For families and their long-term care (LTC) planners, one of the goals of LTC planning may be to reduce the risk that adult children will have to spend large amounts of time caring for their aging parents.
For the federal government, and, to some extent the insurers, that goal is a problem.
The government, especially, wants to see society maximize the amount of informal care older Americans, including privately insured older Americans, get from their children, to reduce the risk that those older American families will make unnecessary use of scarce formal care services, and, in some cases, government LTC benefits programs.
Many LTCI issuers may prefer to see families put off LTCI claims as long as possible, and to think of the LTCI as a backstop to protect themselves against catastrophic LTC needs, not the first line of defense.
Norma Coe of the University of Washington and two other economists, Gopi Shah Goda of Stanford University and Courtney Harold Van Houtven of Duke University, have looked at the effects of private LTCI on the insureds’ children, including the effects of “intra-family moral hazard” — the risk that LTCI will help formal, paid care crowd out informal care — in a draft research paper published on the National Bureau of Economic Research (NBER) website.
The researchers based the paper on an analysis of eight batches, or “waves,” of data from the University of Michigan’s Health and Retirement Study (HRS).
The sample includes people who were ages 50 or older when they first began participating in the survey. When possible, the HRS team tries to get the participants to return to participate in new HRS surveys every two years for the rest of their lives.
Coe and her colleagues pulled out data on the participants who had income at or above the median and said they had filed income tax returns. The researchers then looked at whether the participants had or had not bought LTCI, and what kinds of state LTCI income tax incentives the participants could use.
The researchers also looked at matters such as the participants’ expectations about use of informal care; actual use of informal care; whether any children lived with the parents, or within 10 milies of the parents; whether the children worked full-time or part-time outside the home; whether the parents gave money to the children, or the children gave money to the parents; and whether the parents had named a child as the beneficiary of a trust or will.
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For a look at what the researchers learned when they went through all that data, read on.
1. Many of the tax filers ages 50 and higher with incomes above the median had private LTCI.
The researchers found that 15.7 percent of the HRS participants in their study analysis had private LTCI, and one-third were polled in a year and state in which a state tax subsidy or tax credit for private LTCI was available.
State LTCI subsidies often look modest on paper, but the researchers cite a 2011 paper indicating that the average state LTCI tax subsidy produced a 28 percent increase in LTCI coverage rates in that state.
Two-thirds had at least some college education, and half had three or more children. About 10 percent already had at least one limit on activities of daily living (ADL).