The Importance of Employer-Sponsorship in the Long-Term Care Insurance Market

Abstract

Medicare and Medicaid are major sources of long-term care payments and thus will bear much of the burden from the growth in long-term care service use. The large future demand for long-term care services is of great concern among policymakers due to its expense and the use of public program dollars. It is argued that the individual purchase of long-term care insurance can help alleviate the increasing financial pressure on public programs responsible for the majority of long-term care financing. However, consumers have shown little interest in insuring against the high costs of long-term care. This analysis examines the effect of several factors on the decision to purchase a long-term care insurance policy: knowledge and attitudes of long-term care insurance and the long-term care financing system, the perceived risk for long-term care, financial planning behavior, and the availability of long-term care insurance. The interim results indicate the factor most likely to affect the decision to purchase long-term care insurance is access to employer-sponsored long-term care insurance. This suggests that the availability of affordable and high quality coverage is more important than demand-side factors such as awareness of long-term care insurance and a perceived greater risk for long-term care.