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2012 Conference Presentation

Economics EnglandUnited Kingdom

7 September 2012

Identification of the potential demand for insurance under different LTC funding systems

Ruth Hancock, University of East Anglia, UK, United Kingdom
Marcello Morciano, University of East Anglia, UK, United Kingdom


The presentation focuses on the impact of alternative state policies on the cost, affordability and likely benefits of private insurance products for different socioeconomic groups in society. The analysis explores the implications for the design and take-up of insurance products of alternative levels and forms of state contributions to the costs of long-term care services.

It considers in particular two main policy options: 1. The current English means-tested system, which leaves significant proportions of the population unprotected against the risk of catastrophic long-term care expenditures. In the current system, demand for insurance is likely to come from those expecting to have to self-fund any care needs or those who wish to be free from reliance on the state (e.g. to be free to pay for more expensive care than the state would support). The analysis considers the implications of alternative policy scenarios concerning the disregard of insurance pay-outs received by policy holders. 2. A funding system whereby a monetary cap is implemented which limits individuals lifetime care expenditures or which imposes a time limit on what individuals have to pay before the state funds all or part of care costs without a means test, which a means test still applying up until the cap or time limit is reached. Under this reform option, the demand for insurance would aim to cover the more limited cost that those who initially self-fund would have to meet (including possibly hotel costs), plus, as above those who want to be free from reliance on the state or top up what it provides.

For each of the scenarios explored, the analysis provides estimates of the cost to individuals and the state, of the affordability and likely take-up of the insurance products in England, and of their impact on the risk to individuals of incurring catastrophic care expenditures.


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