Long Term Care Insurance
Long Term Care Financing Analysis
By Michael A. Piekarz
Concerns over financing long-term healthcare in both the public and private sectors have resulted in the first comprehensive review and analysis of research
on the topic in order to provide policymakers with a framework to guide them in the decision-making process.
Over the next several decades, the population of U.S. seniors is expected to experience heavy
growth, more than doubling by 2040 while the population as a whole grows by only one-third. That surge will probably produce a similar increase in the demand for long-term care (LTC) services, according to the
Congressional Budget Office.
The anticipated growth in demand for LTC provided the impetus for a review done by the National Investment Center for the Seniors Housing & Care Industry (NIC). The review,
conducted by RTI International for NIC, involved compiling and analyzing all major studies and projection modeling to date on the issue.
The resulting report, called "The NIC Compendium Project: A Guide to
Long-Term Care Projection and Simulation Models" is expected to help policymakers and others determine the best combination of public and private sector funding that will be needed to pay for the nation's growing
LTC concerns.
"In a short 20 years from now, our nation's economy will face an enormous challenge," said Robert G. Kramer, president of NIC. "That is, how are we going to pay for the massive numbers of baby
boomers who will move through the long-term care system?"
"The real impact of long-term care needs won't be felt until around 2030-2050," continued Kramer.
"How much will this care cost? How will the
nation pay for it? And how can policymakers, seniors housing and care industry leaders, researchers and other decision-makers agree on the best plan to meet those needs? This Compendium will focus attention on the
need for long-term care research and help stimulate a policy debate at the national level."
Among the significant findings was that the need for long-term care is a "normal" life experience. Among those
turning 65 now, nearly 70 percent will need some form of long-term care before they die. Twenty percent will need it for more than five years. This includes informal care, paid homecare, nursing home care and
assisted-living facility care.
Analysis also revealed that the number of people with disabilities is likely to increase substantially, even if disability rates fall. Recent projections indicate that the
number of older people with disabilities will grow from 10 million in 2000 to between 15.1 million and 24.6 million in 2040.
Policymakers cannot assume that declines in disability rates will solve LTC issues.
Demand for LTC is expected to double by 2040. The use of paid homecare will increase from 2.2 million people in 2000 to between 3.9 million and 6.2 million in 2040. During that same period, the number of
older Americans using nursing care will increase from 1.2 million to 3.1 million.
While a big concern in LTC is a possible increase in the cost of medical services – a driving factor in most projections is
the system-wide cost. And not all of the future events that must be considered by policymakers are negative.
Despite a few problems with the pension system, the financial status of older Americans will
improve over time. One projection shows a decline in the proportion of seniors who would be likely to use Medicaid to pay for a significant period of LTC.
The analysis also found that most Americans will not
have private LTC insurance due to its high cost.
The NIC Compendium also found limitations with projection models in use now. One flaw found was that they do not address the substitutability of services such
as homecare and assisted living facilities for nursing home care.
Also problematic was a lack of data on which to determine the impact of price changes on the use of services … or "price elasticity."
The Compendium also found that younger people with disabilities are not included as part of the projections for increased Medicare expenses despite the fact that 22 percent of Medicaid nursing home expenditures in
2003 were for people under age-65.
"This issue on how we will fund future long-term care has huge implications for the seniors housing and care industry, and its leaders need to work closely with government
and research communities to craft ongoing, relevant research, especially in those areas that have been lacking in previous studies," stated Anthony J. Mullen, senior fellow for NIC.
"In addition to full
micro-simulation models, stakeholders also need to develop simpler projection models that allow for easier input of 'expert opinion.' And the results of government-funded projection models should be more publicly
available," Mullen continued.
It is anticipated that the NIC analysis and other studies under development will be used to help determine the course of policy affecting LTC during the upcoming boomer
generation.
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