Private Capacity to Finance Long Term Care. NOTES

03/01/1983

  1. Obviously the degree of impairment is a particularly critical factor. Home-based care cannot substitute for institutional care in all instances - or at least it cannot always serve as a lower cost alternative.

  2. Families with older children may also be able to divide up the responsibility for care among all their members.

  3. For example, Social Security benefits to persons 65 and over are based on retirement calculations, regardless of whether that older individual is also disabled. Similarly, veterans pensions for nonservice connected disabilities are available to otherwise eligible veterans 65 and over regardless of health status.

  4. On the other hand, stringent asset limits for public support and the belief that long-term care needs will not extend beyond a year may cause persons to spend all their resources rapidly. To illustrate the impact of such behavior, the empirical section for the elderly will include one alternative resource measure based on full consumption of net worth.

  5. For a discussion of the use of life expectancy in annuitizing the value of net worth for the elderly, see Moon (1977).

  6. These give homeowners a lump sum or periodic payments in exchange for transfer of the owner's equity to the lender at some future date. See, for example, Schoelen (1980) for a thorough discussion of reverse annuity mortgages and other types of home equity conversion.

  7. See, for example, Bureau of Census (1982), for a discussion of the appropriate treatment of in-kind transfers.

  8. Indeed, when single, low income persons qualifying for Medicaid enter institutions, all but $25 per month of their incomes are currently used to help defray the costs of care.

  9. Certainly, an illness such as a stroke or heart attack may result in a rather sudden change in health status among this age group.

  10. This income source is used below to estimate net worth and convert it into an annuity. Such an adjustment will understate net worth by failing to capture assets that do not yield an income flow. In general these are the less liquid assets.

  11. In addition, the interest rate assumption used to calculate the annuities affects the results. Figures in the text and tables assume an interest rate of 8 percent. If instead 4 percent were used, the means of the fourth definition would rise by about 15 percent.

  12. Since these data were gathered in 1973 and 1974, the income categories are adjusted to correspond to 1976 data from the SIE. The adjustment technique assumed that the proportion of income spent on food and housing remains constant across real income levels.

  13. Ideally, discretionary resources would indicate the dollars of resources available after accounting for food and housing. Since such expenditures are likely to vary with asset levels and other in-kind transfers, the fractions correlated here with income would need to be revised. Such an effort is beyond the scope of this paper. Some adjustments to income were made here, however. The income figure used includes the value of food stamps and any additional cash resources not counted as income.

  14. This could arise because these families are using up some of their assets--dissaving--or because they are underreporting income. Other researchers have also found that current expenditures exceed income for those with few resources.

  15. This amount would reflect the average value of food and housing expenditures by age group. Again, subtracting taxes--which should occur for all individuals and couples--is not possible here.

  16. Indeed, the finding of so many "other" relatives with impairments suggests that families do indeed provide support for family members beyond the nuclear family.

  17. Moreover, unlike the elderly where a substantial portion have no wage or salary income, restricting the sample to nonearners would be too restrictive here.

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

View full report

Preview
Download

"privcap.pdf" (pdf, 2.25Mb)

Note: Documents in PDF format require the Adobe Acrobat Reader®. If you experience problems with PDF documents, please download the latest version of the Reader®