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. 2015 Mar:40:122-31.
doi: 10.1016/j.jhealeco.2015.01.001. Epub 2015 Jan 12.

Long-term care insurance: Does experience matter?

Norma B Coe  1 , Meghan M Skira  2 , Courtney Harold Van Houtven  3
Affiliations

Long-term care insurance: Does experience matter?

Norma B Coe et al. J Health Econ. 2015 Mar.

Abstract

We examine whether long-term care (LTC) experience helps explain the low demand for long-term care insurance (LTCI). We test if expectations about future informal care receipt, expectations about inheritance receipt, and LTCI purchase decisions vary between individuals whose parents or in-laws have used LTC versus those who have not. We find parental use of a nursing home decreases expectations that one's children will provide informal care, consistent with the demonstration effect. Nursing home use by in-laws does not have the same impact, suggesting that individuals are responding to information gained about their own aging trajectory. Nursing home use by either a parent or in-law increases LTCI purchase probability by 0.8 percentage points, with no significant difference in response between parents' and in-laws' use. The estimated increase in purchase probability from experience with LTC is about half the previously estimated increase from tax policy-induced price decreases.

Keywords: Behavioral economics; D81; Expectations; G22; Informal care; Insurance; J14; Long-term care.

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