by Howard Gleckman
It isn’t news that Americans are reluctant to buy private long-term care insurance. Only 7 million have policies and the market is essentially dead in the water. But why don’t we plan for the risk of needing assistance at some point in our lives? After all, 7 of every 10 of us will need care sometime after we reach age 65 and others will need it at younger ages due to injury or illness.
An important new survey has found some answers. There is no magic bullet–no single concern that, if addressed, could convince us to plan for old age. Instead, the study found multiple–and sometimes puzzling reasons–why people don’t buy. And that suggests it won’t be easy to get them to either save more or purchase this insurance.
The researchers, Jeff Brown of the University of Illinois, Gopi Shah Goda of Stanford, and Kathleen McGarry of UCLA, based their conclusions on responses of 1,512 people over age 50 in a survey taken in May and June.
The single most important reason people don’t buy: Price. With 60-year-olds paying average annual premiums of around $2,500, this is no surprise. In one 2007 industry survey, more than 8 out of every 10 non-buyers cited cost as the main reason why they passed up long-term care insurance.
But while 57 percent cited price, others cited a potpourri of reasons why they don’t own insurance. About 12 percent felt they don’t need it: Some said they were too young to buy and others felt they’d never need assistance.
Some non-buyers were unaware that long-term care insurance is available, some thought they’d be rejected due to health reasons, and 4 percent thought they were covered by other insurance. About 9 percent who said they have long-term care coverage said it is included in their health policy–though that is unlikely. Btw, whenever I speak to consumer groups, I always ask how many have long-term care insurance. It turns out that most who think so actually have Medicare Supplement (Medigap) insurance, which does not cover long-term care.
Interestingly, only about 4 percent of the uninsured felt they had other ways to either pay for care or believed family or friends could care for them. In other words, they understand they are not prepared, but still are not doing anything about it.
Finally, a substantial number of the uninsured say they have not bought because they believe carriers will go out of business, refuse to pay claims, or raise premiums. Not a great sign for private carriers.
The role of Medicaid in this decision is very important. Jeff Brown wrote influential papers in 2007-2008 that concluded the availability of Medicaid long-term care benefits could explain why most Americans did not buy private insurance. But this survey tells a somewhat different story. It turns out that people who are aware that Medicaid covers long-term care are slightly more likely to buy than those who do not. Oddly, those who (incorrectly) think Medicare pays for such personal care are slightly less likely to buy private insurance than those who don’t.
Medicaid coverage may still crowd-out private insurance for low-income buyers, but it did matter much for those in this survey (who were on average 61 and in good health).
Some people will buy private insurance: If they think they can afford it, believe they’ll need care, are reluctant to have family members help them, plan for the future, or want to leave an inheritance. The problem is, not a lot of people fit in these categories.