The number of individuals with
long-term care insurance policies grew from 815,000 in
1987 to nearly 2 million in 1990. The number of companies
selling long-term care insurance nearly doubled over the
same period, from 75 to 143.
Nursing home expenditures totaled
$47.9 billion in 1989, of which fully 45 percent was
financed through consumer out-of-pocket payments. Most of
the remainder (43 percent) was financed through the
Medicaid program.
Although the long-term care
insurance market is currently dominated by policies that
are sold individually or through associations,
employer-sponsored plans offer several benefits over
individual policies and could potentially dominate the
market in the future.
Newer long-term care insurance
policies no longer include many of the restrictions
imposed on earlier products, such as limitations on
preexisting conditions, prior hospitalization as a
prequisite for nursing home coverage, and/or skilled
nursing care as a prerequisite for home- or
community-based care.
Ambiguity surrounding the tax
treatment of long-term care insurance might be an
impediment to the market for long-term care
insurance—particularly employer-based group insurance.
This possibility has led policymakers and private
industry to call for clarification of the tax code.
Currently the subsidy for
out-of-pocket long-term care is limited to the dependent
care tax credit and expenses paid from a dependent care
spending account—both applicable only under specific
circumstances.
