November 8, 2011
Long-Term Care: To Buy or Not to Buy
Let’s face it: thinking about long-term care insurance, nursing homes and home health aides is depressing.
It’s no wonder that just 10 percent to 12 percent of America’s elderly population has purchased a long-term care policy.
More are thinking about it though: New research shows that 40 percent of people 50 years or older who were surveyed had “thought a lot about needing long-term care” if they were to become ill in old age.
This research delved into the factors driving individual decisions about whether to buy long-term care coverage – or not buy. The decision “depend(s) on a complex amalgam of many different factors,” concluded a conference paper based on research conducted by the NBER Retirement Research Center.
Here are some of the findings in the paper, by Jeffrey Brown at the University of Illinois, Gopi Shah Goda at Stanford University, and Kathleen McGarry at the University of California at Los Angeles:
- Even though people across-the-board – 87 percent – said they did not want to “create a financial burden for my family if I need long-term care,” this had no major influence on whether individuals purchased coverage.
- The rate of people covered by long-term care insurance was higher among those motivated to leave money to their heirs.
- People who felt that health reasons would make it unlikely that they could live independently in old age also were far more likely to purchase the coverage.
- People who believe family members will care for them when they’re old are less likely to purchase insurance. The prospect of informal family care “does appear to limit demand for long-term care insurance,” the researchers concluded.