Managing health costs in aging populations through long-term care insurance strategies

This chapter explores research related to the use of long-term care insurance products as a means of managing the increasing costs of health care for aging populations, especially those living in developed countries. We explore how publicly managed health benefits for the elderly can be reduced by the use of private insurance policies which provide most of their benefits in long-term care settings. While the public benefits that reduce these costs are either Social Security in the U.S. or government managed health plans provided by national governments, the privately funded insurance costs are the objectives of the majority of the articles selected here. The potential for long-term care insurance to help reduce the financial burden of caring for the aging populations comes mainly from the fact that these elderly persons face inevitably high costs for either family care or private care in institutions such as nursing homes, for which there may be few available resources (Kimura et al., 2023; Patel et al., 2024; Ellis et al., 2025).

Nonetheless, purchasing long-term care insurance is difficult for many reasons. First, these elderly persons must make decisions about long-term care insurance purchase now for events that may happen many years later. Second, aging persons who buy insurance may have different preferences than younger persons. Third, the insurance parameters that really matter are those that relate to the time at which care is actually needed, not when a person dies or at what age relative risks may switch. Fourth, there are lots of conditions that can make long-term care more expensive and long-term care insurance less attractive to sell, such as dementia. Finally, we take a behavioral risk perspective rather than apply the idealized risk-maximization framework. The study extends our previous study in which we first examine the issues associated with insurance products (Wallace et al., 2023; Singh et al., 2024).