Software - Stata/Mata

Statistics Distributions Panel Survival Directly integrate estimation results

Graphics Wide range of flexible routines

Choropleth maps• Not currently in Stata Corp release


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ESRC Microsimulation Seminar Leeds 2nd July 2009 7

Example 1: Local Income TaxExample 1: Local Income Tax

Proposal to replace council tax with local income tax

• Variant 1: uniform rate of local income tax throughout Scotland

• Variant 2: each local authority able to set its own local income tax

What would be the distributional and spatial consequences?


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Distributional EffectsDistributional Effects


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0%

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<-- Poorer Income Decile Richer -->

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Winners and Losers with Local Income TaxWinners and Losers with Local Income Tax


Costs (% of Disposable Income) of Costs (% of Disposable Income) of Various Local Tax Structures Various Local Tax Structures


Example 2 – Projecting Consequences of Example 2 – Projecting Consequences of Indexing Social Security Benefits to PricesIndexing Social Security Benefits to Prices

Rather than transit from Period 1 to Period n in unit time period increments, ignore the dynamics and reweight data based on externally projected control totals.

Disaggregate geographically


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Effect of Continued Price Indexation on Effect of Continued Price Indexation on Household PovertyHousehold Poverty


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Example 3 - Home Care CostsExample 3 - Home Care Costs

Based on Welsh Local Authority SurveyBased on Welsh Local Authority Survey Distribution of

Costs Highly Skewed

40% of clients account for 10% of costs

10% of clients account for 40% of costs

Poses real problems for estimation, simulation

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Modelling Home Care CostsModelling Home Care Costs

Common specification of cost functions• Log cost - log(y) = Xβ + ε•

But E(ln(y)) ≠ ln(E(y))

Unbiased estimates of y difficult if ε is heteroscedastic in x

If ln(y) ~ Normal (μ=xβ, σ2=f(x)), then

E(y|x) = exp(xβ +0.5 f(x))

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Determinants of Personal Care Determinants of Personal Care CostsCosts

Costs • increase with disability•decrease with age•decrease with presence of informal

carer•unaffected by gender and ethnicity•vary by local authority

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Costs by Age and Gender Costs by Age and Gender UK as a Policy LaboratoryUK as a Policy Laboratory

LA Costs of Personal Care - Averages over individuals receiving care (£ per week)

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Costs by Index of Disability Costs by Index of Disability (Resource Need)(Resource Need)


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Charges by DisabilityCharges by DisabilityLA Charges for Personal Care - Averages over individuals

receiving care (£ per week)

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Model CalibrationModel Calibration

Estimate determinants of costs of care using Welsh dataset

Estimate determinants of needing care and of being in receipt of local authority care using FRS data

Match FRS disability classification with that used in Welsh survey

Select most disabled of those receiving LA care in FRS sample to receive personal care – match with proportions receiving LA personal care in Scotland (thus model mimics Scottish policy setting)

Stochastic simulation of model to maintain distribution of costs rather than focus on point estimate

Results weighted using FRS weights to represent UK/Scottish population

Example 4 - Simulating Dementia CostsExample 4 - Simulating Dementia Costs

Satellite Model

Not restricted to private households

Uses information on life expectancy, dementia prevalence, duration and costs

Competing risks model

Time aggregation to generate annual estimates


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Simulating Dementia CostsSimulating Dementia Costs

Weibull hazard used to model months of life expectancy after age 65

Scale and shape parameters set to approximate life expectancy patterns


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Life Expectancy by Multiple Deprivation Life Expectancy by Multiple Deprivation DecileDecile


Prevalence of DementiaPrevalence of Dementia


Dementia CostsDementia Costs

Types of “what if” questions?

What if prevalence rises/falls?

What if onset could be delayed by better medical interventions?

What if cost structure changes?

What if dementia sufferers cared for at home rather than in care homes?


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Dementia by Deprivation DecileDementia by Deprivation Decile


Changed Individual Dementia Changed Individual Dementia PrevalencePrevalence


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Change in Costs Associated with Change in Costs Associated with Changed PrevalenceChanged Prevalence


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Modelling Dementia CareModelling Dementia Care

Model not specific to dementia – could run a different/wider range of competing risks

How to integrate calibrated satellite model with main dataset?

How to deal with care home residents on whom liuttle socio-economic information available


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ConclusionsConclusions

Calibration helps explain the obvious

But is no more powerful than the data on which it is based

Don’t overplay the results

Careful work with policy makers important, especially when calibration weak


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Care CostsCare Costs

Most recent SE estimate of cost of providing FPC at home to pensioners in 2003-04 ~ £120m

Model estimate ~ £170m• Consistent with LAs spending approx £50m prior to

introduction of policy

What about the personal care costs of those aged under 65 requiring PC?

Model estimate ~ £130m

Fewer clients, higher cost per client

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Model ResultsModel Results

Weekly Costs by Age and Gender Household Net Income by Costs of Care Personal Care Costs by Disability Aggregate Annual Costs by Age and Gender Influence of Informal Carers On Costs UK Costs of Applying Scottish Personal Care

Policy to Domiciliary Clients

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Costs by Age and Gender Costs by Age and Gender


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Costs by Household Net IncomeCosts by Household Net Income

Household Net Income Before Housing Costs by Care Status (weighted)

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Not Receiving Personal Care Receiving Personal Care

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Costs by DisabilityCosts by DisabilityLA Costs of Personal Care - Averages over individuals


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Charges by DisabilityCharges by DisabilityLA Charges for Personal Care - Averages over individuals


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Aggregate Costs by Gender and Age Aggregate Costs by Gender and Age GroupGroup

Total Costs of Personal Care by Ageband - aggregate (£m)

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How Does Presence of Informal Carer How Does Presence of Informal Carer Influence Local Authority Costs?Influence Local Authority Costs?

Someone with an informal carer less likely to receive LA care

Someone receiving LA care will receive less costly support if informal carer present

This does not account for effects of informal care provision on labour market participation

When local authority care available, informal carers may act as gatekeepers and/or provide other services

Documents

Microsimulation in a Cold Climate David Bell University of Stirling