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a LifePlans, Inc., and Center for Health and Long-Term Care Research, Waltham, MA
b Clark University, Worcester, MA
Correspondence: Marc A. Cohen, PhD, LifePlans, Inc., 2 University Office Park, 51 Sawyer Road, Waltham, MA 02154. E-mail: Mcohen{at}lifeplansinc.com.
Decision Editor: Laurence G. Branch, PhD
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Abstract |
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Key Words: Chronic care service use • Home care • Long-term care claimants
The population of Americans who require or are at risk of requiring help with personal care and other daily functional tasks is growing rapidly. This is primarily due to the growth rate of the elderly population, especially those aged 85 and older. The percentage of elderly people requiring personal assistance ranges from 8% of those aged 65 to 69 to well over 50% of those aged 85 and over (Spector, Fleishman, Pezzin, and Spillman 1998
). Long-term care (LTC) expenditures (i.e., expenses for nursing homes and related facilities, in-home registered nurses and home health aides, and other home- and community-based services) now account for almost 12% of total personal health expenditures—a threefold increase since 1960. Among people aged 65 and older, LTC expenditures account for 28% of personal health expenditures (AARP 1997).
Those elders who do require formal (paid) LTC are likely to rely on out-of-pocket payments to fund such care. Although Medicare pays 55% of the acute medical expenditures of older Americans, its LTC coverage is limited, covering just 20% of their LTC expenditures (Feder 1999). By contrast, out-of-pocket spending represents only 14% of medical care expenditures for elders, but it accounts for 28% of their LTC costs. Medicaid finances a much greater share of LTC services than acute care expenditures for persons aged 65 and older (38% as compared to 4%; Feder 1999).
Exposure to catastrophic risks of this nature typically stimulates expanded public financing, a demand for private insurance, or both. Over the past decade, the potential for private LTC insurance to become a significant source of financing for formal LTC services has been much debated (Cohen, Tell, Greenberg, and Wallack 1987; Crown, Leutz, and Capitman 1992; Friedland 1990; Meiners 1984; Mulvey and Stucki 1998; Rivlin, Wiener, Hanley, and Spence 1988; Wiener, Hanley, and Illston 1992; Wiener, Tilly, and Goldenson 2000). Even as the debate continues, recent actions suggest that the federal government may look to private insurance to help address the LTC financing challenge. Private LTC insurance typically reimburses the costs of care provided in nursing homes and assisted living facilities as well as in-home personal care services such as home health aides, personal care services, therapies, and nursing services.
The Health Insurance Portability and Accountability Act of 1996 included tax incentives for the purchase of LTC insurance. More recently, the President recommended that a new LTC insurance program be established for federal employees and that a tax credit of up to $1,000 per year be available to those caring for disabled relatives.
Prior to 1985, the private LTC insurance market barely existed. By the end of 1999 it is estimated that more than 6 million LTC policies will have been sold, and in-force premiums will exceed $4 billion (Health Insurance Association of America [HIAA], 1998; National Institute for Health Care Management 1999). It is likely that the LTC insurance market will continue to expand. This is because of the increase in the number of employers as well as insurers entering the market and the increasing interest among younger elders (HIAA 2000).
There is a body of knowledge about who buys policies and what motivates them to do so (American Council of Life Insurers 2000; HIAA 2000), but there has been no systematic study of individuals who are receiving benefits under private LTC insurance policies. An understanding of claimants and their behavior should help consumers make more informed choices about financing their potential LTC needs, help the private insurance industry better meet those needs, and inform public policies designed to support and regulate the market.
The purpose of this study is to provide basic descriptive information on community-dwelling, disabled, private LTC insurance policyholders who have accessed policy benefits. We provide information on the sociodemographic and service utilization profile of these claimants and characterize the level and mix of informal and formal support. We address the implications of the receipt of LTC insurance benefits for use of formal and informal caregiving, the amount of care received, the impact of insurance benefits on the disabled as well as on those caring for disabled elders, and the impact on choices about where care is received. Finally, we summarize claimants' reported level of satisfaction with their LTC insurance policy and the company providing it. We conclude with a discussion of the implications of the findings.
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Methods |
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Claimants from seven companies had reimbursement policies that paid expenses up to a daily maximum amount, whereas claimants from one company had policies that paid cash benefits that could be used in any way deemed appropriate by the claimant. For the most part, eligibility for benefits was based on limitations in activities of daily living (ADLs), the presence of cognitive impairment, and, in some cases, medical necessity as determined by a physician.
A trained nurse or social worker interviewed each claimant in his or her home. Each interviewer underwent comprehensive training to assure interrater reliability. The vast majority of questions were closed, but the claimant did have the opportunity to respond to a number of open questions. Information garnered from these interviews was then linked to policy design and claim information generated from the administrative systems of the participating insurance companies. If the claimant was cognitively impaired, then a proxy, identified by insurance company records or by the researchers upon initial contact, was interviewed. Designated contacts were asked who had the most knowledge about the claimant's health and activities. Typically these proxies were the primary informal caregivers of the insured claimants.
During the interview, claimants or proxies were asked to identify their primary informal caregiver, that is, the person who regularly helped them the most with their everyday activities but did not receive monetary payment. The percentage of claimants with at least one informal caregiver was 77%. A separate telephone interview conducted with 424 of those informal caregivers had a 91% response rate. All fieldwork was completed by February 1999.
The interviewer collected information on (a) the functional, cognitive, and medical status of the claimant; (b) the level and types of assistance received from paid and family caregivers; (c) the family's interaction with the insurance company and the service system; and (d) basic sociodemographic information such as living arrangement, marital status, and income level. The administrative data provided from the insurance company had detailed policy design information as well as claims payments history.
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Results |
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Currently, most available LTC policies require that an individual have at least two limitations out of six common ADLs or be cognitively impaired in order to qualify for benefits. All tax-qualified policies have such a requirement. Older and nontax-qualified policies do, however, enable an individual to access benefits if LTC services are deemed by a physician to be medically necessary. Most claimants (79%) have two or more ADL limitations. The mean number of ADL limitations is 3.3. We defined a person as limited if they required any of the following levels of assistance for a particular ADL: (a) Cueing assistance, requiring a person to be prompted to do an activity, but no physical intervention; (b) stand-by assistance, requiring a person to be nearby in case help is needed; and (c) physical "hands-on" assistance.
The cognitive status of claimants was determined either by a diagnosis of Alzheimer's disease or other dementia (3%) or by having four or more errors on the Short Portable Mental Status Questionnaire (29%). Thus, 32% of claimants are cognitively impaired. Taken together, these findings suggest that 85% of claimants have at least two ADL limitations or are cognitively impaired; the others are either qualifying for benefits through a medical necessity benefit trigger or they are receiving benefits even though they may not be meeting benefit triggers as specified in the insurance contract at the time of the interview.
Formal and Informal Care Services Among Privately Insured Claimants
It is well known that most long-term care is provided informally by family members, typically spouses, daughters, and daughters-in-laws (National Alliance for Caregiving 1998; Penrod, Kane, Kane, and Finch 1995; Tennstedt 1999). Table 1 revealed that many privately insured claimants live alone and do not have children living nearby. For those without informal caregivers, the LTC policy should facilitate use of formal (paid) support. For those with informal supports, the policy may enable them to decrease reliance on such support—an important motivator for initial purchase (Cohen and Kumar 1997). Most claimants (77%) rely on a combination of formal (paid) and informal (unpaid) care, but 23% rely solely on formal (paid) services for their care. In contrast, among disabled noninsured elders, only about 4% rely exclusively on formal care (Jackson and Doty 1999). Thus, privately insured disabled claimants are about six times more likely to rely exclusively on formal care than are nonprivately insured disabled elders living in the community. Home health aides provide most of the formal care given to claimants; two in three claimants receive care from this type of service provider. Less than 10% of claimants rely on skilled nurses for home care services. This represents a significantly lower usage than is observed in the disabled Medicare population (Jackson and Doty 1999).
In order to continue living independently in the community, claimants also need assistance with instrumental activities of daily living (IADLs). Fig. 1 shows that, on average, these claimants receive 59 hours of personal care a week (roughly 8 hours per day), over half of which is devoted to IADL assistance. Not shown in the figure is the fact that privately insured disabled elders receive more weekly care (formal and informal together) than do similarly disabled nonprivately insured elders (Robert Wood Johnson Foundation & Department of Health and Human Services [DHHS], 1999). Thus, any reductions in the level of informal caregiving brought about by the presence of insurance-financed care are more than offset by increases in formal care.
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Much of the cost of formal care is paid for by insurance benefits. In fact, insurance pays all of the costs of care for more than 70% of claimants. The average monthly insurance benefit paid to claimants is $1,527. (These data were obtained from the administrative claims systems from each of the insurance companies.) How does this compare to the primary public payer of home- and community-based care for disabled elders—the Medicaid waiver program? The Medicaid waiver program pays an average of about $485 per month for care (Ladd, Kane, and Kane 1999).
Impact of Private LTC Insurance on Claimants and Informal Caregivers
Claimants and informal caregivers were asked how having an LTC insurance policy has influenced the level and type of care received (by claimants) and provided (by informal caregivers). For claimants, the greatest impact of insurance benefits is on their level of paid care. To measure this, we asked claimants, "In the absence of the policy, would you be able to afford the amount of care that you currently receive?" as well as, "In the absence of your policy, would you receive fewer hours of paid care?" Only 40% indicated that they would be able to afford their current level of services, and some 57% responded that they would have to consume fewer hours of paid care. This implies that an absence of insurance would be associated with more unmet or undermet need. How would such needs be fulfilled? Claimants were asked, "In the absence of your policy, would you have to rely more on family, friends, or other volunteers to provide assistance?" Fifty-four percent indicated that they would have to rely more on informal supports. It is unclear from these data alone whether such informal supports would be able to compensate for the loss associated with lower levels of formal (paid) care.
We asked a similar, although more detailed, set of questions to informal caregivers.
Fig. 2 shows that roughly two in three informal caregivers have not reduced the level of care that they provide since insurance benefits started. In fact, half of the caregivers report no change in the amount of care they provide. This suggests that formal care is certainly not a perfect substitute for informal care, a finding consistent with research on the interaction between formal and informal caregiving in the context of public programs (Hanley, Wiener, and Harris 1991; Jackson 1997; Tennstedt, Crawford, and McKinlay 1993; Yordi et al. 1997). Still, about one in three informal caregivers did indicate that they now provide less informal care. As for the caregivers, a slight majority (52%) indicated that if the policy were not paying benefits they would increase the level of care that they provide. These findings are consistent with recent studies showing that formal services are generally used in conjunction with informal care, and secondary to it; substitution of formal services for informal care is limited and temporary (Robert Wood Johnson Foundation & DHHS, 1999; Tennstedt 1999).
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Informal caregiving can be very stressful (National Alliance for Caregiving 1998). Informal caregivers were asked whether the level of stress has changed since the person they care for began receiving insurance benefits. Most (68%) reported that their level of stress had decreased (see Fig. 3). This is consistent with the belief that an increase in formal care relieves the family member or friend of the responsibilities of managing and providing care. Even so, other factors unrelated to the presence of insurance-financed benefits also likely affect stress levels.
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Given the fact that both the formal and informal care networks are providing significant amounts of care to disabled claimants, a key question emerges: Are the care needs of claimants being adequately addressed? We focus on whether or not certain needs are being undermet. An undermet need is present when a claimant receives assistance performing a particular activity but indicates that they could use more help or believes that they had to wait too long to receive the help. The presence of an undermet need could reflect the fact that caregivers are not available in a timely manner; or, it could result from scheduling difficulties or because, once in the home, caregivers are not providing care when needed. Additionally, it may be that caregivers do not provide an adequate level of care either because of quality or coordination issues.
In total, 23% of claimants report at least one undermet need. Individuals who receive more hours of ADL assistance are also more likely to report greater undermet need. This is particularly true for individuals who rely more on informal rather than formal caregivers. This suggests that when multiple caregivers are involved in the care of an individual, clearly delineated lines of responsibility may be particularly important in assuring that needs are met. One implication of these findings is that training informal caregivers may better prepare them to respond to the multiple needs of their disabled care receivers. Bathing was the ADL with the highest level of reported undermet need. This is not surprising, given the complexity of the activity and the greater chance for mismatch between service schedules and claimant preferences. Those most likely to report undermet needs are unmarried women and individuals with multiple caregivers.
Clearly, long-term care insurance is succeeding in bringing formal caregivers into the homes of disabled elders, many of whom rely solely on the insurance to provide access to care. Yet problems with service availability, scheduling, continuity and coordination of caregivers, claimant preference, and the quality of caregivers all contribute to a sizable minority reporting undermet needs.
A great deal of research has focused on whether the use of formal home care services delays or eliminates the use of costly institutional care such as nursing home care (Garber and McCurdy 1989; Greene, Lovely, and Ondrich 1993: Kane 1998; Shapiro and Tate 1988; Weissert, Cready and Pawelak 1988; Weissert and Hedrick 1994; Wolf 1997). Most of this research suggests that, unless very carefully targeted, home care rarely prevents someone from using nursing home care. There is a growing consensus that home care serves a distinct population that differs in relevant respects from the nursing home population. Still, the decision to seek institutional care is complicated; it involves a myriad of factors, many of which cannot be adequately captured even by the most sophisticated multivariate modeling.
We elected to address this important issue directly. Claimants and informal caregivers were asked whether the disabled claimant would be able to remain in the home if there were no LTC insurance policy to finance formal care. More specifically, claimants were asked, "If your long-term care policy was not paying for home care services, do you think you would be able to remain in your home or would you have to move to an institutional setting like an assisted living facility or a nursing home?" Their primary informal caregivers were asked, "If home care services were not covered by the care receiver's LTC insurance policy, do you think he/she would need to seek institutional care such as nursing home care or assisted living?" Fig. 4 summarizes results.
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Among claimants who thought that they could not remain in the community without their insurance benefits, roughly half said they would need to enter a nursing home and half indicated they would move to an assisted living facility.
Claimant Satisfaction
Claimants were asked a series of questions related to general satisfaction with their insurance policy. Fig. 5 shows that the vast majority of claimants (86%) are satisfied with their policy; slightly less than two in three are very satisfied with their policy.
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Most claimants (70%) found the claims filing process to be easy, and 90% of all individuals filing claims had either no disagreements with their insurance companies or had a disagreement(s) that was resolved satisfactorily. About 10% of claimants felt their disagreement was not resolved satisfactorily. Claimants were also asked a question about actions that their insurance company might have taken, but didn't, to help them when they needed benefits. This was an open-ended question. While about three in four respondents felt there was nothing else that the insurance company should have done, many of the remaining respondents felt that the company could have provided additional customer support, improved claims processing, and given more advice about the policy itself. It is noteworthy that claimants with cash disability policies did express the highest level of satisfaction regarding their interactions with the insurance companies.
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). However, the cross-sectional nature of the study design does not enable us to adequately capture such changes over time. Thus, while we can estimate the prevalence of disability at a point in time, it is quite possible that had interviews been conducted at another point, these estimates would have differed. Finally, although the sample of claimants was drawn to be representative, it does represent the first major wave of claimants. Most sales of LTC insurance policies have occurred in the last 5 years, and these new policyholders are not likely to make claims for 5 to 10 years into the future. Patterns of service use, interactions with insurers, and the extent of undermet need and satisfaction levels may vary greatly as insurers and providers are faced with a much larger pool of claimants. Findings here are applicable to this first, relatively smaller, wave of claimants.
Summary and Implications
Individuals with LTC insurance receive substantial amounts of standby ADL and IADL assistance, typically more than what is received by similarly disabled nonprivately insured elders (Robert Wood Johnson Foundation & DHHS, 1999). Also, the insurance benefits are targeted on individuals with significant ADL dependencies and/or cognitive impairments, as well as on individuals who appear to be on a downward path toward greater disability. For many, in conjunction with the informal care that they receive, the ability to access formal care services through their LTC policy helps them to continue living independently in their homes. A large number of claimants (one fourth) have no available informal support services. As for claimants with informal supports, the availability of insurance benefits has not led to a "breakdown" in informal caregiving by primary caregivers. Rather, most primary informal caregivers have at least sustained the amount of care they provide to their disabled relatives. Taken together, these observations suggest that formal care may substitute for some, but not most, informal care, and that the two systems appear to be working in tandem to meet the LTC needs of claimants.
Findings suggest that while adequate financing of care is a necessary condition for meeting the needs of insured and disabled elders, it is clearly not sufficient. Close cooperation and coordination with the service delivery network is critically important. This holds true for individuals being cared for in institutional settings as well. In such settings, issues related to the quality and training of staff, the amount of staff oversight, and staff ratios will determine whether claimants feel that their needs are being adequately addressed.
Most claimants feel that they are receiving significant benefits from their LTC policy and that it is doing what it is supposed to do, namely, helping to bring paid caregivers into the home or accessing the institutional care that they need. What they believe they need is somewhat better servicing of their claim and more assistance managing providers so that they receive the care that they need when they need it.
About half of claimants and informal caregivers reported that in the absence of insurance benefits, institutional alternatives such as assisted living or nursing home residency would likely be required. This is a particularly important finding. Already, the demand for nursing home care has been declining (Bishop 1999). Data suggest that an increase in the number of LTC insurance policies covering home- and community-based alternatives, as well as institutional options, will buttress this trend. The preference of disabled elders to remain in their homes for as long as possible is well known; these claimants believe that at the very least, the presence of insurance-financed benefits delays their search for institutional alternatives. However, additional analysis is needed to determine whether these individuals have the level of functional and cognitive disability that would make them appropriate placements in institutional settings.
As the LTC insurance market continues to grow and mature, there will be changes in the profile of claimants, the service delivery system, and the design of policies. New patterns of service utilization will emerge, but facets of existing usage patterns will remain the same. It seems very likely that expansion in the private market will be associated with a greater number of disabled elders remaining in their homes with a maintenance of and enhanced resiliency of informal support networks.
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Acknowledgments |
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Received for publication August 10, 2000. Accepted for publication December 11, 2000.
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This article has been cited by other articles:
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  D. L. Roth, W. E. Haley, V. G. Wadley, O. J. Clay, and G. Howard Race and Gender Differences in Perceived Caregiver Availability for Community-Dwelling Middle-Aged and Older Adults Gerontologist, December 1, 2007; 47(6): 721 - 729. [Abstract] [Full Text] [PDF]
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E. J. Porter, L. H. Ganong, N. Drew, and T. I. Lanes A New Typology of Home-Care Helpers Gerontologist, December 1, 2004; 44(6): 750 - 759. [Abstract] [Full Text] [PDF]
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 C. E. Bishop Paid Home Care in the 21st Century: Need and Demand Home Health Care Management Practice, August 1, 2004; 16(5): 350 - 359. [Abstract] [PDF]
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