Family Structure, Informal Care, and Long-term Care Insurance Long-term care (LTC) is one of the biggest financial risks facing the elderly today yet very few people-13 percent of current 65 year olds-insure against the risk of self-financing LTC. This lack of insurance coverage has spurred public policy into action, with over half of all States offering tax breaks for private LTC insurance (LTCI) purchases as of 2008. However, LTCI purchases have remained recalcitrant to policy change thus far, with neither substantial increase in coverage nor cost savings to Medicaid. The recent passage of the Community Living and Supported Services Act (CLASS) is the most sweeping change to the LTCI market to date. However, to adequately predict the impact of CLASS, one must understand the causes of low demand, how having LTCI changes one's treatment choices, and how LTCI thus impacts costs to the system. A crucial but notably overlooked factor in existing empirical studies of LTCI purchases has been the influence of family structure and the availability of informal care. It is imperative to understand how LTCI purchases and family structure interact for policy planning, because the presence of potential informal care may make actuarially fairly priced or even subsidized LTCI plans unattractive to many potential buyers. Furthermore, LTCI and family structure may interact in important ways to affect LTC use, costs, and LTCI market expansion efforts. To fill this critical gap in the evidence base, we will use a combination of qualitative and quantitative methods. Focus groups with older adults we will explore how familial relationships influence preferences for LTC and market purchases of LTCI. Focus groups with adult children will provide insight on how attitudes and preferences to provide informal care change with a parent's LTCI coverage. In addition to informing the quantitative results, the qualitative approach will allow a heretofore unavailable test of the validity of the assumptions economists commonly make in this area-namely, the existence of interfamily moral hazard, and whether cultural norms, filial piety, desires for independence, or bequest motives dominate. Second, we will explore the effect family structure has on the purchase of long-term care insurance using the Health and Retirement Study (HRS), the only nationally representative data set to include consistent questions on LTCI along with comprehensive and dynamic measures of family structure that reflect modern life. To identify heterogeneity of effects and maximize applicability to LTCI expansion efforts such as CLASS, we will focus on family structure's interactions with wealth, income, and other important attributes. Third, we will use the HRS to examine what effect LTCI has on expectations about and trajectories of long-term care use. We will examine whether LTCI alters time elapsed between onset of disability and use of long-term care by type, the order in which distinct types of LTC are accessed over time, and the duration of time spent in any LTC state. Implications for public LTC costs will be simulated using our results and cost data from the literature.
Inadequate planning for future long-term care needs may limit an individual's options for high quality long-term care. Our study seeks to explain how one's family situation affects planning for long-term care needs in the future, including long-term care insurance purchase decisions and long-term care services use.
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