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The Use of Nursing Home and Assisted Living Facilities Among Privately Insured and Non-Privately Insured Disabled Elders

Publication Date
Mar 31, 2000

U.S. Department of Health and Human Services

The Use of Nursing Home and Assisted Living Facilities Among Privately Insured and Non-Privately Insured Disabled Elders

Executive Summary

Marc A. Cohen, Ph.D., and Jessica Miller, M.S.

LifePlans, Inc.

April 2000

This report was prepared under contract between the U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and LifePlans, Inc. Additional funds were provided by the Robert Wood Johnson Foundation Home Care Research Initiative. For additional information about the study, you may visit the DALTCP home page at or contact the ASPE Project Officer, Pamela Doty, at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, SW, Washington, DC 20201. Her e-mail address is:

The dramatic growth in the number of Americans over age 75 coupled with the need to minimize the duration of expensive inpatient hospital care, portend continued reliance on nursing home care for a significant portion of the disabled population. Even in the presence of significant expansions in home and community-based care, the nursing home still remains a key provider of long-term care (LTC) services to more than 1.5 million people, most of whom are over age 65. Alternative institutional settings such as assisted living facilities (ALFs) are also growing in popularity. Today there are more than 28,000 such residences housing more than one million people, many of whom have limitations in activities of daily living (ADLs). Thus, institutional-based care has and will remain an important component of the long-term care service delivery system.

The costs associated with receiving long-term care in institutional settings are significant and pose a financial hardship to many individuals. To meet this hardship, a growing number of individuals are purchasing private long-term care insurance. Through a series of actions, the Federal government is also signaling its desire that individuals accept greater personal responsibility for planning and paying for their long- term care needs. Such actions include tax clarification of long-term care insurance contracts, a plan to implement a Federal employees long-term care insurance plan, and expenditures on education related to the risks and costs of long-term care.

While there is a growing body of knowledge about who buys policies and what motivates them to do so, there has been no systematic study of individuals in institutionalized settings who are receiving benefits under their long-term care insurance policies. On an industry-wide basis, no one knows whether claimants and/or their families feel they are getting good value for their premiums, and whether the presence of private insurance influences the type of care people receive in these settings.

The purpose of this report is to provide basic descriptive statistics on disabled private LTC insurance policyholders who have accessed long-term care benefits in institutional settings, and to compare such data and findings to non-privately insured institutionalized elders. We did this by interviewing 480 long-term care insurance claimants from seven participating companies receiving benefits under their policies and residing in nursing homes or assisted living facilities. Key findings of the study are presented below.

The Profile of Long-Term Care Insurance Claimants in Residential Care Facilities (Nursing Homes and Assisted Living Facilities)

  • The majority of claimants in residential care facilities -- 72% -- were residing in nursing homes, and 28% were receiving services in assisted living facilities.

  • There are few differences in the socio-demographic profile of nursing home and assisted living claimants.

  • Most claimants in residential care facilities are over age 80, female, unmarried, highly educated and have incomes greater than $30,000.

  • The average income had by these residential facility claimants was about $33,000.

  • Married claimants are more likely to be in nursing homes than in assisted living facilities.

  • Slightly less than one in three claimants with dementia who are in residential care settings receive their care in assisted living facilities. Typically, the costs associated with caring for individuals in these facilities are less than in nursing homes. Thus, for some cognitively impaired individuals, private insurance coverage for assisted living care substitutes for more costly nursing home care.

  • Claimants in assisted living are about twice as likely to assess themselves to be in excellent health compared to those in nursing facilities. A parallel finding is that, compared to assisted living claimants, nursing home claimants are twice as likely to describe their health as poor.

  • The differences in the prevalence of specific diagnoses between residents of nursing homes and assisted living facilities are not statistically significant. This suggests that it is not the underlying primary diagnosis that differentiates individuals in each of these service modalities, but, instead, the way the diagnosis manifests itself.

  • The average number of ADL limitations for nursing home claimants is 4.7, whereas for assisted living claimants, this figure drops to 2.8 -- 79% of current claimants have two or more ADL limitations.

  • Among the participating companies, the average number of ADL limitations among nursing home claimants ranged from 4.0 to 5.2; for assisted living claimants, the range for the average number of ADL limitations was from 2.6 to 4.7.

  • For each ADL, the proportion of nursing home claimants in need of assistance is greater than the corresponding proportion of assisted living claimants.

  • The prevalence of cognitive impairment (as measured by diagnosis and orientation) is higher among nursing home claimants than it is among assisted living claimants. Overall, claimants in the nursing home are 1.3 times more likely to be cognitively impaired than are those found in assisted living facilities.

  • The proportion of claimants with cognitive impairment in the nursing home ranges between 75% and 86%, whereas in assisted living, the range is between 47% and 81%.

Claimants in Residential Care Facilities and HIPAA Eligibility Criteria

  • At the time of the in-person interview, almost all nursing home claimants had two or more ADL limitations or were cognitively impaired.

  • Only 78% of assisted living claimants met the HIPAA benefit eligibility criteria.

  • Individuals who did not meet HIPAA triggers in the assisted living facilities were much more likely to be unmarried, slightly less educated, and had somewhat lower levels of income. They also resided in facilities with lower daily charges -- $86 compared to $92.

  • About half (46%) of the assisted living residents who did not meet HIPAA benefit eligibility triggers had no ADL limitations at all.

Prior Residence and Service Use

  • About three in five (63%) of all nursing home residents and three in four (73%) assisted living residents had either been a previous resident in an assisted living facility or nursing home or had used home care prior to entering their current facility.

  • Almost half of assisted living residents had been in a different assisted living facility or nursing home before moving to their current residence.

  • About one-quarter of the assisted living residents had been transferred to assisted living from a nursing home. This suggests movement in both directions along the continuum of care: from nursing homes to assisted living and from assisted living to nursing homes.

  • About two in five facility residents had accessed formal home care services before their current admission to the facility.

  • The probability of entering a nursing home from a hospital is more than twice as high as entering an assisted living facility directly from a hospital -- 25% compared to 11%.

  • Prior to entering a residential care facility, between 43% and 47% resided in the community either alone or with their families.

Service Use, Costs and Payment Sources in Residential Care Settings

  • Claimants residing in nursing homes receive an average of five types of services each month, compared to four service types for assisted living claimants. This is not surprising, given the greater level of disability among nursing home claimants.

  • Nursing home residents use more medical services, skilled nursing care, nutritional services and social services than do assisted living claimants. In contrast, assisted living residents are much more likely to use transportation services.

  • With the exception of charges for skilled care, charges for care provided at the intermediate, residential and Alzheimer’s level are significantly lower in assisted living facilities -- an average of 27% for these claimants.

  • Assisted living facilities enable Alzheimer’s patients to be cared for at a lower cost than care provided in a nursing home. For this block of claimants, the associated “savings” of being able to access cognitive-related care in an assisted living facility instead of a nursing home are16%.

  • Depending on institutional setting, the insurance is the primary payment source for between 70% and 80% of these claimants. What is not paid for by the insurance is typically funded from personal resources.

  • An average of 73% of the long-term care liability is paid for by insurance. For nursing home claimants, 67% of the costs are covered, whereas for assisted living residents, the average daily benefit pays for most (88%) of the incurred costs.

  • In cases where insurance is not the primary payment source for nursing home claimants, the average daily benefit is lower, there is less likelihood of having a policy with inflation protection, and the difference between the daily charge and the daily benefit is greater.

Benefits Paid Under Insurance Contracts and Insurance Policy Designs

  • The average monthly insurance benefit paid to claimants is $2,141.

  • Monthly nursing home benefits are about 23% higher than assisted living benefits -- $2,251 versus $1,827.

  • These claimants have already used an average of $29,000 in insurance benefits per person -- $34,000 for nursing home residents and $16,000 for assisted living residents.

  • Most of these individuals (85%) have reimbursement policies covering four or more years of care at around $83 per day.

  • About two in five are eligible to receive over $100 per day in benefits for institutional care services; 45% of the claimants have policies that include some level of inflation protection.

  • The average value of available benefits is $161,000 and these individuals have thus far used up about 18% of their benefits.

  • Most individuals have been on claim for about 17 months.

  • About 45% of nursing home residents have been receiving benefits for more than a year-and-a-half; the comparable figure for assisted living residents is 25%.

Claimant Satisfaction with Insurance Policy and Insurance Company

  • The vast majority of claimants are satisfied with their policy, with most being very satisfied.

  • The vast majority (85%) had no difficulty understanding what their policy covered.

  • Roughly four out of five assisted living claimants felt that the benefits were adequate, given their care needs; the corresponding figure for nursing home claimants was about three out of five residents.

  • Most individuals -- more than 70% -- found the process of filing a claim to be easy.

  • Assisted living claimants were more likely -- 1.7 times more likely -- to find the process of filing a claim to be difficult.

  • About 90% of all individuals filing claims had either no disagreements with their insurance companies or had a disagreement(s) that was resolved satisfactorily. About 4% of claimants felt their disagreement was not resolved satisfactorily.

Impact of Private Long-Term Care Insurance on Claimants

  • For about three-quarters of claimants, the presence of insurance was not viewed as having had an influence on service-seeking behavior.

  • One in five assisted living claimants, and one in eight nursing home claimants, indicated that the presence of insurance allowed them to delay their entry into an institution.

  • Roughly one in ten individuals indicated that they entered an institution sooner than they otherwise would have, given the presence of their insurance benefits. An analysis of the profile of these individuals suggests that they are typically older, have higher incomes, and are somewhat less ADL dependent than are those who did not change their behavior and enter an institution sooner.

  • Data suggests that, for some claimants, entry into the institution is motivated by social concerns as well as by a desire to be in a protective environment should additional declines in functioning occur.

Comparing Privately Insured and Non-Privately Insured Institutionalized Disabled Claimants1

Nursing Home Residents

  • On average, disabled nursing home residents with long-term care insurance are somewhat younger than their non-privately insured institutionalized counterparts: the proportion of privately insured claimants age 85 and over is only half that found in the general population of nursing home residents.

  • There also tends to be a greater proportion of privately insured male residents compared to other residents.

  • Residents with private long-term care insurance are 2.8 times more likely to be married than are those without such insurance.

  • Compared to non-privately insured nursing home residents, insured residents are four times as likely to be college educated and about 3.2 times more likely to have incomes greater than $20,000.

  • The privately insured sample is slightly more impaired compared to other residents. The average number of limitations for disabled long-term care insurance claimants is 4.9; this compares to between 4.4 and 4.7 limitations among non-privately insured residents.

  • The vast majority of disabled residents have some degree of cognitive impairment, although insured residents are somewhat less likely to be cognitively impaired.

  • Privately insured disabled residents appear to receive fewer services than do other residents -- 5.4 services per month versus 6.7.
  • The non-insured resident population has somewhat greater medical or skilled care needs. This is borne out by their greater use of skilled nursing and medical services.

  • Non-privately insured residents have an average of 4.0 medical diagnoses whereas for claimants, the number is 3.0.

  • Data presented here suggests that, after gaining admission to a nursing home, the privately insured appear to use fewer services than that seen for other residents. Thus, if the costs associated with room and board are similar between privately insured and other residents, the former would be more profitable for two reasons: (1) the daily rate paid is likely to be higher than what is paid by other residents; and (2) service use is lower.

  • In nominal terms, the average charge among privately insured residents ($3,742) was between 27% and 40% higher than for other residents. After accounting for the impact of inflation, the difference narrows somewhat to between 10% and 22%.

  • For the privately insured, long-term care insurance and personal resources account for the major payer sources, whereas for the non-privately insured, Medicaid and personal resources comprise the primary payer sources.

Assisted Living Residents

  • Compared to other residents in assisted living, long-term care insurance claimants are somewhat younger, more likely to be male, and much more likely to be married. They also have somewhat higher income levels.

  • Long-term care insurance claimants in assisted living facilities have more disabilities than do non-privately insured residents. The average number of disabilities among claimants is 2.8, whereas among non-insured residents the comparable figure is 1.7.

  • About 75% of all assisted living residents have two or fewer ADL limitations. Among the privately insured, only 35% have fewer than two limitations.

  • For each ADL, higher proportions of insured residents exhibit dependency.

  • The greatest differences between the two groups relate to continence and toileting where claimants are between 1.8 and 2.8 times more likely to require assistance in these basic activities of daily living.

  • Assisted living residents with long-term care insurance are about twice as likely to be cognitively impaired, compared to all assisted living residents.

  • The monthly costs of care for insured residents ($2,700) are roughly 1.3 to 1.8 times higher than for other residents.

Whereas one might have thought that the continuum of care moves from home care to assisted living to nursing home care, the data present a more complicated picture. For some individuals, assisted living may actually substitute for remaining in the home and relying on formal home care services. Other claimants in assisted living facilities faced the alternative of nursing home care. Either way, it appears that, in the presence of comprehensive insurance coverage, one can expect greater use of lower intensity and more home-like institutional settings like assisted living. This presents opportunities to a sub-set of policyholders who would otherwise face more costly nursing home care.

Given the rapidly changing landscape of the service delivery network, insurers will need to continue to emphasize flexibility in their products. Along with such flexibility, however, is the need to keep consumers informed about the relationship between benefit levels and future service costs. This is particularly true for those accessing costly nursing home services. Here policy benefits cover a smaller fraction of the costs than in either the home or assisted living setting. While the presence of insurance will certainly alter service utilization patterns, few individuals seem to be drawn more quickly to seek institutional alternatives just because they have insurance. What the insurance does allow is the ability for disabled individuals to access a variety of services in alternative settings and to do so in a way that leaves these people very satisfied with their coverage.


  1. To be included in the comparison sample, the privately insured and non-privately insured had to meet a minimum disability threshold of at least two of six ADL limitations or be cognitively impaired.

The Full Report is also available from the DALTCP website ( or directly at