The potential to privately pay for long-term care services

Financing long-term care for the elderly has become an issue of public versus private financing. As proposals to cut public spending are discussed, alternative methods for financing long-term care services need to be introduced. This study addresses the usage of long-term care insurance and reverse mortgages as alternative financing methods. Using the Assets and Health Dynamics of the Oldest-Old, I establish who received long-term care services and how they paid for such services. Next, I examine alternative financing methods to determine which elderly would qualify. Finally, I adjust the criteria of inclusion to increase the beneficiary group of each payment method. I find that both reverse mortgages and long-term care insurance benefit certain groups of individuals. Reverse mortgage beneficiaries included those elderly with large equity in their housing. Using a $30,000 or more home equity, I illustrate that a reverse mortgage would not cover the cost of one year in a nursing home for many elderly. Long-term care insurance, on the other hand, would benefit a majority of elderly individuals, although adjustments need to be made in the insurance market. Individuals with ADL limitations or disease conditions must be allowed to purchase such policies. Insurance premium costs need to be supplemented for those individuals who can not afford them. Individuals between the ages of 80 and 84 must also be considered for insurance policies. My results support the argument that policy discussions concerning long-term care financing should focus on three groups of elderly. Public payers are a group of elderly who rely heavily on Medicaid to cover the costs of their long-term care services. Private payers are those elderly with high incomes and assets who are financially capable of sustaining their long-term care needs. Gappers are those elderly with income and asset levels too high to qualify for Medicaid and too low to pay for their care out-of-pocket. This study indicates that the most beneficiary alternative financing method for gappers is long-term care insurance. The industry is still young, and now is the time to take a stance and make long-term care insurance the solution to financing long-term care