Accounting for Low Take-up Rates and High Rejection Rates in the U.S. Long-Term Care Insurance Market
Tatyana Koreshkova (),
Karen Kopecky () and
R. Anton Braun
Additional contact information
R. Anton Braun: Federal Reserve Bank of Atlanta
No 515, 2016 Meeting Papers from Society for Economic Dynamics
A protracted stay in a nursing home towards the end of life is one of the biggest risks faced by individuals. The annual cost of a nursing home stay in 2010 was $84,000. At age of 50, the probability of a nursing home stay ranges from 50 to 59 percent and among those who have a stay, 20 percent spend more 3 years. Yet, only about 10 percent of U.S. retirees purchase private long-term-care (LTC) insurance. Previous research has emphasized that Medicaid crowds out the demand for private LTC insurance. However, rejection rates are also high. Nearly 40 percent of the potential pool of purchasers would be rejected if they applied for private LTC insurance using current screening guidelines. We explore the possibility that high rejection rates are due to adverse selection. We propose a model which features agents who have private information about their risk exposure, a private LTC insurer and a government who provides public insurance (Medicaid). Our model accounts for low coverage rates and high rejection rates of private LTC insurance and is used to consider welfare-enhancing reforms of private and public provision of LTC insurance.
New Economics Papers: this item is included in nep-age, nep-dge and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:515
Access Statistics for this paper
More papers in 2016 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().