What is the impact of policy differences on nursing home utilization? The cases of Germany and the Netherlands

•Almost twice the percentage of elderly in the Netherlands was institutionalized in Germany.•Not one single factor is decisive; factors are consistent with a - relatively - large government responsibility toward care for the elderly.•Encouraging elderly to move to elderly homes to decrease the housing shortage after WWII might have had long-lasting effects.•A key in the success of a reform is a behavioral change in the system.

Though need factors would predict a higher rate of institutional use in Germany, in 2004 the percentage of people over 65 in institutions in the Netherlands was almost double the percentage in Germany. The lower nursing home utilization in Germany coincided with lower out-of-pocket costs, de facto means-testing of social assistance for such care, a lower perceived quality of nursing home, and less acceptance of the nursing home as a main care modality for adults experiencing functional impairments. These factors have developed over time and are consistent with a - relatively - large government responsibility toward care for the elderly and a preference for institutional care over home care in the Netherlands. The policy to encourage older adults to move to elderly homes to decrease the housing shortage after WWII might have had long-lasting effects. This paper points out that a key in the success of a reform is a behavioral change in the system. As there seems to be no single factor to decrease the percentage of older adults in nursing homes, a sequence of policies might be a more promising route.