Working Paper

Reforming the US Long-Term Care Insurance Market

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.

Keywords: Long-term care insurance; Medicaid; adverse selection; partnership program;

JEL Classification: D82; D91; E62; G22; H30; I13;

https://doi.org/10.26509/frbc-wp-202417

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers

Publication Date: 2024-08-14

Number: 24-17