State Efforts to Encourage LTC Insurance Purchases Falling Flat

[This article was originally published on December 7, 2006.  The links were updated on June 13, 2018.]

State incentive programs to encourage the purchase of long-term care insurance have failed to generate the hoped-for increases in sales, a new study has found.

With baby boomers aging and Medicaid costs rising, many states are trying to persuade individuals to purchase long-term care insurance. The two main tools of persuasion are tax breaks and the Long-Term Care Partnership program.

In a new the report, David C. Nixon of the University of Hawaii's Public Policy Center concludes that both strategies are failing. The tax incentive programs have not increased the sale of long-term care policies because the subsidies they provide are insufficient to prompt anyone to buy such insurance. The same people who bought the insurance with the subsidy would have bought it without it, Nixon found.

Similarly, Nixon determined that the partnership program, which offers special long-term care policies that allow buyers to protect assets and qualify for Medicaid when the policy runs out, have failed to induce additional sales of private insurance. This is significant because the partnership program, previously restricted to a handful of states, is now available for all states to use.

The study found that states are still far from the goal of having half of the over-50 population covered by private long-term care insurance.

'Unless states enact substantially more generous subsidies and focus the subsidies on more price-conscious potential buyers of insurance," Nixon writes, "the programs are counter-productive. They draw resources away from state coffers that could be better spent preparing for the approaching long term care crisis.'

To read the full report, State Programs to Encourage Long Term Care Insurance, click here. For a policy brief on the report, click here.
(Both documents are in PDF format. If you do not have the free PDF reader installed on your computer, download it here.)

For more on long-term care insurance, including partnership policies, click here.