HHS/ASPE. U. S. Department of Health and Human Services.Background

Long-Term Care Insurance

ASPE Research Brief

June 2012

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This Research Brief describes the long-term care insurance industry; in particular, it covers who buys the product, how much it costs, what the market looks like, and foreign experience.

This brief was prepared through intramural research by the U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, Office of Disability, Aging and Long-Term Care Policy. For additional information about this subject, visit the DALTCP home page at http://aspe.hhs.gov/office_specific/daltcp.cfm or contact the authors Pamela Doty, Ph.D., or Samuel Shipley at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, S.W., Washington, D.C. 20201, Pamela.Doty@hhs.gov or Samuel.Shipley@hhs.gov.



Background

Long-term care includes a range of services and supports individuals may need to meet their health or personal needs over a long period of time. Most long-term care is not medical care, but rather assistance with the basic personal tasks of everyday life, sometimes called "Activities of Daily Living" or ADLs. There is a high likelihood that individuals who survive to older ages will need assistance with these ADLs, which can include: bathing, dressing, toileting and eating. The assistance is costly and there are limited sources of third party funding.

Private LTCI is currently being purchased primarily by middle aged and older Americans with higher than average incomes, who are healthy enough to pass underwriting, and who plan ahead.

  Percentage of Adults Age 55 and Older with LTCI  
Less than $20,000 3.3
$20,000 to $50,000 8.8
$50,001 to $100,000 13.8
More than $100,000     19.3  

Private LTCI differs in important ways from health insurance.


The Market for and Cost of LTCI

  Age at Purchase     Percentage Increase  
65 and younger   25%
66 20%
67 15%
68 10%
69 5%
70 and older   No increase  


Barriers to Expansion of Private LTCI

Barriers to expansion of LTCI include underwriting, affordability, distrust of private LTCI companies, lack of awareness of the risk of needing long-term care, and, some argue, Medicaid crowd-out of LTCI.

Underwriting

Affordability

Distrust of Private Insurers

Lack of Awareness of Potential Long-Term Care Risk

Medicaid's Role


Efforts to Expand the Role of Private LTCI

Tax Incentives

The "Long-Term Care Insurance Partnership"

Long-Term Care Awareness Campaign


Cross-National Experience

Almost all European Union countries have universal public long-term care programs (benefits not restricted to the poor) -- but these programs vary greatly.53

France is the only European country with substantial voluntary LTCI take-up -- probably because private LTCI "wraps around" a modest public benefit that is income-adjusted.


Endnotes

  1. Kemper, P., Komisar, H.I., and Alecxih, L. 2005/2006 (Winter). "Long-term care over an uncertain future: What can current retirees expect?" Inquiry, 42(4): 335-350.

  2. Ibid.  

  3. Ibid.  

  4. MetLife Mature Market Institute. 2011. Market Survey of Long-Term Care Costs. Available at http://www.metlife.com/assets/cao/mmi/publications/studies/2011/mmi-market-survey-nursing-home-assisted-living-adult-day-services-costs.pdf.

  5. Tabulations by Brenda Spillman, Urban Institute for ASPE/HHS, unpublished.

  6. Analyses of 2004 NLTCS carried out for ASPE by Brenda Spillman of the Urban Institute, Washington, DC.

  7. Ibid.  

  8. Ibid.  

  9. Ibid.  

  10. Data compiled November 2, 2011 for ASPE by Eileen Tell, V.P. at Univita Health, Natick, MA based on LIMRA reports and other Univita data.

  11. Data on percentage of in force individual/group policies are from Eileen Tell (see endnote 3). Data on percentage of individual/group new sales are from the 2010 AHIP survey conducted by LifePlans and were provided in advance of publication by Marc Cohen of LifePlans, Inc., Waltham, MA, October 24, 2011.

  12. American Association of Long-Term Care Insurance. 2011 Long-Term Care Source Book. Available at http://www.aaltci.org/ltc-marketing/sourcebook/2009.php/.

  13. Johnson, R., and Park, J. 2011 (January 28). Who Purchases Long-Term Care Insurance? Washington, DC: Urban Institute. Available at http://www.urban.org/publications/412324.html. This and the next four bullets under this heading were based on analyses of 2008 HRS data. Johnson has made additional unpublished HRS data analyses on LTCI purchase available to ASPE under an ASPE contract with the Urban Institute.

  14. Ibid.  

  15. Ibid.  

  16. Ibid.  

  17. Ibid.  

  18. Johnson, R.W., and Mermin, G.T. 2008 (August). Long-Term Care and Lifetime Earnings: Assessing the Potential to Pay. Washington, DC: Urban Institute. Final Report to ASPE/HHS. Available at http://aspe.hhs.gov/daltcp/reports/2008/ltearn.htm. The published report is based on 2004 HRS data, but additional unpublished analyses based on 2008 HRS data have been provided to ASPE under an ongoing contract with the Urban Institute.

  19. Calculations by ASPE staff using LIMRA data provided by Eileen Tell, Univita Health (see endnote 3).

  20. AHIP. 2012. Who Buys Long-Term Insurance 2010-2012? Available at http://www.ahip.org/AHIPResearch/.

  21. LifePlans. 2011 (April). National Long-Term Care Claims Decision Study: An Empirical Analysis of the Appropriateness of Claims Adjudication Decisions and Payments. Available at http://aspe.hhs.gov/daltcp/reports/2010/claims.htm.

    Miller, J.S., Shi, X., and Cohen, M. 2008 (April). Private Long-Term Care Insurance: Following an Admissions Cohort over 28 Months to Track Claim Experience, Service Use, and Transitions. Available at http://aspe.hhs.gov/daltcp/reports/2008/coht28mo.htm.

    Cohen, M., and Miller, J. 2000 (April). The Use of Nursing Home and Assisted Living Facilities among Privately Insured and Non-Privately Insured Disabled Elders Living in the Community. Available at http://aspe.hhs.gov/daltcp/reports/2000/nhalfuse.htm.

    Cohen, M., Weinrobe, M., and Miller, J. 2000 (April). Multivariate Analyses of Patterns of Formal and Informal Services Use among Privately Insured and Non-Privately Insured Disabled Elders Living in the Community. Available at http://aspe.hhs.gov/daltcp/reports/2000/multanal.htm.

  22. Brown, J., and Finkelstein, A. 2011 (September). Insuring Long-Term Care in the U.S. NBER Working Paper No. 17451 Available at http://www.nber.org/papers/w17451.pdf.

  23. Tergeson, A., and Scism, L. 2010 (October 16). Long-Term Care Premiums Soar. Lankford, K. 2011 (January). "Long-term care rate hikes loom." Kiplinger Personal Finance Magazine. Available at http://www.kiplinger.com/magazine/archives/longtermcare-rate-hikes-loom.html.

    U.S. General Accounting Office. 2008 (June 30). Long-Term Care Insurance Oversight of Rate Setting and Claims Settlement Practices. Washington, DC: GAO-08-712.

  24. Trevor, T. 2010 (September 20) "Hancock plans to raise rates by 40%" in LifeHealthPro. Available at http://www.lifehealthpro.com/2010/09/20/hancock-plans-to-raise-ltc-rates-40?page=2.

  25. For information specifically on low lapse rates of private LTCI see LIMRA International and Society of Actuaries. 2006. Long-Term Care Insurance Persistency Experience. Available at http://www.soa.org/files/pdf/ltci-ins-persistency.pdf.

  26. LifePlans. 2010 (December). A Profile of Declined Long-term Care Insurance Applicants: A View of Selected Socio-Demographic Characteristics. Prepared for ASPE/HHS, not yet published on ASPE's website.

  27. Ibid.  

  28. 2010 data are from the 2010 AHIP survey conducted by LifePlans and were provided in advance of publication by Marc Cohen of LifePlans, Inc., Waltham, MA, October 24, 2011 (also including comparative statistics from earlier AHIP LTCI Buyer/Non-Buyer Surveys). The 1990, 1995, 2000, and 2005 survey findings are summarized in AHIP. 2007 (April). Who Buys Long-Term Care Insurance: A 15 Year Study of Buyers and Non-Buyers 1990-2005. Available at http://www.ahip.org/content/default.aspx?bc=39|341|328|21022.

  29. Unpublished focus group research conducted for ASPE under a contract with Thomson/Reuters by Knowledge Networks.

  30. AHIP survey, op cit 28.

  31. Ibid.  

  32. Duhigg, C. 2007 (March 26). "Aged, frail, and denied care by their insurers."New York Times. Retrieved on December 4 from http://www.nytimes.com/2007/03/26/business/26care.html.

    Duhigg, C. 2007 (May 25). "Congress putting long-term care under scrutiny." New York Times. Retrieved December 4, 2009 from http://www.nytimes.com/2007/05/25/business/25care.html?scp=1&sq=long-term+care+insurance&st=nyt.

    Duhigg, C. 2007 (October 3). "Scrutiny for insurers of the aged." New York Times. Retrieved December 4, 2009 from http://www.nytimes.com/2007/10/03/business/03care.html?scp=3&sq=long-term+care+insurance&st=nyt.

  33. LifePlans. 2010 (April). National Long-Term Care Claims Decisions Study: An Empirical Analysis of the Appropriateness of Claims Adjudication Decisions and Payments. Washington, DC: ASPE/HHS. Available at http://aspe.hhs.gov/daltcp/reports/2010/claims.htm.

  34. Harvard Professor Robert Blendon's 2011 poll sponsored by the Robert Wood Johnson Foundation and National Public Radio found similar trends. Cited by Ludden, J. 2011 (September 27). Retirement: Reality Not as Rosy as Expectations. National Public Radio. Transcript available at http://www.npr.org/2011/09/27/140680583/retirement-reality-not-as-rosy-as-expectations.

  35. See speeches, articles, testimony and reports by Steve Moses and others published by the Center for Long-Term Care Reform, Seattle, WA at http://www.centerltc.com/reports.htm.

  36. Waidmann, T., and Liu, K. 2006 (April). Asset Transfer and Nursing Home Use: Empirical Evidence and Policy Significance. Issue Brief for the Kaiser Commission on Medicaid and the Uninsured. Washington, DC: Henry J. Kaiser Family Foundation. Available at http://www.kff.org/medicaid/upload/7487.pdf.

  37. Pauly, M.V. 1990 (February). "The rational non-purchase of long-term care insurance." Journal of Political Economy, 98(1): 153-168.

    Brown, J., Coe, N., and Finkelstein A. 2007. "Medicaid crowd out of private long-term care insurance demand: Evidence from the Health and Retirement Survey." Tax Policy and the Economy, 21: 1-34.

  38. Kim, G. 2010. Medicaid Crowd-Out of Long-Term Care Insurance with Endogenous Medicaid Enrollment. Available at http://repository.upenn.edu/cgi/viewcontent.cgi?article=1211&context=edissertations&seiredir=1#search=%22Medicaid%20Crowd-Out%20LongTerm%20CareInsurance%20Endogenous%20Medicaid%20Enrollment%22.

  39. Johnson, R.W., and Mermin, G.B.T. 2008. Long-Term Care and Lifetime Earnings: Assessing the Potential to Pay. Draft paper for ASPE.

  40. Cited in Ludden, J. 2011 (September 27). Retirement: Reality Not as Rosy as Expectations. National Public Radio. Transcript available at http://www.npr.org/2011/09/27/140680583/retirement-reality-not-as-rosy-as-expectations.

  41. Dranove, D., Capps, C., and Dafny, L. 2011. Strategic Analysis of HHS Entry Into the Long-Term Care Insurance Market. Kellogg School of Management, Northwestern University, Evanston, IL and Bastes White Economic Consulting, Washington, DC. Non-published report commissioned by ASPE/HHS.

  42. National Survey of Residential Care Facilities. 2010. Joint NCHS and ASPE funded research.

  43. Brown, J., and Finkelstein, A. 2011 op cit.

  44. Ibid.  

  45. Thomson Reuters and Univita Health. 2011 (October 17). The Long-Term Care Partnership Program: 5 Years After Enactment under the Deficit Reduction Act. Prepared for ASPE/HHS contract.

  46. Ibid.  

  47. Ibid.  

  48. State of Connecticut, Office of Policy and Management. 2011 (January). The Connecticut Partnership for Long-Term Care, A Progress Report to the General Assembly. Available at http://www.ct.gov/opm.

  49. Thomson Reuters and Univita Health. 2011 (October 17). The Long-Term Care Partnership Program: 5 Years After Enactment under the Deficit Reduction Act. Prepared for ASPE/HHS.

  50. Long-Term Care Group and LifePlans. 2006 (November 30). Final Report on the "Own Your Own Future" Consumer Survey. Washington, DC: ASPE/HHS. Available at http://aspe.hhs.gov/daltcp/reports/2006/OYFsurvey.htm.

  51. Ibid.  

  52. Personal communication by insurer to ASPE staff (insurer requested not to be publicly identified).

  53. Nadash, P., Doty, P., Mahoney, K.J., and von Schwanenflugel, M. 2012 (February). "European long-term care programs: Lessons for community living assistance services and supports." Health Services Research, 47(1pt1): 309-328.

  54. Intramural research project by Pamela Doty, ongoing.


OTHER LONG-TERM CARE WORKFORCE BRIEFS AVAILABLE

Long-Term Care Insurance Research Brief (June 2012)
Full HTML Version   http://aspe.hhs.gov/daltcp/reports/2012/ltcinsRB.shtml
Full PDF Version   http://aspe.hhs.gov/daltcp/reports/2012/ltcinsRB.pdf
Direct Care Workforce: An Integral Part of Long-Term Services and Supports (April 2013)
Full HTML Version   http://aspe.hhs.gov/daltcp/reports/2013/dcwIB.shtml
Full PDF Version   http://aspe.hhs.gov/daltcp/reports/2013/dcwIB.pdf

To obtain a printed copy of this report, send the full report title and your mailing information to:

U.S. Department of Health and Human Services
Office of Disability, Aging and Long-Term Care Policy
Room 424E, H.H. Humphrey Building
200 Independence Avenue, S.W.
Washington, D.C. 20201
FAX:  202-401-7733
Email:  webmaster.DALTCP@hhs.gov


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Last Updated: 02/04/2013