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Private Long-Term Care Insurance (LTCI) and Patterns of Care Use among Older Adults

Private Long-Term Care Insurance (LTCI) and Patterns of Care Use among Older Adults. Yong Li li80@iupui.edu AcademyHealth June 10, 2008. Authors. Yong Li, Ph.D, School of Public & Environmental Affairs, Indiana University Purdue University – Indianapolis (IUPUI)

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Private Long-Term Care Insurance (LTCI) and Patterns of Care Use among Older Adults

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  1. Private Long-Term Care Insurance (LTCI) and Patterns of Care Use among Older Adults Yong Li li80@iupui.edu AcademyHealth June 10, 2008

  2. Authors • Yong Li, Ph.D, School of Public & Environmental Affairs, Indiana University Purdue University – Indianapolis (IUPUI) • Gail A. Jensen, Ph.D, Department of Economics and Institute of Gerontology, Wayne State University

  3. Background

  4. Long-term care financing Shares of spending on long-term care for the elderly, 2004 Source: Congressional Budget Office, 2004

  5. Growing interest in LTCI • Long-term care is not adequately insured • High cost, misperception, Medicaid… • Growing interest among researchers and policy makers. • Welfare model insurance model • Little is known about how LTCI may change the pattern of care use.

  6. Research objectives • We examine the effects of LTCI on patterns of care use among disabled older adults ages 65 and over. • We extend earlier work in three ways. • Look at three major types of long-term care • Address the issue of endogeneity • Use most recent and nationally representative data from HRS

  7. Design and Methods

  8. Data • Pooled HRS data wave4 – wave7 • Study sample: • Older adults who were 65 years old or older • Reported limitations in at least two activities of daily living (ADLs). • Sample size = 4,319 (2,711 unique individuals) • Robust standard errors are reported in all regression analyses.

  9. Empirical specification • LTC: use of nursing home care, formal home care, or informal care • INS: whether an individual has LTCI • INS is presumed to be correlated with ε • X: a vector of exogenous covariates • g(): probit or linear

  10. Two-part models of utilization • Skewed distribution in the dependent variables • Significant occurrence of the value 0 • OLS inappropriate • A series of two-part models are implemented • Part I: probit model of any positive use. • Part II: linear model of the amount of care, conditional on having any.

  11. Endogeneity of LTCI • LTCI may be subject to the endogeneity problem. • OLS inconsistent • No causal interpretation • We formally test for endogeneity of LTCI in each model estimated. • Identifying variables: • Whether one has a life insurance policy. • Price (premium) of LTCI policy.

  12. Results and Discussion

  13. Main findings

  14. Effect of LTCI on nursing home care utilization

  15. Conclusions • LTCI significantly changes the pattern of care utilization among older adults. • Avoid or at least postpone entering a nursing home. • Receiving care in their preferred setting. • No evidence of informal care cut back. • LTCI is a more efficient way to finance LTC services. • Directs resources to formal home care, without discouraging family care-giving. • Reduces unnecessary nursing home stays

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