Reforming the US Long-Term Care Insurance Market

Nursing home risk is significant and costly. Yet, most Americans pay for long-term care (LTC) expenses out-of-pocket. This chapter examines reforms to both public and private LTCI provision using a structural model of the US LTCI market. Three policies are considered: universal public LTCI, no public LTCI coverage, and a policy that exempts asset holdings from the public insurance asset test on a dollar-for-dollar basis with private LTCI coverage. We find that this third reform enhances social welfare and creates a vibrant private LTCI market while preserving the safety net provided by public insurance to low-income individuals.