Marc A. Cohen, Ph.D.
Vice President, LifePlans, Inc.
President, Center for Health and Long-Term Care Research
Maurice Weinrobe, Ph.D.
Professor of Economics, Clark University
Jessica Miller, M.S.
Senior Research Associate, LifePlans, Inc.
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 http://aspe.hhs.gov/_/office_specific/daltcp.cfm 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: Pamela.Doty@hhs.gov.
The opinions and views expressed in this report are those of the authors. They do not necessarily reflect the views of the Department of Health and Human Services, the contractor or any other funding organization.
In April of 1999, a report entitled "A Descriptive Analysis of Patterns of Informal and Formal Caregiving among Privately Insured and Non-Privately Insured Disabled Elders Living in the Community" was submitted to the Department of Health and Human Services and the Robert Wood Johnson Foundation. The purpose of that report was to provide basic descriptive statistics on disabled policyholders of private long-term care (LTC) insurance who had accessed long-term care benefits in the community. Information about these individuals and their service use was then compared to similar data among non-insured disabled community-dwelling elders.
Many of the comparative descriptive analyses in that report showed important differences between the privately insured and non-privately insured groups along a number of important dimensions. For example, we showed that individuals with private insurance use less informal care but, on average, use more total weekly assistance with activities of daily living (ADLs) and instrumental activities of daily living (IADLs) than do those without insurance. We also showed that the use of Medicare funded home health services is much lower among the privately insured than among those without private insurance. Finally, a significant minority of individuals with private LTC insurance reported undermet ADL needs.
While all of these bivariate results were found to be statistically significant, because no other possible explanatory variables were controlled for, one could not attribute these differences to the presence of insurance. In this report, we employ a number of multivariate analytic techniques to begin to do so. Thus, the purpose of this report is to enhance our understanding of the factors associated with these differences and to begin to identify the independent effect or role played by LTC insurance. We also analyze the underlying dimensions of satisfaction that are related to the claimant's evaluation of the insurance policy.
Key findings are presented below.
The Impact of Private LTC Insurance on Total Services Consumed
Having private LTC insurance does increase the amount of care received by individuals and the same can be said for having public LTC insurance (i.e. Medicaid). The presence of insurance increases weekly care by between 10 and 13 hours.
Benefits also appear to be distributed rationally: individuals with greater levels of ADL and IADL limitations receive more weekly care.
Finally, the net effect of having an informal caregiver is more care received and not less. Put another way, the additional care financed by insurance does not lead to an overall reduction in the total care received by individuals. Even in cases where informal caregiving may decline, this is more than offset by increases in formal caregiving.
The Impact of Private LTC Insurance on the Use of Medicare Financed Home Health Care Services
Above and beyond selection effects, individuals with LTC insurance are less likely to access Medicare home health services than are those without the insurance.
Given the demographic and health characteristics of the privately insured, their rate of Medicare home health use is only one-half of what would be predicted -- 5.6% compared to 11.1%.
Expansions in the market for private insurance should be accompanied with declines in Medicare home health usage and expenditures. For every 100 privately insured claimants, Medicare saves annual costs of up to $20,647 (1999 dollars).
The Relationship between Insurance Status and Undermet Need
Privately insured claimants are more likely to report undermet ADL need than are the non-privately insured. Yet, when holding other variables constant, having private LTC insurance does not influence whether or not someone reports undermet ADL need.
The majority of claimants do not report undermet needs. However, individuals with multiple caregivers and those who receive a great deal of care informally are most likely to report undermet ADL need.
While both age and disability status are positively associated with the probability of reporting undermet need, the effects moderate somewhat among the oldest and most disabled individuals. This suggests that the insurance is helping to address the needs of the group most "at risk" for potentially having to access more costly institutional care.
The fact that a sizeable minority of individuals reports undermet ADL needs indicates problems in the service delivery system. Such problems as the lack of clear lines of responsibility vis-à-vis coordination of care and inadequate caregiver training are among the most important underlying individuals' sense that their ADL needs are not being adequately met.
Consumer Satisfaction with Private LTC Insurance
When it comes to claimants' evaluation of the insurance policy, the critical dimensions of satisfaction with insurance benefits include how much care people are receiving, how individuals are treated by the insurance company at claim time, the characteristics of the insurance policy, and whether the policy allows them to remain living in the community.
Although policy design is important to claimant satisfaction, it is not the most important variable. The interaction between the insurance company and the claimant at claim time and how a claim is serviced are critical to the claimant's overall evaluation of the policy.
These multivariate analyses demonstrate that it is not just who is buying the insurance that explains differences in service utilization, but the presence of the insurance itself. Findings presented here suggest that, while the insurance clearly finances greater levels of formal care, its benefits do not replace informal care. In fact, reductions in the level of informal caregiving are more than offset by increases in formal care.
There is also an interaction between the insurance and use of Medicare home health services. Those who have LTC insurance are much less likely to access Medicare funded services. Thus, as the market continues to grow, reductions in Medicare financed home health services can be expected to decline. Whether this would be sustained over time is a question that cannot be answered from this data.
There are lessons for insurance companies as well. Insurers will need to broaden their role and focus on how to help individuals use benefits judiciously. They may also be called upon to take a more active role in monitoring the quality of providers and assuring that services are meeting needs. Results presented here strongly suggest that, as more people seek to protect themselves against the catastrophic costs of long-term care, successful marketing and retention of policyholders will depend on the customer service strategies of insurance companies as well as on the inherent value of their products.