Private long-term care insurance: after coverage restrictions is there anything left?

Private long-term care insurance has been suggested as a solution to the crushing burden of out-of-pocket expenditures for nursing home and home health care. This paper examines the effects of common policy restrictions among currently marketed policies, more than a million of which have been sold. Using a conditional probabilities model and data from the 1985 National Nursing Home Survey (NNHS), we estimate likelihood of policy compliance for 31 combinations of policy restrictions. Compliance estimates range from 8.5% to 91.9%. Results indicate that prior hospitalization and prior skilled care clauses represent significant stumbling blocks for policyholders seeking benefit payments.