Private Long-Term Care Insurance (LTCI) and Patterns of Care Use among Older Adults Yong Li AcademyHealth June 10, 2008

Authors  Yong Li, Ph.D, School of Public & Environmental Affairs, Indiana University Purdue University – Indianapolis (IUPUI)  Gail A. Jensen, Ph.D, Department of Economics and Institute of Gerontology, Wayne State University

Background

Long-term care financing Source: Congressional Budget Office, 2004 Shares of spending on long-term care for the elderly, 2004

Growing interest in LTCI  Long-term care is not adequately insured High cost, misperception, Medicaid…  Growing interest among researchers and policy makers. Welfare model insurance model  Little is known about how LTCI may change the pattern of care use.

Research objectives  We examine the effects of LTCI on patterns of care use among disabled older adults ages 65 and over.  We extend earlier work in three ways. Look at three major types of long-term care Address the issue of endogeneity Use most recent and nationally representative data from HRS

Design and Methods

Data  Pooled HRS data wave4 – wave7  Study sample: Older adults who were 65 years old or older Reported limitations in at least two activities of daily living (ADLs). Sample size = 4,319 (2,711 unique individuals)  Robust standard errors are reported in all regression analyses.

Empirical specification  LTC: use of nursing home care, formal home care, or informal care  INS: whether an individual has LTCI INS is presumed to be correlated with ε  X: a vector of exogenous covariates  g(): probit or linear

Two-part models of utilization  Skewed distribution in the dependent variables Significant occurrence of the value 0 OLS inappropriate  A series of two-part models are implemented  Part I: probit model of any positive use.  Part II: linear model of the amount of care, conditional on having any.

Endogeneity of LTCI  LTCI may be subject to the endogeneity problem. OLS inconsistent No causal interpretation  We formally test for endogeneity of LTCI in each model estimated.  Identifying variables: Whether one has a life insurance policy. Price (premium) of LTCI policy.

Results and Discussion

Main findings

Effect of LTCI on nursing home care utilization

Conclusions  LTCI significantly changes the pattern of care utilization among older adults. Avoid or at least postpone entering a nursing home. Receiving care in their preferred setting. No evidence of informal care cut back.  LTCI is a more efficient way to finance LTC services. Directs resources to formal home care, without discouraging family care-giving. Reduces unnecessary nursing home stays