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The Impact of Policy Incentives on Long-Term Care Insurance and Medicaid Costs: Does Underwriting Matter?

ABSTRACT: OBJECTIVE:To test whether underwriting modifies the effect of state-based incentives on individuals' purchase of long-term care insurance. DATA SOURCE:Health and Retirement Study (HRS), 1996-2012. STUDY DESIGN:We estimated difference-in-difference regression models with an interaction of state policy indicators with individuals' probabilities of being approved for long-term care insurance. DATA EXTRACTION:We imputed probabilities of underwriting approval for respondents in the HRS using a model developed with underwriting decisions from two U.S. insurance firms. We measured the elasticity response to long-term care insurance price using changes in simulated after-tax price as an instrumental variable for premium price. PRINCIPAL FINDINGS:Tax incentives and Partnership programs increased insurance purchase by 3.62 percentage points and 1.8 percentage points, respectively, among those with the lowest risk (highest approval probability). Neither had any statistically significant effects among the highest risk individuals. CONCLUSIONS:We show that ignoring the effects of underwriting may lead to biased estimates of the potential state budget savings of long-term care insurance tax incentives. If the private market is to play a role in financing long-term care, policies need to address the underlying adverse selection problems.

SUBMITTER: Cornell PY

PROVIDER: S-EPMC6153154 | biostudies-literature | 2018 Oct

REPOSITORIES: biostudies-literature

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The Impact of Policy Incentives on Long-Term Care Insurance and Medicaid Costs: Does Underwriting Matter?

Cornell Portia Y PY Grabowski David C DC

Health services research 20180516 5

<h4>Objective</h4>To test whether underwriting modifies the effect of state-based incentives on individuals' purchase of long-term care insurance.<h4>Data source</h4>Health and Retirement Study (HRS), 1996-2012.<h4>Study design</h4>We estimated difference-in-difference regression models with an interaction of state policy indicators with individuals' probabilities of being approved for long-term care insurance.<h4>Data extraction</h4>We imputed probabilities of underwriting approval for responde ...[more]

PMID: 29770443

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Project description:The sustainability of long-term care (LTC) is a prominent policy priority in many Western countries. LTC is one of the most pressing fiscal issues for the growing population of elderly people in the European Union (EU) Member States. Country recommendations regarding LTC are prominent under the EU's European Semester.This paper examines challenges related to the financial- and organizational sustainability of LTC systems in the EU. We combined a targeted literature review and a descriptive selected country analysis of: (1) public- and private funding; (2) informal care and externalities; and (3) the possible role of technology in increasing productivity. Countries were selected via purposive sampling to establish a cohort of country cases covering the spectrum of differences in LTC systems: public spending, private funding, informal care use, informal care support, and cash benefits.The aging of the population, the increasing gap between availability of informal care and demand for LTC, substantial market failures of private funding for LTC, and fiscal imbalances in some countries, have led to structural reforms and enduring pressures for LTC policy-makers across the EU. Our exploration of national policies illustrates different solutions that attempt to promote fairness while stimulating efficient delivery of services. Important steps must be taken to address the sustainability of LTC. First, countries should look deeper into the possibilities of complementing public- and private funding, as well as at addressing market failures of private funding. Second, informal care externalities with spill-over into neighboring policy areas, the labor force, and formal LTC workers, should be properly addressed. Thirdly, innovations in LTC services should be stimulated to increase productivity through technology and process innovations, and to reduce costs.The analysis shows why it is difficult for EU Member State governments to meet all their goals for sustainable LTC, given the demographic- and fiscal circumstances, and the complexities of LTC systems. It also shows the usefulness to learn from policy design and implementation of LTC policy in other countries, within and outside the EU. Researchers can contribute by studying conditions, under which the strategies explored might deliver solutions for policy-makers.

Dataset Information

The Impact of Policy Incentives on Long-Term Care Insurance and Medicaid Costs: Does Underwriting Matter?

Publications

The Impact of Policy Incentives on Long-Term Care Insurance and Medicaid Costs: Does Underwriting Matter?

Similar Datasets

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