Given that most informal caregivers providing help for patients with Alzheimer’s disease are retired spouses or unemployed people, there is no market value for their time. Most articles that tried to estimate the cost of informal care for Alzheimer’s disease rely on the so-called “replacement” methodology, which assumes that 1 hour of informal care has the same value as 1 hour of professional care. Little attention has been dedicated to exploring the validity of this assumption. In this article, we determine the relationship between the price of informal caregiving and professional care from the first-order condition of a theoretical model that maximizes informal caregivers’ satisfaction with providing care.
This article formalizes the marginal substitution rate between informal and formal care. We assume that the caregiver’s utility depends on the caregiver’s burden and the patient’s quality of life (QoL). After explaining the parameters of the marginal utility of caregivers, we estimate each of these parameters using PLASA data.
Our results show how the value of informal care increases as the care contributes to improving patients’ QoL but decreases as the burden on the caregiver increases and professionals contribute to patients’ QoL.
The central assumption of the replacement cost method of perfect substitution between informal and formal care leads to a misestimation of the value of informal care. The effects of informal care must be considered (direct effect on the burden and indirect effects on the patient’s QoL).