Can long-term care insurance reduce catastrophic health and long-term care expenditures among older adults? A quasi-experimental study in China

Older adults with cognitive and/or physical limitations often face excessive health and long-term care (LTC) costs, which significantly affect their living standards. However, current measures of catastrophic health expenditure primarily focus on healthcare costs, overlooking the substantial burden of LTC costs. Our study is among the first to introduce the concept of catastrophic health and long-term care expenditures (CHLTCE) to comprehensively capture the economic burden of health and LTC costs associated with functional limitations. Drawing data from 2011, 2013, 2015, and 2018 waves of China Health and Retirement Longitudinal Study, we employed a staggered difference-in-differences approach to assess the impact of long-term care insurance (LTCI) on alleviating CHLTCE. We found that after accounting for LTC costs, both total health and LTC expenditures and CHLTCE risk significantly increased compared to when only healthcare costs were considered. Furthermore, LTCI coverage significantly reduced CHLTCE risks among older adults with cognitive and/or physical limitations. This effect was more pronounced among those with severe cognitive impairments and those with physical limitations and chronic diseases. In addition, its effectiveness in reducing CHLTCE risks for individuals with complex care needs was observed only at the high threshold, but not at lower thresholds. Our findings offer empirical contributions by incorporating both health and LTC costs into catastrophic expenditures analysis. We recommend that policymakers refine LTCI eligibility criteria and implement tiered coverage options based on various levels and dimensions of cognitive and physical function—beyond activities of daily living—to offer targeted protection for individuals with complex care needs.