Private financing options for long-term care.

Private financing for long-term care now comes almost exclusively from out-of-pocket payments. Long-term-care costs quickly impoverish most elderly, resulting in Medicaid dependency. The consequences are profound for the western Sun Belt with its rapidly growing elderly population. Key private financing options are long-term-care individual retirement accounts (LTC/IRAs), home equity conversion, social-health maintenance organizations and long-term-care insurance. Study of data from the past half century suggests that the LTC/IRA approach would prove unsatisfactory for the purpose despite the intuitive appeal of this mechanism. Experience with home equity conversions is still very limited, and unresolved questions limit this approach to the role of a reserve option for now. While promising, social-health maintenance organizations are still in the experimental stages and not yet commercially available. Long-term-care insurance is currently sold on a thin market and emphasizes nursing home coverage. New approaches to private financing through long-term-care insurance seem to offer the best approach for immediate implementation.