To Comfort Always: The Prospects of Expanded Social Responsibility for Long-Term Care

Long-term care is an important means of providing basic and humanitarian care for elderly Americans who are severely disabled. The demand for long-term care is likely to increase dramatically as baby-boomers begin to reach advanced ages. Long-term care has been a focus of health care reform because its current financing--largely a combination of out-of-pocket payments and Medicaid--is viewed as inadequate. Only a small fraction of long-term care is financed by private insurance, which is expensive in part because moral hazard and adverse selection may create greater distortion in the utilization of long-term care than in use of hospital and physician services. Increased government financing does not appear to be a feasible option for the coming decades, since the ratio of retirees to working age adults will decline at the time that the demand for long-term care rises. Furthermore, there is little prospect that the costs of existing Federal entitlement programs can be reduced enough to finance a greatly expanded government role in long-term care. Although there are likely to be roles for private insurance, especially if it can be made more efficient, and publicly funded catastrophic coverage, Federal efforts to improve financing of long-term care are most likely to be successful if they promote private savings.