Private Long-term Care Insurance Research Articles

Partnership Program for long-term care insurance: the right model for addressing uncertainties with the future?

ABSTRACTPublic policies that provide incentives for higher middle-income people to purchase private long-term care insurance (LTCI) have been proposed as a way to shield large numbers of middle-income people from the risk of needing costly long-term care. A proposal to promote purchases of private LTCI that has gained modest traction in the United States of America is the Partnership Program. The structure and public–private nature of the Partnership Programs are reviewed along with the trends in sales of both regular private LTCI policies and Partnership LTCI policies to show that both experienced low purchase rates. Implementation efforts for the Partnership Programs were very modest, in part because many were launched when the Affordable Care Act was passed. At the same time, several well-known insurers withdrew from selling private LTCI. Understanding why the Partnership Program is not a success provides lessons for other counties interested in creating similar public–private ventures.

When the Affordable Has No Value, and the Valuable is Unaffordable: Comments on the U.S. Market for Long-Term Care Insurance

The crowding-out by Medicaid has been identified as a possible reason for the low demand for private long-term care insurance. I extend the previous analysis to the case in which budget constraints inhibit access to care. This changes the nature, scope, and welfare implications of crowding-out. It suggests a large value of Medicaid that a private insurance market is unable to offer due to a dilemma prevalent in - but not exclusive to - the market for long-term care insurance: a dilemma between access and affordability. Several empirical patterns can be explained by considering the implications of limited affordability.

Demand-Side Factors Associated with the Purchase of Long-Term Care Insurance.

Demand-side barriers are known to be important toward explaining the limited purchase of private long-term care insurance (LTCI). In this study, we examine several factors associated with the demand for LTCI including the availability of less costly substitutes (e.g., Medicaid, family), consumer information, and risk perception. Using buyer surveys from 2000, 2005, and 2010, our results suggest that, among individuals not eliminated through medical underwriting, consumer risk perception and the presence of lower cost, imperfect substitutes are strongly associated with the limited purchase of LTCI. These factors were also predictive of the generosity of coverage purchased. If policymakers seek to stimulate demand for LTCI, new public policies might include Medicaid reform, integrating LTCI with Medicare Advantage plans, enhanced LTCI offerings through employers, and targeted informational campaigns.

Multistate Actuarial Models of Functional Disability

Long-term-care (LTC) costs are expected to significantly increase over the coming decades as the Baby Boom generation nears retirement. Recent policy discussions in the United State have focused on expanding the private LTC insurance market so as to alleviate some of the pressure on public programs. An important and fundamental input to the pricing of LTC insurance products is a set of age- and sex-specific functional status transition rates that can flexibly take into account alternative benefit trigger specifications. We apply generalized linear models to evaluate disability transitions for individuals in old age based on a large sample of U.S. elderly. We estimate a multistate model for LTC insurance applications and find significant differences in disability rate patterns and levels between our set of estimates and those separately estimated using an earlier approach developed by the Society of Actuaries. Our results suggest that the elderly face a 10% chance of becoming LTC disabled only at ages past 90, rather than in their 80s. Furthermore, age patterns of recovery are found to differ significantly between the sexes. We also show that these estimates of transition probability are sensitive to the definition of “LTC disability,” which has implications for the design of benefit triggers for private and public LTC insurance programs.

Steigende Inanspruchnahme von Hilfe zur Pflege – Reformbedarf für die Pflegeversicherung?

Abstract Since the late 1990s, the number of people who are dependent upon welfare due to the need for long-term care is increasing continuously. This development is not only alarming because receiving social assistance is emotionally difficult for every single person who is in need. It also means an increasing challenge for the local authorities which are responsible for financing this social welfare scheme. However, neither enhancing the statutory long-term care insurance system nor subsidizing supplementary private long-term care insurance will resolve this problem satisfactorily. It is necessary to find different political solutions.

Bilateral Intergenerational Moral Hazard: Empirical Evidence from China

Bilateral intergenerational moral hazard (BIMH) has been considered as one of the most important reasons for the sluggish development of private long-term care (LTC) insurance. On the one hand, the parent, who relies on child effort to avoid admission to the nursing home, may abstain from purchasing LTC insurance. On the other hand, buying LTC insurance coverage serves to protect the available bequest from the cost of LTC, thus weakening child interest in providing informal care as a substitute for formal LTC. In this paper, we investigate whether BIMH with respect to LTC exists in China. A survey conducted in October 2012 in Shanghai suggests that respondents may well exhibit BIMH as predicted by Courbage and Zweifel. However, contrary to their predictions, neither a decrease in parental wealth nor a decrease in the child’s expected inheritance are found to trigger net BIMH effects. These findings have important implications both for insurance companies planning to develop LTC products and for Chinese public policy concerning LTC.

Lemons or Cherries? Asymmetric Information in the German Private Long-term Care Insurance Market

This study provides evidence of the presence of asymmetric information in the German long-term care (LTC) insurance market. While certain private information—individuals’ pessimism level and preference for insurance—contributes to advantageous selection, the major source of adverse selection—individuals’ self-assessed high LTC risk—switches the final correlation between insurance and risk to one that is significantly positive. In addition, the study reveals that although individuals’ self-assessment of poor health predicts their future care needs very well, such assessments are not necessarily reflected in insurance demand. The results from this study could assist insurers in better understanding and managing LTC risk.

How Can Adult Children Influence Parents' Long-Term Care Insurance Purchase Decisions?

Long-term care (LTC) poses a significant strain on public health insurance financing. In response, there is policy interest in bolstering the private long-term care insurance (LTCI) market. Although families are central to LTC provision, their role in LTCI demand remains unclear. The purpose of this study was to obtain in-depth information concerning: (a) How do older parents evaluate the need for LTCI, (b) what role do adult children play? and (c) How do families communicate about parents' LTC preferences and plans, including LTCI purchase? We conducted focus groups with older parents and adult children in diverse markets. Two groups were conducted with older parents who had purchased LTCI and two with parents who had not purchased LTCI. Four groups were conducted with adult children, mixed as to whether their parents had purchased LTCI. Probes were informed by published reasons for purchasing or not purchasing LTCI. We analyzed transcriptions using directed content analysis and constant comparative method. Older parents valued autonomy for themselves and their children. Older parent purchasers regarded LTCI as supporting this value while nonpurchasers perceived limitations. Adult children described unstated expectations that they would care for their parents. Though discussions between parents and children about LTCI were rare, successful influence occurred when children appealed to shared values, specifically avoiding burden and remaining home. Messages that emphasize autonomy over LTC decisions and interventions that start the LTC conversation among families, with attention to shared values, could increase private LTCI uptake.

Long-Term Care Insurance in China: Public or Private?

China faces an overwhelming and urgent need for long-term care (LTC). We explored long-term care insurance (LTCI) plans in China and the factors associated with each plan’s contribution rate. A cross-sectional survey of 814 residents (18–59 years) was conducted to assess the expectations of elderly care, public and private LTCI features. Public LTCI may be more popular whether in terms of participation or contribution. The factors associated with public LTCI contribution rate were healthcare costs, household income, and number of daughters; for private LTCI, the factors were the proportion of living expenditures, worry about future care problems, and healthcare costs. Policymakers should develop public LTCI as a solid foundation and improve private LTCI as a substitute to meet the urgent LTC needs in China.

Can the government incentivize the purchase of private long-term care insurance? Evidence from the Partnership for Long-Term Care

Using data from the Health and Retirement Study, I show that state adoption of Partnerships for Long-Term Care incentivized the purchase of private long-term care insurance, particularly for households displaying the greatest risk aversion and long-term financial planning horizons.

Can Long-Term Care Insurance Partnership Programs Increase Coverage and Reduce Medicaid Costs?

Although long-term care is a substantial financial risk for retired households, only about 10 percent purchase insurance, with many of the remainder relying on Medicaid. Faced with rising Medicaid expenditures on long-term care, states have attempted to encourage the purchase of private long-term care insurance through partnership programs that exempt purchasers of qualifying policies from the Medicaid asset test. Using numerical optimization techniques, and assuming plausible preference parameters, we show that the programs will only increase insurance coverage among single males by 5 percent and single females by 4 percent. Most of the program benefits will go to those who would have purchased non-partnership long-term care insurance anyway. Thus, the cost of the subsidy will exceed the savings in Medicaid costs.

Role of race and ethnicity in private long-term care insurance ownership.

To determine if racial/ethnic disparities exist in the ownership of private long-term care insurance (LTCI) among current Medicare beneficiaries. This study used the 2011 wave of the National Health and Aging Trends Study. Bivariate analysis and multivariate logistic regression were employed to isolate the independent effects of race/ethnicity on LTCI uptake. Stratified multivariate analyses were used to further examine the effect of race/ethnicity on LTCI ownership. 12.3% of Blacks and 5.8% of Hispanics, compared with 20.2% of Whites (p < .001), reported having LTCI coverage. We found that Hispanics were 48% less likely to have LTCI (p = .005) compared with Whites, whereas no difference was found between Blacks and Whites. Compared with White women, Hispanic women were 81% less likely to be insured (p < .001). Ethnic disparities persisted among individuals who, based on income and assets, are considered appropriate for purchasing private LTCI coverage. This study demonstrates that ethnic differences exist in the ownership of LTCI among elderly Americans. Additional research is needed to determine what factors are responsible for the apparent underrepresentation of Hispanics in the LTCI market.

Social long-term care insurance and redistribution

We study the role of social long-term care (LTC) insurance when income taxation and private insurance markets are imperfect. Policy instruments include public provision of LTC as well as a subsidy on private insurance. The subsidy scheme may be linear or nonlinear. For the linear part we consider an arbitrary number of types, characterized by earnings and survival probabilities. In the nonlinear part, society consists of three types: poor, middle class and rich. The first type is too poor to provide for dependence; the middle class type purchases private insurance and the high income type is self-insured. The main questions are at what level LTC should be provided to the poor and whether it is desirable to subsidize private LTC for the middle class. Interestingly, the results are not totally similar under both linear and nonlinear schemes. First, whereas in the linear case a subsidy of private LTC insurance is desirable, it is not in the nonlinear case (at least at the margin). Second, the desirability of public provision of LTC services depends on the way the income tax is restricted. In the linear case, it may be desirable only if no demogrant (uniform lump-sum transfer) is available. In the nonlinear case, public provision is desirable when the income tax is sufficiently restricted. Specifically, this is the case when the income is subject only to a proportional payroll tax while the LTC reimbursement policy can be nonlinear.

Financing long-term care for frail elderly in France: The ghost reform

Like many welfare states, France is faced with increasing demand for long term care (LTC) services. Public LTC coverage has evolved over the past 15 years, reaching a coverage depth of 70%. Nonetheless, it does not provide adequate and equitable financial protection for the growing number of frail elderly individuals, who are expected to constitute 3% of the population by the year 2060. Since 2005, various financing reform proposals have been debated, ranging from a newly covered risk under the social security system to targeted subsidies for private LTC insurance. However, to date no reform measure has been enacted. This article provides a brief history of publicly financed LTC in France in order to provide a context for the ongoing debate, including the positions and relative political power of the various stakeholders and the doubtful short-term prospect for reform.

Multi-State Actuarial Models of Functional Disability

We apply generalized linear models to evaluate disability transitions for individuals in old age based on a large sample of U.S. elderly. We estimate a multi-state model for long-term care insurance applications, and find significant differences in disability rate patterns and levels from the commonly-used Robinson (1996) model. Our results suggest that the elderly face a 10% chance of becoming long-term care disabled only at ages past 90, rather than in their 80s. Furthermore, age patterns of recovery are found to differ significantly between the sexes. These estimates of transition probability are sensitive to the definition of 'long-term care disability', which has implications for the design of benefit triggers for private and public long-term care insurance programs

Can Long-Term Care Insurance Partnership Programs Increase Coverage and Reduce Medicaid Costs?

Although long-term care is a substantial financial risk for retired households, only about 10 percent purchase insurance, with many of the remainder relying on Medicaid. Faced with rising Medicaid expenditures on long-term care, states have attempted to encourage the purchase of private long-term care insurance through partnership programs that exempt purchasers of qualifying policies from the Medicaid asset test. Using numerical optimization techniques, and assuming plausible preference parameters, we show that the programs will only increase insurance coverage among single males by 5 percent and single females by 4 percent. Most of the program benefits will go to those who would have purchased non-partnership long-term care insurance anyway. Thus, the cost of the subsidy will exceed the savings in Medicaid costs.

Social values and the role of law: the use of legal planning tools for old age by privatised and non-privatised Kibbutz members

ABSTRACTHistorically, the Kibbutzim in Israel were established as collective, socialist communities. However, since the 1980s, the Kibbutz movement has undergone profound social processes. One of the outcomes of these processes was the privatisation of the Kibbutz. The goal of this study was to examine the relationship between the socio-legal structure of the Kibbutz (i.e. non-privatised versus privatised) and the awareness, knowledge and usage of legal planning tools for old age. Using a quantitative research method, a closed questionnaire was designed and distributed to a non-probability convenience sample, consisting of 295 respondents, of them 137 (46%) from traditional Kibbutzim and 158 (54%) from privatised Kibbutzim. Five different legal tools were examined: private pension; private long-term care insurance; advanced health-care directive, will, and organ donation. According to findings, on average, members of privatised Kibbutzim reported higher levels of awareness, knowledge and usage regarding legal planning tools for old age. These findings support other studies that point to the relationships between societal values (collectivist versus individualistic) and social policies regarding older persons – in general, and legal policies in the field of law and ageing – in specific. It is expected that a shift toward a more individualistic value-based society will increase the awareness and usage of individually based legal planning tools for old age.

Die Auswirkungen bedarfsabhängiger Leistungen: Ergänzungsleistungen in der Schweiz

AbstractAs in many other countries, means tested benefits constitute an important part of the Swiss old age security system and disability insurance. In contrast to universal benefits, such targeted transfers are intended to only support the ones in need and thereby lead to low level of public expenses. However, individuals face strong incentives at various stages in life to adapt their behavior in order to become eligible. Using the Swiss Erg¨anzungsleistungen as an example, we argue that means tested benefits increase the incentive to apply for disability benefits, raise the attractiveness of early retirement, and induce individuals to favor a lump sum payment over an annuity. Moreover, they decrease the incentive to purchase private long-term care insurance.

Partnership Long-Term Care Insurance: Lessons for CLASS Program Development

The Community Living Assistance Services and Supports (CLASS) Act was a voluntary public insurance strategy intended to help people pay for long-term care. CLASS was passed as part of health reform to overcome aspects of private long-term care insurance market failure but came under close scrutiny from both its supporters and its detractors. Experience with the long-term care insurance market and State Partnership Programs provide insights about how to make CLASS fiscally viable. A CLASS program that offered one set of options to cover front-end risk (e.g., 1 to 3 years) and another set to cover catastrophic risk (after a high deductible) could have been offered as an alternative to the basic CLASS “long and lean” benefit model with all enrollees joined into a single risk pool. This would have broadened the risk pool and lowered premium costs under the program.

The Effect of Long-Term Care Insurance on Home Care Use Among the Disabled Elders

Using the 1998–2004 Health and Retirement Study, this study uses Cox’s model to explore the effects of private long-term care insurance ownership on first home care use among the disabled elderly. Results show that long-term care insurance ownership and Medicaid eligibility did not significantly increase the likelihood of using home care services, while income and homeownership lowered this likelihood. Functional limitation was the key determinant of home care use and those who lived with children were less likely to use home care services. Based on the findings, this study provides foundations for long-term care policies and long-term care planning programs.