Reforming the US Long-Term Care Insurance Market

R. Braun and Karen Kopecky

No 24-005E, CIGS Working Paper Series from The Canon Institute for Global Studies

Abstract: One in three 50-year-old Americans will spend over 90 days in a nursing home, with roughly one in ten facing out-of-pocket expenses exceeding $200,000. Yet, only about 10 percent of individuals aged 65 or older possess private long-term care insurance (LTCI). While Medicaid provides benefits for those with minimal assets (about $2,000 or less) and low income, its stringent means-test and private market frictions result in many retirees paying for long-term care (LTC) expenses out-of-pocket. As the American population ages, policymakers anticipate a rise in state and federal Medicaid expenditures. This chapter examines reforms to both public and private LTCI provision using a structural model of the US LTCI market. Three policies are considered: universal public LTCI, no public LTCI coverage, and a policy that exempts asset holdings from the Medicaid asset test on a dollar-for- dollar basis with private LTCI coverage. We find that this third reform enhances social welfare and creates a vibrant private LTCI market while preserving the safety- net provided by Medicaid to low-income individuals.

Pages: 32
Date: 2024-03
New Economics Papers: this item is included in nep-age and nep-hea
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Working Paper: Reforming the US Long-Term Care Insurance Market (2024)
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