Private Capacity to Finance Long Term Care. Determining the Group to Study


To assess the ability of individuals to contribute to the cost of long-term care, we should ideally study only persons who will need such services. Individuals currently receiving this care may have already exhausted their assets and made adjustments over time in ways that would provide a distorted picture about persons just beginning to require care. Moreover, few studies examine institutionalized persons and those who receive home-based care are difficult to identify on available surveys, thus making current long-term care recipients difficult to study.

At the other extreme, it is not particularly helpful to know the income distribution of the entire population to predict ability to finance long-term care. It is highly unlikely that potential long-term care users are evenly distributed throughout the population with regard to their level of financial resources. Rather, the elderly and those with previous health limitations are more likely to need such care and their resources are likely to be lower on average. Within the elderly, persons needing long-term care are likely to be the oldest of the old. At that age a general deterioration in health is likely to lower the individual's ability to provide for his or her own physical well-being. For younger persons, those with a long history of health problems are in greater potential need of services. Although accidents or acute illnesses that require long recuperative periods may strike randomly across the population, it is nonetheless reasonable for this study to focus on those subgroups of the population.

Another issue which arises in focusing on the group for study is the type of care likely to be demanded. For example, services delivered in an institutional setting often pose more out-of-pocket costs than care in the home. An institution provides complete shelter as well as medical care. For a single individual, the institution substitutes for maintaining a household in the community. All of that individual's resources would be available to finance their institutional care. On the other hand, when a family member enters an institution, the need to maintain the household remains. The cost of doing so will only be marginally reduced. Since disabled persons who remain at home may receive an implicit in-kind transfer from a relative providing some necessary services, the observed cost of that care may seem to be lower. However, demands on the caregiver may affect the ability of the family to maintain a particular income level. Ability to finance care, therefore, ought to be based on different considerations for those who remain at home than for those who are institutionalized. Thus, when possible, it is important to anticipate the type of care demanded.

A disabled person is more likely to remain at home if a caregiver--usually a spouse--is also present and if few other demands are placed on the family.1 Consequently, in single person households and households with young children, home-based care is less feasible than in families consisting of only a husband and wife (or only adults).2 Homeownership is also likely to play a role. Persons owning their homes may have a large stake in remaining there rather than entering an institution. For a single person who enters a nursing home, however, an owned home may be used to support private care. Consequently, this analysis will highlight the empirical results by homeownership and family composition categories.

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