Long-Term Care Insurance:
Better Information Critical to Prospective Purchasers
T-HEHS-00-196, Sep 13, 2000
Pursuant to a congressional request, GAO discussed the challenges the baby boom generation and society face in planning for and financing its future long-term care needs, and the role that private long-term care insurance may play in meeting those challenges, focusing on: (1) the increased demand the baby boom generation will likely create for long-term care; (2) an overview of current spending for long-term care of the elderly, including recent changes in Medicaid and Medicare financing of long-term care; and (3) the potential role of private long-term care insurance in helping finance this care, including who buys this insurance, its affordability, and the critical need for consumer information and protections.
GAO noted that: (1) estimates of the magnitude of the baby boomers' future long-term care needs vary, with estimates of the number of disabled elderly when the baby boom generation becomes elderly ranging from 2 to 4 times the current number; (2) estimates of cost are even more imprecise due to the uncertain effect of several important factors, including how many will be needing care, the types of care they will need, and the availability of public and private sources to pay for that care; (3) spending for long-term care for the elderly is an estimated $123 billion this year; (4) Medicaid and Medicare will pay for nearly 60 percent of these services, contributing $43 billion and $29 billion respectively; (5) Medicaid funds go primarily to nursing homes and other institutional settings of long-term care, but home and community-based services represent a growing share of Medicaid spending and recipients; (6) Medicare primarily covers acute care services, and thus plays a lesser role in financing nursing home care but has grown to play a significant role in covering long-term care through its home health benefit; (7) recent federal legislative changes in response to rapid and inexplicable growth in spending for long-term care services in Medicare have already resulted in a reduction in home health spending, but it remains uncertain how much Medicare will be spending for long-term care services in the future; (8) several recent congressional initiatives, including establishing a program to make group long-term care insurance available to federal employees and proposals to provide tax subsidies to individuals purchasing long-term care insurance, aim to expand the role of private long-term care insurance; (9) less than 10 percent of the elderly and an even lower percentage of near-elderly individuals have purchased long-term care insurance, although these numbers are increasing; (10) questions remain about the affordability of policies and the value of the coverage relative to the premiums charged; (11) if long-term care insurance is to have a more significant role in addressing the baby boom generation's upcoming chronic health care needs, the policies offered must be viewed by consumers as good, affordable products that are easily understandable; and (12) the National Association of Insurance Commissioners has recently strengthened its model regulation for long-term care insurance, including recommending that states enact laws requiring additional disclosure to consumers about the potential for future policy rate increases and better ensuring that long-term care insurers accurately price their policy premiums.