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The Rational Nonpurchase of Long-term-Care Insurance

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  • Pauly, Mark V
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    Abstract

    Only a tiny fraction of the nonpoor population currently purchases private insurance coverage against long-term-care costs. Studies generally attribute the failure to purchase private coverage to "unawareness" by potential purchasers of the benefits of coverage and a misperception that Medicare currently covers long-term care. The author explores alternative reasons for failure to purchase coverage by well-informed, expected utility-maximizing, risk-averse individuals for whom long-term care is associated with a large increase in mortality and for whom family members represent an alternative source of care. There may be no demand for long-term-care insurance, even if it is made available at actuarially fair premiums, because the main consequence of coverage is to enhance the expected value of one's estate. Copyright 1990 by University of Chicago Press.

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    Bibliographic Info

    Article provided by University of Chicago Press in its journal Journal of Political Economy.

    Volume (Year): 98 (1990)
    Issue (Month): 1 (February)
    Pages: 153-68

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    Handle: RePEc:ucp:jpolec:v:98:y:1990:i:1:p:153-68

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    1. We can prevent the ‘crowding out’ of long term care insurance by family financing if government offers a level of provision that can then be topped up
      by Blog Admin in British Politics and Policy at LSE on 2011-06-02 10:14:03
    2. ESD: Volker Meier
      by Jason Shafrin in Healthcare Economist on 2007-07-24 05:13:19
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