The market for private long-term care insurance

摘要: Long-Term Care Risk Long-term care expenditures represent one of the largest uninsured financial risks facing elderly in United States. Expenditures on long-term care, such as home health and nursing homes, accounted for 8.5 percent all spending States, about 1.2 GDP 2004. (1) These are projected to triple real terms over next few decades, large part because aging population. (2) distributed unevenly among Therefore they a significant source uncertainty households. Only third current 65-year-olds will never enter home. However, those who do, 12 men 22 women spend more than three years there; eight five there. (3) stays costly: average, year cost $50,000 2002 semi-private room, even private room. (4) Standard insurance theory suggests that random costly nature longterm makes it precisely type risk would make valuable risk-averse individuals. Yet most expenditure is uninsured. 4 paid by insurance, while out pocket. (5) By contrast, sector whole, pays 35 only 17 (6) The limited coverage has important implications welfare elderly, potentially their adult children well. become pronounced baby-boomers age medical costs continue rise. market also government expenditures. Because Medicaid already devoted (7) policymakers increasingly concerned fiscal pressure further growth place federal state budgets come. As result, there growing interest stimulating insurance. There host potential theoretical explanations size market. (8) On demand side, consumer rationality--such difficulty understanding low-probability high-loss events (9) or misconceptions extent public care--may play role. Demand may be availability imperfect but cheaper substitutes, provided means-tested program, transfers from children, unpaid directly family members lieu formal care. (10) supply function impaired problems high transactions costs, competition, asymmetric information, dynamic with contracting. This article briefly summarizes rapidly body empirical work dedicating improving our why currently so small. Functioning Of Private Insurance: High Prices, Limited Benefits To understand small market, Jeff Brown I start examining what available policies this like. (11) We find typical policy purchased covers expected present discounted value Moreover, at premiums "marked up" substantially above benefits. …