Long-term care insurance: Does experience matter?

Abstract

We examine whether long-term care (LTC) experience helps explain the low demand for long-term care insurance (LTCI). We test if expectations about future informal care receipt, expectations about inheritance receipt, and LTCI purchase decisions vary between individuals whose parents or in-laws have used LTC versus those who have not. We find parental use of a nursing home decreases expectations that one’s children will provide informal care, consistent with the demonstration effect. Nursing home use by in-laws does not have the same impact, suggesting that individuals are responding to information gained about their own aging trajectory. Nursing home use by either a parent or in-law increases LTCI purchase probability by 0.8 percentage points, with no significant difference in response between parents’ and in-laws’ use. The estimated increase in purchase probability from experience with LTC is about half the previously estimated increase from tax policy-induced price decreases.

Family Structure and Long‐Term Care Insurance Purchase

“…8 We explored cohort dummies in initial analyses, but they are omitted from the final specification because they were never significant. 9 In related work, Coe et al (2015) examine the effect of information about LTC (expectations or experience) on purchase, but we are not able to include those variables in this work because of data limitations (e.g., expected use of a nursing home in the future is only asked of individuals 65 years and above, and we wanted to examine persons under age 65 years). 10 We thank Gopi Shah Goda and Meghan Skira for this suggestion.…”

“…However, the study used a measure of insurance from the early years of HRS that was later shown to be subject to measurement error (Finkelstein and McGarry, 2006) and included a relatively short panel of data, limiting statistical power. Other researchers have controlled for family structure while pursuing other main predictors of interest in their models of LTCI ownership, purchase, or lapse, with no strong pattern of consistently significant predictors (Kumar et al, 1995;Sloan and Norton, 1997;McCall et al, 1998;Bernet, 2004;Cramer and Jensen, 2006;Schaber and Stum, 2007;Coste et al, 2008;Stum, 2008;Kim, 2009;Caro et al, 2010;Costa-Font, 2010;Konetzka and Luo, 2010;Coe et al, 2015). Overall, the current literature has at least four major limitations preventing us from understanding the role of family structure and informal care in LTCI purchase.…”

“…4 For G 1 characteristics, models control for marital status (divorced/separated, widowed, and never as reference) and relative age of one's spouse. A respondent's parents' characteristics (G 0 ) include whether the parents are deceased, marking possible experience with LTC (Coe et al, 2015). The respondent's children's characteristics (G 2 ) include the presence of biological children and stepchildren.…”

“…In related work, Coe et al . () examine the effect of information about LTC (expectations or experience) on purchase, but we are not able to include those variables in this work because of data limitations (e.g., expected use of a nursing home in the future is only asked of individuals 65 years and above, and we wanted to examine persons under age 65 years).…”

Bringing Invisible Partners in Care out of the Shadows: Employment Effects of Informal Care Provision in Europe and Implications for the United States

“…Compounding these factors, the Patient Protection and Affordable Care Act of 2010 did not retain the long‐term care insurance provision (CLASS Act) but did increase attention to care coordination and transitions of care, which increases demand for family and friends to help. And in non‐Medicaid expansion states, demand for informal care will be even higher, given lower access to publicly financed long‐term care (Coe, Goda, and Van Houtven ; Sommers and Grabowski ).…”