This study examined the effect of family caregivers’ income level on their willingness to pay out-of-pocket payments for use of better LTC services for institutional care recipients. As a result, 39.0% of the participants were willing to pay out-of-pocket payments if a recipient could use a better service than the current one. Specifically, 46.7% of those with a monthly household income of “greater than or equal to 3 million won and less than 5 million won” and 59.3% of those with the monthly household income of “greater than or equal to 5 million won” showed the willingness to pay out-of-pocket payments. The results indicate that those with higher monthly household incomes are more willing to pay out-of-pocket payments. In addition, the willingness to pay out-of-pocket payments increased in the group paying high non-benefit out-of-pocket payments and in the group feeling no financial burden of the out-of-pocket payments and having a high monthly household income. It was also confirmed that as the monthly household income of the family caregivers increased, the willingness to pay out-of-pocket payments significantly increased, even after adjusting demographic characteristics of recipients and family caregivers, non-benefit out-of-pocket payments, the financial burden for out-of-pocket payments, satisfaction with service quality, and need for quality improvement.

The family caregivers’ financial and education levels are key contributors to choosing the types of services and the use of LTC services. Brau and Lippi Bruni [17] suggested that coverage of LTC service is lower in the lower-income class than in the other classes, and that income influences the service purchase power. In domestic studies, the amount of benefit use was relatively low in the low-income class in a low health insurance premium quintile [18], and the income level had a significant effect on the choice of facility admission and the amount of home care service use [14].

The financial resources required for the operation of LTC insurance consist of the national treasury, insurance premiums, and out-of-pocket payments paid by the users. The results of our study showed that the higher the monthly household income, the higher the recipient’s willingness to pay more out-of-pocket payments if it resulted in better services. These results are consistent with the results of studies conducted in Germany [19] and Taiwan [20] on the willingness to pay health insurance premiums and LTC insurance premiums for older adults. In a study conducted in Germany [19], the recipients were asked, “Assuming that you have no health insurance, how much health insurance premium per month are you willing to pay if the current level of health insurance service is provided, considering your income level?” The result was that the higher their income level, the higher the amount they could pay. In a study conducted in Taiwan that examined the willingness to pay the insurance premiums required to continue health insurance services and expand their scope to LTC [20], it was also found that the higher the household income, the higher the willingness to pay and the higher the amount that could be paid. Through these two studies, the household income of the family caregivers correlates with their willingness to pay insurance premiums and the amount they can pay, which indicates that the income of family caregivers is a variable that significantly affects (a) the willingness to pay for the maintenance, continuation, and expansion of social insurance and (b) the amount they can pay.

In addition, Japan’s LTC insurance system applies the out-of-pocket payment rate differentially according to the user’s ability to pay to secure the system’s financial sustainability [4,21]. In the early stage of the system introduction in April 2000, the out-of-pocket rate of 10% was applied uniformly, but 20% (from August 2015) or 30% (from August 2018) was applied differentially to the high-income class later [4]. The impact of the 20% increase included a decrease or increase in service use or suspension of the service between the 10% and 20% groups, but it was not statistically significant [21]. In addition, after the 30% increase in the out-of-pocket payment rate, the rate of decrease or suspension of the use of LTC services was 3.2% in the 20% group and 5.2% in the 30% group. The rate was higher in the 30% group, but a statistical verification was not conducted. These two surveys presented that the increase in the out-of-pocket payment rate had statistically minimal effect on the amount of care service used.

LTC service users consider the mitigation of out-of-pocket payments (41.3% in 2019, 49.9% in 2020, and 48.8% in 2021) as the most important thing for system improvement [1]. However, it should be noted that, as seen in the results of our study, as much as 39.0% of the service users said they would pay more out-of-pocket payments than now if they could use better services. This indicates that it is necessary to have an institutional mechanism where the mitigation of out-of-pocket payments is expanded and high-quality services are available to those who want to pay more out-of-pocket payments.

The willingness to pay out-of-pocket payments should have a precondition that recipients could use better services. Better LTC institutional service and “good care” can be defined in various ways depending on the characteristics of the defining entities and the environment surrounding them. Seok [10] defined “good care” as living like a human until the day of death while sustaining the remaining ability to the maximum in a safe environment, holding the right to self-determination under professional judgment, considering individual tastes, and maintaining relationships with family members. In other words, person-centered service rather than provider-centered service can be defined as good care. Murphy [22] conducted a survey targeting the nurses who provided LTC services and concluded that the factors that influence “good care” include services that increase the independence and autonomy of users and create a home-like environment, along with person-centered services that increase intimacy and professional services by experienced and competent staff. Additionally, staff must have a strong understanding of users’ conditions and desires. The results of these two studies indicate that to enjoy “good care,” the recipients should be able to (a) use professional services by staff who are well aware of the various conditions and needs of recipients in a safe and comfortable environment and (b) live a dignified life while actively interacting with their families or local communities. To provide such good care, we need to invest in infrastructure aspects, such as providing more private bedrooms to guarantee personal privacy and control infectious diseases, strengthening manpower allocation standards to provide more direct services, and securing more diverse and professional service providers [23]. The area that accounts for the highest percentage of LTC insurance benefit costs (fee) is labor costs [24], so adjustment of the fee schedule should also be considered in this discussion.

The cost bearers (family caregivers) unanimously emphasized that the “medical and nursing services” must be improved within the LTC facilities. In a survey about LTC in 2019, 6.9% of the survey respondents were not satisfied with the LTC facilities’ nursing and medical services, and 16.2% of respondents reported that the treatment service specialized for diseases must be improved in institutional care benefits [5]. Part-time doctors, nurses, or nursing assistants are providing medical and nursing services in LTC facilities. It is prescribed in the law that at least one part-time doctor should be assigned to a LTC facility, and one nurse or nursing assistant should be assigned to 25 residents [8]. According to the LTC benefit provision standards, institutional care benefit institutions, including LTC facilities, should assign nurses preferentially to manage the health of residents [25]. However, as of the end of December 2021, nurses accounted for only 14.4% of the whole nursing staff (nurses and nursing assistants) in institutional care benefit institutions, including LTC facilities [9]. It was found that 6.5% of LTC facility users (112,741 as of April 2016) experienced hospitalization, and 82.7% received outpatient medical treatment [26]. The most frequent diseases for either hospitalizations or outpatient medical treatments were unspecified pneumonia, Alzheimer’s dementia, essential hypertension, and cerebral infarction. The residents in LTC facilities have a high level of medical and nursing care needs. Therefore, in order for them to actively respond to the medical and nursing services provided by LTC facilities, it is necessary to have a full-fledged discussion on medical and nursing services provided in LTC facilities as well as strengthen the nurse staffing standards.

Lee et al. [6] found that a new group of older adults with a higher education level, higher income, and higher financial independence than the current older adult population had appeared. When this new group of older adults use LTC services, they will demand more specialized, diverse, and personalized services than they receive now. Thus, the LTC insurance system should be improved to meet this new group’s expectations and to consider their financial sustainability. For future implications, it is necessary to think more deeply about a system that can actively respond to optional services to reflect individual preferences and improve the quality of basic care services. In Germany, Article 88 of the LTC Insurance Act stipulates that additional benefits can be provided to older residents under the agreement with older adults beyond the necessary LTC services. These additional benefits refer to particularly good services related to care, meals, and additional caregiving services, which are made under the agreement between older adult resident and the LTC facility. In principle, the entire cost shall be borne by the users [4].

From the standpoint of older adults in a LTC facility, the facility is both residential and living space. Therefore, it is necessary to devise a plan that can address the individual and diverse needs of older adults residing in LTC facilities. In a study by Kwon et al. [27], both academic and field experts agreed on the provision of additional services to the recipients, such as additional cognitive activities at the request of recipients, a physical function recovery program, and individual meals at a time and place desired by recipients, at a cost that exceeds the current out-of-pocket payment rate. However, there is still no discussion on essential care services in LTC insurance. Based on our findings, we recommend a system that can provide optional services beyond the scope of mandatory standards or basic care services. In addition, a cost burden mitigation policy should also be discussed to prevent the recipients from being unable to properly use necessary services due to financial burdens.

In this study, we found that 39.0% of recipients were willing to pay more out-of-pocket payments for the use of better services. To our knowledge, this study is the first study to examine the effect of the monthly household income of the family caregivers and their willingness to pay out-of-pocket payments for the use of better LTC services.

However, this study has some limitations. First, the monthly household income value may differ from the actual household income because the survey respondents subjectively reported their income values. We converted the monthly household income based on the March health insurance premium of the certified LTC recipients in 2021 of the households that the survey respondents found to be the same as the 5th quintile distribution. Second, this study targeted only the cost-bearers (family caregivers) for institutional care benefit users. Institutional care benefits and home care benefits have differences in non-benefit expenses, such as meal material cost and out-of-cost expense rate (institutional care benefit: 20% of benefit cost, home care benefit: 15% of benefit cost), but this study analyzed only the institutional care benefits. Therefore, it is necessary to analyze the willingness to pay out-of-pocket payments for each income level of the cost-bearers (family caregivers) paying the cost of home care benefits in the future. Third, in this study, the cost bearers were composed of only family members who were paying out-of-pocket payments. In Korea, most of the out-of-pocket payments for LTC facilities are paid by the older person’s adult children. The proportion of paying partial or full out-of-pocket payments has increased from 1.8% [16] in 2010 to 9.4% [28] in 2021, but the proportion of family members, such as children, paying the cost of LTC service is still higher than that of recipients themselves. As the proportion of recipients of pensions such as private pensions and basic pensions is increasing, the proportion of recipients paying the cost of LTC services is expected to gradually increase. Lee et al. [29] suggested that a “new elderly generation” with significantly different characteristics and needs from the current older adults has emerged. Lee et al. [29] argued that this generation will show characteristics that are different from the previous elderly generations in various ways, such as a high level of education, familiarity with leisure culture, and a high desire to participate. Han [30] examined the requirements of the new older generation for LTC services. They found that the new older generation had high requirements for personal health care, respect for lifestyle, social interaction, high quality of service, and a safe environment. Lee et al. [29] and Han [30] suggested that post-baby boomers have high secondary education completion rates, high income levels, and diverse personalities and needs. In other words, the consumers who will use LTC services in the future need to deeply consider how they will respond to their various needs and expectations for high quality services. For future implications, tailoring a fact-finding survey to this emerging baby boomer generation and conducting a follow-up study to identify the service quality that they want and their perception of the cost burden regarding LTC services and facilities are recommended.

In the LTC insurance system, out-of-pocket payments are one of the main sources along with LTC insurance premiums and national and local government contributions. In this study, 39.0% of the families of LTC institutional care recipients were willing to pay out-of-pocket payments if older adults can use better LTC services. As the income level of the cost-bearers (family caregivers) increased, their willingness to pay out-of-pocket payments also increased. Our findings indicate that the review of the out-of-pocket payment system should be discussed along with the review of the quality of LTC services. It is necessary to reach a social consensus by publicizing the LTC services the family caregivers want, how much more they can pay for better services, and how much more they are willing for LTC insurance premiums. A full-scale review of the system reform is necessary to prevent out-of-pocket payments from becoming an economic barrier to service use and to allow the out-of-pocket payments to contribute to service quality improvement and financial stabilization of the LTC insurance system for older adults.