Private Long-Term Care Insurance: Not the Solution to the High Cost of Long-Term Care for the Elderly

Authors

Lawrence A. Frolik, University of Pittsburgh School of LawFollow

Document Type

Article

Publication Date

2016

Abstract

Long-term care can be extremely expensive. As older Americans plan for financing care for their golden years, one option is to purchase a Long-Term Care Insurance (LTCI) policy. However, despite the potentially steep costs of long-term care, few elderly individuals actually purchase LTCI. This decision is rational for most elderly people. First, LTCI insures a risk that may never occur, as the majority of elderly Americans only need a year or less of long-term care. Second, Medicaid provides a publicly subsidized alternative to LTCI. An elderly person can rely on his or her savings to pay for care and then qualify for Medicaid if necessary. Third, the likely benefits payout is difficult for insurers to estimate, resulting in higher premiums for policyholders. Additionally, the growth of assisted living facilities, a far more attractive living situation than nursing homes, may incentivize elderly policyholders to begin claiming benefits sooner, which also results in increased insurance rates. The elimination period of LTCI policies, coupled with the unpredictability of the need for LTCI and a daily benefit amount that is unlikely to cover the full cost of a nursing home, further renders purchasing such a policy unappealing. One possible solution is redefining long-term care costs as a social, as opposed to an individual, problem and requiring all older Americans to purchase LTCI, a measure that could reduce the burden on Medicaid while ensuring that all elderly Americans are able to afford long-term care.

Recommended Citation

Lawrence A. Frolik, Private Long-Term Care Insurance: Not the Solution to the High Cost of Long-Term Care for the Elderly, 23 Elder Law Journal 371 (2016).
Available at: https://scholarship.law.pitt.edu/fac_articles/246