Long-Term Care: Baby Boom Generation Increases Challenge of Financing Needed Services

The confluence of the aging baby boom generation, longer life expectancies, and evolving options for providing and financing long-term care services will require substantial public and private investment in long-term care and the development of sufficient capacity to serve this growing population. Spending for long-term care was about $134 billion in 1999. Medicaid and Medicare paid for nearly 58 percent of these services, contributing about $59 billion and $18 billion, respectively. Private long-term care insurance was viewed as a possible way to reduce catastrophic financial risk for the elderly needing long-term care and to relieve some of the financing burden now shouldered by public long-term care programs. Yet private insurance represents only about 10 percent of long-term care spending. Questions remain about the affordability of policies and the value of the coverage relative to the premiums charged. Although many states have adopted standards for long-term care policies, it is uncertain whether these standards have bolstered consumer confidence in the reliability of long-term care insurance. If long-term care insurance is to have a more significant role in addressing the baby boom generation's upcoming chronic health care needs, consumers must view the policies being offered as reliable, affordable products with benefits and limitations that are easy to understand.