Long-Term Care. Econ 737.01 10 /28/10. Outline. I. Introduction II. Supply III. Demand. I. Introduction.
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Given the high cost of LTC and probability of eventually needing it, it seems like there would be great demand for LTC insurance.
However, only about 10% of the elderly have LTC insurance. Why?
Medicaid crowd out (Brown and Finkelstein, 2008)
High administrative costs from individual instead of group coverage (Cutler, 1996)
May have to pay premiums for decades before receiving any benefits (Cutler, 1996)
State and federal tax incentives have been used to try to stimulate the LTC insurance market to ease the burden on Medicaid. People do seem to respond to these incentives, but they appear to be net losers for the government (Courtemanche and He, 2009).