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Reforming the US Long-Term Care Insurance Market

Author

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  • R. Anton Braun
  • Karen A. Kopecky

Abstract

Nursing home risk is significant and costly. Yet, most Americans pay for long-term care (LTC) expenses out-of-pocket. This chapter examines reforms to both public and private LTCI provision using a structural model of the US LTCI market. Three policies are considered: universal public LTCI, no public LTCI coverage, and a policy that exempts asset holdings from the public insurance asset test on a dollar-for-dollar basis with private LTCI coverage. We find that this third reform enhances social welfare and creates a vibrant private LTCI market while preserving the safety net provided by public insurance to low-income individuals.

Suggested Citation

  • R. Anton Braun & Karen A. Kopecky, 2024. "Reforming the US Long-Term Care Insurance Market," Working Papers 24-17, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwq:98684
    DOI: 10.26509/frbc-wp-202417
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    Keywords

    Long-term care insurance; Medicaid; adverse selection; partnership program;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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