Subsidize consumers or service firm? The design of a government subsidy policy for an older adult care service supply chain.

BACKGROUND: To promote the development of older adult care services, a government can offer two types of subsidy programs: a consumer subsidy policy and a service subsidy policy. Choosing an appropriate subsidy policy to maximize social welfare is a critical decision for the government. METHODS: We consider an older adult care service supply chain consisting of the government, a service firm, and heterogeneous older adult consumers, who are classified into economy-conscious and quality-conscious segments, and develop a game-theoretic model to analyze the optimal subsidy program. RESULTS: The structure of the optimal subsidy policy depends on the price sensitivity coefficient of economy conscious consumers, the service cost, and the market share of such consumers. As the price sensitivity coefficient increases, the consumer subsidy policy exhibits an increasingly pronounced advantage over the service subsidy policy in enhancing consumer surplus, firm profit, and social welfare. In particular, when the price sensitivity coefficient is high, the consumer subsidy policy always achieves such a tripartite outcome. CONCLUSIONS: Consumer subsidy policy lowers the financial threshold for accessing older adult care services, thereby promoting health equity among the older population, and this improved affordability does not necessarily come at the expense of service quality. Therefore, governments should adopt the price-sensitivity coefficient of older adults as a core criterion in subsidy design, since it simultaneously guides the economically optimal policy and the instrument most congruent with public health goals.