Impact of Long-term Care Insurance on Setting and Use of Formal and Informal Care

1. Impact of Long-term Care Insurance on Setting and Use of Formal and Informal Care Christine Bishop, Ph.D. Schneider Institute for Health Policy, Heller School for Social Policy and Management, Brandeis University Boryana Dimitrova, Ph.D. Deloitte & Touche Marc Cohen, Ph.D. LifePlans, Inc. AcademyHealth Annual Research Meeting Boston June 27, 2005

2. Research Support • Health Care Financing and Organization, an initiative of Robert Wood Johnson Foundation • Data developed in previous projects supported by • ASPE/ Office of the Assistant Secretary for Planning and Evaluation, Department of Health and Human Services • Robert Wood Johnson Foundation/HCRI

3. The LTCI Market Has Experienced Steady Growth Source: LifePlans computations; Number of Long-Term Care Insurance Policies Sold, Cumulatively 1987-2002 estimates AAHP-HIAA LTC Market Survey 2003. Includes preliminary numbers for 2002.

4. The Fastest Growing Segment of the LTCI Market is Employer-Sponsored Average Annual Growth Rates in the LTC Insurance Marketplace (1991-2001) Source: HIAA LTC Market Survey 2003: Lifeplans Computations

5. Estimated Market Penetration 2002 LifePlans Inc., 2003

6. Long-Term Care Insurance • A “contingent claim” • Provides holder with more resources when the insured “event” (disability) occurs • If the event occurs, resources have high value for consumption

7. Research Questions • Does insurance affect choice of setting of care • at home vs. • residential setting • For community residents, does insurance affect • Use of paid care • Use of unpaid care (informal care)

8. Impact of insurance on choice of setting • Higher income is associated in cross-section with greater use of residential care given disability, perhaps because of living arrangement and caregiver patterns by socioeconomic status • “Extra” resources contingent on disability could support earlier entry into residential care OR • Could support care at home, other things (marital status, age, disability, living arrangement, caregivers) constant.

9. Choice of Setting by Income for Elders with Disabilities—NLTCS 1999

10. Modeling Selection Effect for Holding LTC Insurance • LTC insurance market is new; age will differ • Income: Medicaid programs, premium costs  higher income for purchasers • Education • Marital status at time of purchase: more likely to be married • Race: marketing to whites?

11. Unmeasured Effects • Purchasers have a higher self-assessed probability of needing LTC in next five years • Purchasers are more risk averse than nonpurchasers • See Finkelstein and McGarry (2004)

12. Data Sources • All insured persons claiming benefits from 8 private LTC insurance companies in 1999 • Disabilities in 2+ ADLs OR • Cognitive impairments • 1999 National Long-term Care Survey comparison group – same functional level • Disabilities in 2+ ADLs OR • Cognitive impairments

13. Comparing the two groups • Insured group with physical disability is • Younger • More likely to be married • Higher education • Higher income • More likely to be white

14. Elders with disabilities: Insured elders differ from general population

15. Proportion in nursing home

16. Bivariate Probit for Insured State and Setting of Care • Sample: restrict to nonpoor (couples or singles) • Insured status • Insurance as the endogenous variable of interest • Education and never married as instruments: affect insured state • Setting of care • Insurance • Level of disability • Income

17. Bivariate Probit Results

18. Bivariate Probit Results (2)

19. Marginal Effects on Probability of Community Residence

20. Insurance is Associated with Higher Probability of Care at Home • Care at home is not associated with higher income -- does not appear to be a “superior good” • But perhaps additional resources contingent on disability are used differently from ordinary income? • Or people preferring care at home are more likely to purchase insurance?

21. For Community Residents: Effect of Insurance on Paid Care and/or Unpaid Care? • Conditional on community residence: selection effect • Because insurance affects who remains at home, we are observing a different group than would occur otherwise • Should be modeled as simultaneous with choice of setting (choose based on care available) • Paid and unpaid care: substitutes or complements? • Zeros

22. Bivariate Probit for Joint Distribution of ANY Paid and ANY Unpaid Help

23. If assume unpaid hours given --

24. Tobit Analysis Paid and Informal Hours

25. Insurance has a strong effect on paid care for community-resident elders • Bivariate probit shows large significant effect on any paid (of course) • Estimate given paid hours are nonzero implies 56 hours a week more for insured; paid hours are reduced by about 12 minutes for every hour of informal care • Tobit shows large effect – 60 hours

26. Insurance affects informal care through effect on amount of paid care • No significant effect on the probability of any informal care • Tobit shows reduction of about 11 hours for insured • (Of course) insured must be buying more care for themselves than they would with an equal income increase – (about an hour a week for a $10000 income increase)

27. Compute Inverse Mills Analog Based on Bivariate Probit Results

28. Paid Hours (2SLS)

29. Unpaid Hours (2SLS)