The following is a reformatted version of an article originally published in National Underwriter Life & Health Magazine Oct. 14, 2002.

The 4.5 million private U.S. long-term care insurance policies already in place could save Medicaid and Medicare about $30 billion, according to a new study by LifePlans Inc., Waltham.

The researchers who compiled the study, which was sponsored by the Health Insurance Association of America, Washington, used data from the U.S. Department of Health and Human Services and the Robert Wood Johnson Foundation, Princeton, N.J., to measure the effects of private LTC policies on private and public LTC expenditures.

The researchers found that private LTC coverage saved an average of $1,668 in out-of-pocket expenditures per month for insureds who used home care and $2,458 per month for insureds who needed nursing home care.

Private LTC coverage also reduced the probability that an insured would become poor enough to qualify for Medicaid nursing home assistance to 3%, from 9%.

Private LTC coverage could save Medicaid $23 billion, or $5,032 per insured, for all forms of long-term care and Medicare $7 billion, or $1,609 per insured, for home care, the researchers estimate.

The forecast did not include factors such as defaults by private long-term care insurers or major changes in Medicaid program rules.

But the LifePlans research team, led by Marc Cohen, says public officials ought to consider private LTC coverage in their plans for the future.

“Growth in the market will lead to a reduction in public expenditures on long-term care,” the researchers write. “Given the budgetary pressures faced by states as well as the federal government, a vibrant and growing private market represents one way to begin to address such pressures.”

The LifePlans report, which is available in the press section on the HIAA Web site, at www.hiaa.org, also includes information that could be helpful to insurance agents, brokers and others responsible for selling and marketing private LTC coverage.

The researchers report, for example, that collecting private home care benefits may cut the risk that an insured will have to move to a nursing home as much as 48%.

Private home care benefits seem to reduce the risk of institutionalization partly by reducing the burden on wives, husbands, children and other family caregivers.

Survey data analysis included in the LifePlans study suggests that relatives of privately insured older adults who need home care spend about 27 hours per week providing unpaid family care. That compares with an average of 38 hours of unpaid family care provided each week by relatives of disabled older adults who have no private home care benefits.

HIAA officials are pleased they commissioned the study, according to HIAA spokesman Joe Luchok.

“We assumed that there were benefits” from private LTC insurance, Luchok says. “It removes a lot of the burden. But some of the results look even better than we might have assumed.”


Reproduced from National Underwriter Life & Health/Financial Services Edition, October 14, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.