The Impact of Policy Incentives on Long-Term Care Insurance and Medicaid Costs: Does Underwriting Matter?

TitleThe Impact of Policy Incentives on Long-Term Care Insurance and Medicaid Costs: Does Underwriting Matter?
Publication TypeJournal Article
Year of Publication2018
AuthorsCornell, PY, Grabowski, DC
JournalHealth Services Research
Volume53
Issue5
Pagination3728-3749
ISSN Number1475-6773
KeywordsLong-term Care, Medicare/Medicaid/Health Insurance, Policy, Taxes
Abstract

OBJECTIVE: To test whether underwriting modifies the effect of state-based incentives on individuals' purchase of long-term care insurance.

DATA SOURCE: Health and Retirement Study (HRS), 1996-2012.

STUDY DESIGN: We estimated difference-in-difference regression models with an interaction of state policy indicators with individuals' probabilities of being approved for long-term care insurance.

DATA EXTRACTION: We imputed probabilities of underwriting approval for respondents in the HRS using a model developed with underwriting decisions from two U.S. insurance firms. We measured the elasticity response to long-term care insurance price using changes in simulated after-tax price as an instrumental variable for premium price.

PRINCIPAL FINDINGS: Tax incentives and Partnership programs increased insurance purchase by 3.62 percentage points and 1.8 percentage points, respectively, among those with the lowest risk (highest approval probability). Neither had any statistically significant effects among the highest risk individuals.

CONCLUSIONS: We show that ignoring the effects of underwriting may lead to biased estimates of the potential state budget savings of long-term care insurance tax incentives. If the private market is to play a role in financing long-term care, policies need to address the underlying adverse selection problems.

DOI10.1111/1475-6773.12870
User Guide Notes

http://www.ncbi.nlm.nih.gov/pubmed/29770443?dopt=Abstract

Alternate JournalHealth Serv Res
Citation Key9633
PubMed ID29770443
PubMed Central IDPMC6153154