Introduction to Private Sector Strategies
Interest in private sector approaches to financing long-term care is fairly new but has grown substantially over the last six years. Although still in their infancy, private sector approaches tend to dominate current public policy discussions of long-term care reform. These initiatives are of two sorts. Some options, such as individual medical accounts and home equity conversions, encourage people to save or to use their assets in new ways to pay for their own long-term care needs. Other options, such as private long-term care insurance, continuing care retirement communities, and social/health maintenance organizations, pool the costs associated with long-term care over a broad population, most of whom will never incur substantial long-term care expenditures. Thus the risk pooling reduces the cost of long-term care to any one person.
Despite considerable public policy, media, and academic interest in private sector approaches, they are only a tiny part of current long- term care financing. In all, less than 2 percent of the elderly participate in any private long-term care financing mechanism. There are about 400,000 people with private long-term care insurance; 150,000 in continuing care retirement communities; 15,000 in social/health maintenance organizations; 2,000 with home equity conversions; and no one contributing to individual medical accounts. 1
Private sector approaches are appealing because they reflect the American tradition of individuals taking responsibility for their own