To Borrow or Insure? Long Term Care Costs and the Impact of Housing

Abstract

Health status and health costs a major longevity risk in retirement. Health state important in retirement planning (Ameriks et al., 2011; Yogo, 2009). Large component of wealth in illiquid home equity (Home-ownership rate: 80% for 65 ). Housing and LTC are complementary ways of financing or insuring health costs (Davido, 2010). LTC costs are increasing and the increase is projected to continue (Congressional Budget Office, 2004; Shi and Zhang, 2013). Australia: government requires co payment for LTC costs, potential use of home equity to fund costs. U.S.: Medicaid and Medicare private insurance personal payment. The private LTC insurance market is an important supplement (Glendinning et al., 2004; Colombo et al., 2011).