Family Life Course and Perceptions about Financing Long Term Care: Examining Family Decision Making

Transcription

1 Family Life Course and Perceptions about Financing Long Term Care: Examining Family Decision Making Marlene S. Stum, Ph.D. Kristina Anderson Heather Haberman Nicola Rodrigues Family Social Science University of Minnesota June 2005 A study funded by the State of Minnesota Department of Human Services

2 Acknowledgements This study was primarily funded by the State of Minnesota Department of Human Services under a research contract (CFMS #A72196/ /DB) with the University of Minnesota. Background of Researcher Principle Investigator: Marlene Stum, Ph.D. is an Associate Professor at the University of Minnesota. Dr. Stum has an established record as a researcher focusing on later life transitions and family economic well-being, including financing long term care. Her research contributes sound conceptual frameworks and quality quantitative and qualitative research to help inform policymakers and practitioners. She has extensive expertise in disseminating research, training professionals, and educating the general public regarding financing long term care through her faculty appointment with the University of Minnesota Extension Service. One example can be found at - Financing long term care: A decision making center for families. Dr. Stum s academic background is in Family Economics, Social Gerontology, and Adult Education ( For More Information Any questions or comments regarding this research report should be forwarded to Marlene Stum at mstum@che.umn.edu, , or by writing to Family Social Science, 290 McNeal Hall, 1985 Buford Avenue, University of Minnesota, St. Paul, MN 55108

3 iii Table of Contents Table of Contents...iii Table of Tables... v Table of Figures... vii Table of Graphs...viii Executive Summary... ix Purpose of Study... ix Methods...ix Implications for Improving Financing Long Term Care Decision Making... x Build on New Insights... xii Introduction and Purpose of Study... 1 Potential Value and Implications... 2 Family Life Course as Context: Why and How... 3 Why age?... 4 Why family configuration?... 4 The Importance of Perceptions in Decision Making... 6 A Review of the Literature... 9 Individual Characteristics and LTCI Decisions... 9 Perceptions about Financing Long Term Care Methods Guiding Model Definitions and Measures The Sample Data Collection Analysis Findings Understanding Socio-Demographic Differences Risk Perceptions Perceived Solutions Perceived Resources Perceptions about Financing Long Term Care: Examining Family Decision Making. University

4 iv Conclusions and Implications for Policy and Practice Are Employees Positioned to Make Informed Decisions? What are the Gaps in Perceptions and Reality? Overall Summary References Appendix A Perceptions about Financing Long Term Care: Examining Family Decision Making. University

5 v Table of Tables Table 1. Socio-demographic: Descriptive Profile of Total Sample Table 2. Socio-demographic Characteristics: Differences by Employee Age Table 3. Socio-demographic Characteristics: Differences by Marital Status Table 4. Socio-demographic Characteristics: Differences by Parental Status Table 5. Risk Perception: Differences by Marital Status and Parental Status Table 6. Knowledge of LTC Risk and Costs: Descriptive Profile and Differences by Age.. 39 Table 7. Knowledge of LTC Risk and Costs: Differences by Marital Status and Parental Status Table 8. Who should be Responsible for Financing Long Term Care? Differences by Age 45 Table 9. Who should be Responsible for Financing Long Term Care? Differences by Marital Status and Parental Status Table 10. Knowledge of Financing Solutions: Differences by Age Table 11. Knowledge of Financing Solutions: Differences by Marital Status and Parental Status Table 12. Long Term Care Insurance Attitudes: Descriptive Profile and Differences by Age Table 13. Long Term Care Insurance Attitudes: Differences by Marital Status and Parental Status Table14. Perceptions about Self-Insuring as Financing Option: Differences by Marital Status and Parental Status Table 15. Do Solutions Fit with Financial Goals? Differences by Age Table 16. Do Solutions Fit with Financial Goals? Differences by Marital Status and Parental Status Table 17. Perceived Financial Resources: Descriptive Profile and Differences by Age Table 18. Perceived Financial Resources: Descriptive Profile and Differences by Marital Status and Parental Status Table 19. Perceived Social Capital: Descriptive Profile and Differences by Age Table 20. Perceived Social Capital: Differences by Marital Status and Parental Status Table 21. Perceived Long Term Care Financing Self-Confidence: Descriptive Profile and Differences by Age Table 22. Perceived Long Term Care Financing Self-Confidence: Differences by Marital Status and Parental Status Perceptions about Financing Long Term Care: Examining Family Decision Making. University

6 vi Table 23. An Overview of Perceptions as Motivators and Barriers to Financing Long Term Care Decision Making Intentions and Action Table 24. Closing the Gaps in Perceptions and Reality: What do employees most need to know about financing long term care? Table 25: A Summary of Differences in Risk, Financing Options, and Resource Perceptions by Family Life Course Context Appendix Table 1. Measures and Coding for Financing Long Term Care Perceptions Perceptions about Financing Long Term Care: Examining Family Decision Making. University

7 vii Table of Figures Figure A. A Family Decision Making Model: Influences on Financing Long Term Care Decisions... 8 Figure B. Examining Family Life Course as Context and Financing Long Term Care Perceptions: A Family Decision Making Framework Perceptions about Financing Long Term Care: Examining Family Decision Making. University

8 viii Table of Graphs Graph 1. Perceived Risk: Willingness to Take Chance of Needing Long Term Care Graph 2. Perceived Risk: List Threats to Your Financial Security Graph 3. Financing Options: Who should be Responsible? Graph 4. Attitudes about Long Term Care Insurance: Composite Scores (Age Group) Graph 5. Attitudes about Long Term Care Insurance: Composite Scores (Marital Status).. 53 Graph 6. Attitudes about Long Term Care Insurance: Composite Scores (Parental Status). 53 Graph 6. Perceptions about Self-Insuring as Financing Option Graph 7. Perceived Self-Confidence about Financing Long Term Care (Age Group) Graph 8. Perceived Self-Confidence about Financing Long Term Care (Marital Status) Graph 9. Perceived Self-Confidence about Financing Long Term Care (Parental Status) Graph 10. Perceived Self-Confidence: Differences in Degree of Confidence Perceptions about Financing Long Term Care: Examining Family Decision Making. University

9 ix Executive Summary Purpose of Study Ensuring that Minnesotans address the risk of needing long term care as part of their overall financial planning is a daunting challenge. For families, making decisions about financing long term care forces individuals to think about and plan for the unthinkable. Long term care is a risk management decision families often avoid and face unprepared and ill informed. This study was driven by the need to change the reality of family decision making in regards to financing long term care from reactive to pro-active. Understanding how individuals and families go about making financing long term care decisions seems essential as a basis for knowing how to change family decision making. In this study, the lens was focused on examining the perceptions or feelings of Minnesotans in regards to financing long term care as a risk management issue. Perceptions are a key feeling and filtering component in family decision making processes. Existing research reinforces that financing long term care decision outcomes are influenced more by feelings than by thinking processes, or by individual characteristics. Perceptions were examined in the context of an individual s family life course, defined as the chronological age of the employee within the context of their family relationships. Two questions were specifically addressed: What are the perceptions of Minnesotans in regards to long term care risk, financing alternatives and resources? Is family life course as context related to employee perceptions about financing long term care? That is, are age, marital status, and parental status related to perceptions of long term care risk, financing alternatives, and resources? Methods To answer these questions, data collected from a random sample of Minnesota public employees who were offered group long term care insurance in 2000 as a workplace benefit was utilized. This sample included current employees in the executive, legislative, and judicial branches of Minnesota state government, the Minnesota State Colleges and Universities, and the University The findings are generalizable to the entire Perceptions about Financing Long Term Care: Examining Family Decision Making. University

10 x population of state employees (a population of 61,000). Analysis of this sample presents an informative picture of employees facing the risk of needing long term care and needing to make informed decisions. A family decision making conceptual framework was used to understand family life course as context and perceptions as influences on financing long term care decision outcomes. Implications for Improving Financing Long Term Care Decision Making The findings in this study provide insight for policymakers and practitioners interested in motivating individuals to address the risk of needing long term care. We propose two recommendations for action to help ensure employees are positioned to make informed decisions. These recommendations are grounded in what was learned about the intersection of family life course as context and financing long term care perceptions. We recommend policymakers and practitioners: Identify effective strategies to build on existing decision making motivators and address the barriers as feasible Close the gaps in perceptions and reality in regards to financing long term care risk, financing options, and resources. Identify effective strategies to build on identified motivators and address barriers as feasible Expecting Minnesotans to take personal responsibility without being prepared to make informed decisions is not family-friendly policy. The overall profile of perceptions suggests that there is both good news and bad news in regards to whether State of Minnesota employees are positioned to make informed financing long term care decisions. The good news is that there are perceptions about risk, financing options, and resources that are likely positive motivators. The findings also suggest that there are perceptions about risk, financing options, and resources that are likely serving as barriers to intentions and decisions. We recommend identifying effective strategies to build on existing motivators and address the barriers when feasible. Close the Gaps in Perceptions and Reality Closing the gaps in perceptions and reality is essential if Minnesotans are to be better positioned to make informed decisions. There are clearly gaps between what individuals perceive as the reality of financing long term care and what is widely known and recognized Perceptions about Financing Long Term Care: Examining Family Decision Making. University

11 xi as reality. Individuals first need to have accurate perceptions of long term care as a family financial risk management problem before long term care will become an issue worthy of attention and action. Individuals also need to have accurate perceptions of the alternatives available to financing long term care. The findings suggest many gaps in what individuals perceive and the reality in regards to the current range of private and public financing options. To make informed decisions, individuals also need to have accurate perceptions of the resources they will have available to address financing long term care. This includes finances, social capital, and self-confidence as three types of resources. Suggested strategies. The findings in this study identify where specific gaps in perception and reality exist in regards to long term care risk, financing options, and resources. Two strategies for closing these gaps are offered. They include: Investing in incentives and effective methods to educate Minnesotans about financing long term care Focus on identified content gaps. The findings provide insight as to what content employees most need to know about if the gaps in perceptions and reality are to be narrowed. Gaps were found in all three areas investigated: risk, financing options, and resources. The greatest need is to learn the facts about public and private financing options. Target groups of employees based on meaningful differences found by age, marital status, and parental status. The findings suggest that there are meaningful differences in perceptions within age groups, by marital status, and by parental status. We now have a better understanding of who most needs to know what about risk, financing options, and resources to narrow the gaps in perceptions and reality. In this sample, perceptions appeared to be most frequently related to age, followed by marital status, and then parental status. These findings can be used to focus messages and target educational campaigns for selected audiences. Ensuring diverse and quality financing options are available. Closing the gaps in perceptions and reality will also involve ensuring quality financing long term care options are available to meet the needs of increasingly diverse families. Perceptions about Financing Long Term Care: Examining Family Decision Making. University

12 xii The findings in this study reinforce that there are gaps in what individuals desire as financing options and the reality of what they find in the marketplace. In this case, employee perceptions most likely do reflect reality; it is the reality of the marketplace that needs to change. Build on New Insights As a result of this research, the State of Minnesota and long term care risk management professionals and educators have gained a solid knowledge base to address the challenge of ensuring Minnesotans address the risk of needing long term care. This study contributes new insight to change the reality of family decision making from reactive to proactive, including: A better understanding of the motivators and barriers that are influencing family decision making intentions and actions An understanding of the gaps between perceptions and reality that need to be closed In-depth profiles of financing long term care perceptions from a family life course lens An understanding of meaningful differences in perceptions by age, marital status, and parental status. Recommendations for needed action to help ensure employees are positioned to make informed decisions. Perceptions about Financing Long Term Care: Examining Family Decision Making. University

13 1 Introduction and Purpose of Study Long term care is an uncertain lifespan risk facing family members that they may not want to think about or even imagine. For families, making decisions about financing long term care forces individuals to think about and plan for the unthinkable. We know that long term care is a risk management decision families often avoid, face unprepared, and wait until a crisis to react. This study was driven by the need to change family long term care financing decision making from reactive to proactive. The purpose of this study was to increase what is known about how individuals and families go about making financing long term care decisions. The findings can help inform strategies for improving the current state of family decision making about financing long term care. In this study, the lens was focused on examining the perceptions or feelings of Minnesotans regarding financing long term care as a risk management issue. Perceptions were examined in the context of an employee s family life course. Family life course was defined as the chronological age of the employee within the context of their family relationships. Two questions were specifically addressed: What are the perceptions of Minnesotans in regards to long term care risk, financing alternatives and resources? Is family life course as context related to employee perceptions about financing long term care? Specifically, are age, marital status, and parental status related to perceptions of long term care risk, financing alternatives, and resources? To answer these questions, a random sample of Minnesota public employees, who were offered group long term care insurance as a workplace benefit, was utilized. This sample included current employees in the executive, legislative, and judicial branches of Minnesota state government, the Minnesota State Colleges and Universities, and the University The findings are generalizable to the entire population of state employees (a population of 61,000). Analysis of this sample presents an informative picture of employees facing the risk of needing long term care and needing to make informed decisions.

14 2 Potential Value and Implications As a result of this research, policymakers and practitioners have a solid conceptual base on which to help change and improve financing long term care decision making. Specifically, A profile of perceptions about long term care risk, financing alternatives, and resources to better understand motivators and barriers in decision making An understanding of the potential gaps between perceptions and reality that need to be closed In-depth profiles of perceptions from a family life course lens An understanding of meaningful differences in perceptions by age, marital status, and parental status.

15 3 Family Life Course as Context: Why and How The vast majority of personal financial decisions are made in the context of family as a key social unit, not in isolation. The majority of existing research on financing long term care has ignored the context of family as a critical decision making unit. Specific relationships between financing long term care perceptions and family life course as context have yet to be examined. No published or internet studies were found to have specifically examined family life course as the context for understanding perceptions or feelings about financing long term care. Many existing studies have examined if and how individual characteristics (health status, age) are related to financing long term care decisions. In the case of group long term care insurance (LTCI), many studies suggest that a LTCI decision is between the employee, employer, and/or insurance provider. To do so does not reflect the real context in which most employees make decisions, that is, their family. The life course perspective used in this study addresses this gap and takes into account the age norm context of the individual and the connecting roles and relationships in a person s family unit (Roehling, Roehling & Moen, 2001). Families as the context for decision making are not all alike. We expect the diverse nature of today s families to influence perceptions about financing long term care, and therefore decision outcomes. It has long been recognized that families seldom march through predictable and easily categorized family life stages or life cycle stages. Today s families are increasingly diverse in structure, form, and composition. Contemporary families are characterized by multiple wage earners, smaller nuclear groups (2.8 average family size by 2040), step-families, never marrieds, and extended family systems with international geographic dispersion. More families are experiencing verticalization with four to five living generations and fewer family members in each generation. As families have fewer children and more remain childless, social networks are more likely to include non-kin and friends. Historically, the concept of a family life cycle referred to operationalizing the process of family development, or the stages of a family career into orderly segments (Kapinus & Johnson, 2003). The concept of a family life cycle has most typically been measured by the intersection of biological age and presence and ages of children (Aldous, 1990; Roehling, et al., 2001). The increasing diversity of the meaning of the term family, as well as increasing diversity and complexity in family

16 4 composition and structure, has made it virtually impossible to define the family life cycle or a typical family life history (Kapinus & Johnson, 2003). How do we capture the family life course as context for decision making given the de-standardized realities of our lives? We focus on biological age and family configuration as two family life course dimensions likely to have real consequences for financing long term care perceptions. Biological age and family configuration are measured by three separate variables in this study: age of employee at time of decision, marital status, and parental status. These three variables were intentionally selected given their expected relationship to perceptions as part of the decision making process. These three variables begin to capture some of the complexity of family life course as context for financing long term care decision making. Why age? There is wide agreement that chronological age is related to the increased probability of needing long term care (Congressional Budget Office (CBO), 2004). We expect older individuals and individuals nearing retirement to be more likely to make decisions about financing long term care due to the increasing risk. Age of an individual is also an important factor given the relationship of age with the affordability of financing options and the potential for becoming uninsurable. For example, LTCI premiums are tied to age of purchase. The annual premium for a policy purchased at age 45 is $375 compared to the same policy at age 65 which is $1,086 (CBO, 2004). While group plans offer open enrollment periods for all employees, individual policies have the option to screen eligibility based on age and health status (HIAA, 2000; 2001). This creates a sense of urgency, especially for individuals closer to retirement age. Age is also known to be related to the type and amount of financial resources and self-confidence. Older individuals are more likely to have higher household incomes and assets on the average; and more experience to build decision making confidence, relative to younger individuals. Why family configuration? We propose that perceptions about long term care risk, costs, financing options, and resources will be influenced by existing family configurations, especially marital and parental status. Knowing if there is a spouse/partner and if there are children will provide information on who in the family is contributing resources as well as competing for limited resources.

17 5 Competing financial goals and responsibilities require families to make difficult choices about allocating limited resources. We expect that employees who are experiencing different goals and demands in their families will also have different perceptions about financing long term care risk, financing options, and resources. For example, younger employees who are married and have two children may be buying a home, saving for the kids' college expenses, and also attempting to save for retirement. In this family life context, the costs of managing the risk of long term care may simply not compete with other demands. The presence of a spouse or partner in the past and present is likely to influence financing long term care decisions in several ways. First, a spouse/partner may contribute to available resources to make financing options more affordable. Next, a spouse/partner also adds increased demands on available resources. Third, families with two adults face decisions about protecting both individuals against the risk of needing long term care. Fourth, a spouse can play a significant role in providing informal care if long term care is needed. In addition to a spouse/partner, the presence of children can potentially influence long term care decisions in several ways. First, children can potentially play a significant role in providing informal care if long term care is needed. Children also add multiple competing demands and financial responsibilities.

18 6 The Importance of Perceptions in Decision Making Perceptions are one of many factors that interact to influence family decision making. Inherent in most decision making theories is the element of perception, or how a stimulus is perceived. This study helps address the theoretical and conceptual gaps in an overwhelming majority of research on financing long term care decision making. Without a solid conceptual framework, it is difficult for policymakers and practitioners to understand how complex factors relate to each other and to identify strategies for affecting intentions and behavior. In this study, a coherent family decision making conceptual framework is used to understand the decision context and perceptions as influences on financing long term care decision outcomes. The guiding conceptual model is based on existing theory in family decision making (Rettig, 1993), human ecological systems theory (Bubolz & Sontag, 1993), and financing long term care (Schaber, 2004; Stum, 2001). This conceptual framework assumes that financing long term care decisions are influenced by the context in which the decision is made, as well as perceiving and deciding processes (Figure A). Context is defined as any environmental factor that contributes to the decision making process and affects the decision outcome. In this study, the focus is on the historical and social context an individual brings to the decision situation, that is, their birth cohort experiences. Perceiving and deciding are the dynamic process phases of family decision making that lead to a decision outcome (Melson, 1980; Paolucci, Hall, & Axinn, 1977; Rettig, 1993). Perceiving is considered a feeling process because of the influence of family experiences, values, and beliefs. Deciding is a thinking process because it involves accessing information, creating a knowledge base, and weighing the factors (Rettig, 1993). Decision outcomes are measures of the resultant action. Perceiving is a filtering process that shades how families view the problem, their resources, and potential solutions. We believe that financing long term care decision making will be influenced by how a person perceives: a) the risk of needing long term care (or the problem), b) attitudes about the role of private and public financing solutions, and c) the availability of financial resources, social capital, and self-confidence to solve the problem. There is increasing evidence that perceiving is the component of decision making that offers the greatest explanation of differences in decision outcomes relative to context

19 7 or deciding processes. What has been learned in previous studies is that perceiving appears to be the part of the decision making processes that is most likely to make the difference between inaction, intentions, and behavior (Schaber, 2004; Stum, 2001; 2005). That is, financing long term care decisions appear to be influenced more by feeling versus thinking processes. Schaber s (2004) study reinforced that long term care insurance enrollment decisions are made more with the heart (perceiving) than the head (deciding), with both components essential to make informed decisions. Understanding the range and diversity of perceptions about financing long term care is key to identifying the gaps between perceptions and reality, and to developing effective strategies to reach family members with relevant and focused messages.

20 8 Figure A. A Family Decision Making Model: Influences on Financing Long Term Care Decisions Decision Context Decision Processes Decision Outcomes Family Life Course Perceiving Deciding (Thinking) Intentions Individual Age Marital Status Parental Status Risks Deciding Style Behavior Solutions Resources Actual Resources Perceptions about Financing Long Term Care: Examining Family Decision Making. University

21 9 A Review of the Literature A review of the literature was conducted to identify what is already known about financing long term care perceptions in relationship to family life course as context. No published or internet studies were found that had examined the intersection of perceptions and family life course context in relationship to financing long term care decision making. However, two bodies of literature were reviewed that offer useful background for understanding how characteristics of individuals are related to financing long term care outcomes and perceptions of risk, financing options, and resources. Individual Characteristics and LTCI Decisions The majority of existing literature and market research to date has focused on understanding the role of demographic and individual characteristics as contextual influences on decision outcomes. Socio-demographic variables, such as age and marital status, have been examined as predictors of who purchases LTCI. Parental status has seldom been examined; but caregiver availability as an influential factor has been examined. Following is a brief overview of what is known about age, marital status, children, and financing long term care decision making. Age A great deal of what is known about the role of age in LTCI decisions is based on samples composed primarily of individuals 55 and over. This clearly limits what is known about age as a developmental influence. The majority of studies have examined individual LTCI decisions with samples reflecting the older market for that product. An American Council of Life Insurers (ACLI) study of individual LTCI policyholders was an exception, with a sample ranging from years of age (Stucki, 2001a). Individuals in the group LTCI market are generally age 49 (HIAA, 2001; Stum, Zuiker, Pelletier, & Hope, 2001) in contrast with the mean age of 67 years individual LTCI policyholders (HIAA 2000). Group LTCI studies have samples with broader age ranges reflecting the employee age market for the product. Stucki (2001b) found enrollees to be slightly younger, averaging 43 years of age. Swamy (2004) used data from year olds in Maryland to examine consumer demand for LTCI in general, not using an employee based sample.

22 10 All of the studies mentioned here have consistently found age to be significantly related to LTCI enrollment behaviors and intentions. In a study of individual LTCI owners and potential enrollees aged 37-93, Stucki (2001a) found reasons for owning a LTCI policy varied significantly by age. Younger owners and pre-retirees reported wanting to avoid financial problems associated with long term care that could compromise their quality of life and lifestyle in retirement. Older owners were more likely to be motivated by avoiding dependency and wanting to assure adequate care and choice of provider. The Health Insurance Association of America (HIAA) recently completed a study of who buys LTCI in the workplace using a sample of enrolled and non-enrolled employees from nine different employers including a mix of public and private as well as different sized employers (HIAA, 2001). This study specifically examined differences in employees who had enrolled, versus employees who considered the purchase by requesting an enrollment package, and then made a decision not to enroll. Overall, enrolled employees were slightly older than nonenrollees, with 50 being the average age of policyholders. In a comparison of individual and group LTCI policyholders, the main differences seemed to be that group LTCI purchasers were younger than individual policy owners increasingly under age sixty (HIAA, 2001). Stucki (2001b) and Swamy (2004) have both found a higher propensity for younger versus older workers to enroll when offered a group plan over an individual plan. Older workers report they would seek out an individual policy if a group plan was not offered (Stucki, 2001b). In another ACLI sponsored study, linkages between retirement and LTCI were examined using a sample of employees between 22 and 60 years of age who had requested group LTCI enrollment packages and then chose to enroll or not enroll (Stucki, 2001b). The findings in this study suggested that most employees felt long term care planning was an important part of their planning for retirement. The influence of age as a predictor was reinforced with a high portion of potential enrollees under age 60 not enrolled yet, but planning on doing so just before retirement. Younger individual LTCI owners were found to be planners, saving for retirement, and likely to be planning for an early retirement. Younger persons' reasons for buying included: wanting to maintain their current lifestyle in retirement, to avoid using their retirement income on long term care costs, and to avoid becoming dependent on others. The majority (73%) of employees younger than 60 did not enroll in group LTCI because of other demands on their

23 11 financial resources and indication that coverage was not a high priority for their stage in life. On the other hand, older enrollees felt time was running out and now was the time to purchase (Stucki, 2001b). Marital Status The role of marital status as a contextual factor for financing long term care decisions is less clear, with mixed findings available. The majority of samples have consisted primarily of married couples, perhaps not allowing differences to be detected. One of the early studies examined decisions made by retired teachers in Ohio (Atchley & Dorman, 1994; Ritchey, Atchley, & Seltzer, 1991). Marital status was found to be one of four influential variables related to the purchase of LTCI. A profile of individual LTCI buyers indicated married people were twice as likely to purchase LTCI than single people, however single and divorced consumers were more prevalent buyers in the under 65 population (HIAA, 2000; Stucki, 2001a). On the other hand, marital status was not found to be significant in the decision to enroll in group LTCI plans in other studies (HIAA, 2001; Stum et al., 2001). In HIAA s study of group as well as individual long term care insurance policyholders, a comparison of enrollees was made (HIAA, 2001). This comparison suggested that group and individual market enrollees were similar in terms of marital status; that is, most often married. Presence of Children The presence of children, their ages, and total number as influential factors on financing long term care processes and/or outcomes have seldom been examined. HIAA (2001) found that non-enrollees of employee sponsored plans were more likely to have children living in the home (37% compared to enrollees 29%) and subsequently, more expenses related to child rearing. For the younger group market, competing financial responsibilities were given as a reason to not enroll (Stucki, 2001b). In a study of group LTCI, the presence of children was not significantly related to enrollment behavior; however 71% of the sample had children (Stum et al., 2001). Given that a majority of LTCI studies have included older samples, most respondents were likely to have adult children living on their own, not younger children living at home. Numerous studies have examined the role of adult children as potential caregivers in relationship to LTCI use and decisions. Examining the risk of long term care related to family structure, a married person with no children was 1.6 times the risk for nursing home placement

24 12 and 1.8 times the risk for assisted living (Wolf, 1999). Single status with no children doubled those risks. Waidmann (2003), in his study on residential transition for long term care services, found the presence of potential caregivers had a significant effect on the risk of transition into institutional long term care. The presence and availability of family caregivers, primarily immediate family members, reduced the reliance on formal care and increased the reliance on informal care (Kemper, 1992). McCall, Mangle, Bauer, and Knickman (1998) found lack of caregivers to be a factor in the decision to purchase LTCI. Caregiver availability did not significantly impact the enrollment decision about group LTCI in a study of public employees (Stum et. al, 2001). Relative Importance of Individual Characteristics The majority of studies summarized above on LTCI have not used multivariate statistical methods to examine the relative importance of age, marital status, or other socio-demographic variables. Of the studies that have examined the relative contribution of factors, findings reinforce that contextual variables are not important relative to other decision making factors in explaining differences in decision outcomes (Schaber, 2004; Stum et al.; 2001; Stum, 2005; Swamy, 2004). Perceptions about Financing Long Term Care The literature includes numerous studies on financing long term care; most studies examining the issue from a societal or macro perspective. There are some existing studies, however, that do examine family member perceptions about risk, financing options, resources, or overall planning behavior. The majority of these studies have been focused on perceptions in the context of LTCI as one financing alternative. Following is an overview of what is known from this literature. Perceptions of risk It is commonly documented that individuals tend to underestimate the risk of experiencing bad events. Long term care appears to be no exception. Perceptions such as it won t happen to me, or being willing to take the chance I won t need long term care were common reasons for not planning described by family members (Stum, 2001). McGrew (2000) built on concepts from developmental and cognitive psychology and qualitative data from 18 individuals (mean age of 74; primarily female) to understand the failure to plan for long term

25 13 care. Four themes emerged as reasons for inertia and provide insight into the lack of perceiving oneself at risk of needing long term care. The findings suggest that to overcome the failure to plan, individuals must have a) a conception of a future self as dependent; b) a perception of the effects (costs) of dependency, c) a concern today about the possible dependency and its effects, and d) a realistic belief in the capacity to control the risk of dependency, to cope with its effects and plan for possibility. San Antonio & Rubinstein (2004) built on McGrew s (2000) qualitative findings and used data from a University of Maryland survey to identify five broad themes of cultural understanding and appreciation of the need to address the risk of long term care. Results from the survey clearly reinforce the gaps between long term care planning needs and individuals understanding of the future. San Antonio & Rubinstein (2004) suggest that the following dimensions of our culture serve as barriers to long term care planning: a) not wanting to envision oneself as dependent; b) mixed messages about aging as continued youth and health or decline and illness; c) emphasis on acute versus chronic conditions; d) traditions of caregiving that may conflict with planning; e) blindness to issues of women as primary caregivers and survivors. A majority of what is know about risk perceptions is from studies of LTCI enrollment patterns, both group and individual plans. Chen (2003) explored potential reasons for individuals not being willing to buy LTCI. He offered two behavioral tendencies, loss aversion and mental accounting to explain the lack of utility-maximizing rationality in the use of LTCI and the overall lack of planning behavior. He suggests that loss aversion, not risk aversion is important in decision making. This means people often delay making a decision about risk because they might regret the consequences of the decision. For example, LTCI provides no benefit if individuals do not need the service, therefore individuals avoid the so-called use it or lose it syndrome. Chen (2003) defined mental accounting as the tendency for individuals to judge financial risks in isolation, rather than alongside other risks. Reasons for lack of apathy toward group LTCI were identified by Granza, Madamba & Warshawsky (1998). Results in this study revealed that in general, TIAA-CREF participants were aware of long term care issues and the need for LTCI. The aversion to nursing homes and the belief that younger people do not need long term care were identified as key barriers to enrollment. Respondents also reported having more important demands on their money than the need to buy LTCI.

26 14 Not surprisingly, studies of LTCI have found that individuals, who perceive the risk of needing long term care to be greater, are more likely to purchase coverage (HIAA, 2000; Schaber, 2004; Stum et al., 2001; Swamy, 2004). Overall, individuals have been found to underestimate the risk of needing long term care. Non-purchasers have been found to perceive the risks and costs as lower than in reality (HIAA, 2000). HIAA s (2001) study of group LTCI potential enrollees, found that 25% of non-buyers claimed the reason for not enrolling was due to a low risk of needing care. In a study of group LTCI, Schaber (2004) found perception of risk to be the primary influence when explaining differences between enrollees and non-enrollees. The importance of risk was found relative to many other family level decision making factors investigated. Specifically, the logged odds of being a LTCI enrollee increased dramatically when employees were risk averse, or not willing to chance the chance they would need long term care. Motivators Underlying values and goals can serve as barriers and/or motivators for financing long term care planning. Beliefs about who should pay for long term care are one example. Most studies have found that people believe long term care is an individual responsibility and that the government should not shoulder the financial costs (HIAA, 2000; 2001; Stucki, 2001a; Stucki, 2001b; Stum et al., 2001). HIAA (2001) found that buyers were more likely to believe they or their family members were responsible for paying for long term care services than non-buyers. In a qualitative study of family members coping with long term care, Stum (2000) identified six competing goal patterns that families considered when making decisions about financing long term care: remaining financially independent, protecting spouse s financial security, maintaining control and choice over the services needed, maintaining privacy around financial matters, using government resources when entitled, and leaving an inheritance. Existing studies of LTCI enrollees have frequently examined motivators for purchasing/notpurchasing. When asked about specific reasons for enrolling in LTCI, protecting assets and leaving an estate were the most important, followed by preserving financial independence, in HIAA s (2001) study of who buys LTCI in the workplace. Additional studies have identified independence, asset protection, protecting one s standard of living or lifestyle in retirement, and

27 15 avoiding dependence on others as reasons for purchasing LTCI (Alecxih & Lutzky, 1995; HIAA, 2000; Stucki, 2001b). Overall Knowledge and Confidence Evidence suggests that baby boomer and non-baby boomer knowledge in regards to paying for health care and long-term care was the lowest in comparison to other types of financial decisions (Cutler 1997b). A study of long term care finance issues found that while the public thinks it is well-informed, the public is not well informed about the range of long term care services or alternatives for paying for care (Wagner, 1996). Similarly, a General Electric Financial Literacy telephone survey (1999) found wide discrepancies between actual and perceived understanding of long term care financial terms and issues. For example, 67% said they were familiar with LTCI, but could not define or explain LTCI when asked to do so. AARP (2001) gathered data from a random sample of 1800 adults aged 45-plus to understand awareness of costs and funding sources for a variety of long term care options. While differences by cohorts were not examined in the report, the findings provide overall insight in regards to perceptions. For example, over half of Americans aged 45-plus (60%) self-reported that they were familiar with long term care. However, respondents knowledge of costs and funding sources did not support how familiar they said they were with long term care. When asked to estimate costs for a variety of services, only small numbers could come within 50% of the actual cost. Evidence also suggests that baby boomer self-confidence in regards to paying for health care and long-term care was the lowest in comparison to other types of financial decisions (Cutler 1997b). McGrew (2000) found non-planners expressed a lack of self confidence. This included the perception that it is difficult to choose among moving or changing alternatives regarding different schemes and systems that are available regarding insurance. In a study of group LTCI, enrollees were more confident in their abilities to make a decision about long term care financing than non-enrollees, expressing confidence in five of six aspects of decision making (Stum et al., 2001). Most studies have not examined self-confidence but rather, looked at confusion in information. The HIAA (2000) studies of individual insurance buyers/nonbuyers reported that close to half of non-buyers cited confusion around policies and coverage features as a reason for not buying.

28 16 Perceptions about Financing Options A majority of research reinforces that one of the main differences between purchasers and non-purchasers of LTCI is the knowledge consumers have regarding public programs and attitudes toward LTCI. Purchasers are more likely to have greater knowledge of financing alternatives than non-purchasers (HIAA, 2000; Stum et al., 2001; Swamy, 2004). Misconceptions about who will pay if long term care is needed are much too common. Many individuals believe that they have long term care coverage when they probably do not. For example, about three in ten (31%) indicated that they had purchased insurance that covers long term care expenses, while 6% is the national average (AARP, 2001). Stum s (2001) study of group LTCI found 34% of employees thought that their existing health plan would pay for long term care if needed. This was similar to HIAA s 2001 finding that 39% of workers in the general population believe other health insurance will pay for long term care. In AARP s 45- plus year old study (2001), a majority demonstrated low knowledge levels when asked whether or not Medicare or Medicaid covers various types of long term care. Findings reinforced that the 45-plus group often think funding sources are available when they are not available. Studies of LTCI consistently find lack of affordability a key reason for not buying or enrolling (GAO, 2001; HIAA, 2001; Stum et al., 2001; Stum, 2005; Swamy, 2004). In the HIAA (2001) study of group LTCI, 52% reported too costly as the number one reason for not enrolling. For the younger group market, competing financial responsibilities were a reason to not enroll (Stucki, 2001b). Individuals who did not buy individual LTCI expressed an intention to do so in the future, reporting cost as a primary barrier for themselves and their spouses (HIAA, 2000; 2001). Perceived high cost and lack of affordability was the primary reason found for not buying long term care insurance in Swamy s (2004) study of potential purchasers. In a study of group LTCI enrollment patterns, Schaber (2004) found perceived affordability to be significantly related to enrollment patterns (odds ratio.147). Specifically, the odds of enrolling were 85% lower for an employee who perceived the plan to be unaffordable. Existing research on LTCI also suggests that numerous types of attitudes are likely to influence buying or not buying (GAO, 2002; HIAA, 2000; HIAA, 2001; GAO, 2002; Silva, 2004; Stum et al., 2001). Attitudes regarding the ability of coverage features to meet needs, trust of the employer to select and offer quality workplace benefits, trust of the insurance company to

29 17 provide a good value, and overall availability of individual and group LTCI have all been found to influence decision outcomes. The review of literature suggests that we do have some insight as to how family members feel about financing long term care long term care risk, resources, and financing options. Existing studies have consistently found relationships between age and LTCI enrollment patterns. Mixed findings exist in regards to marital status as an influence on LTCI enrollment patterns. The majority of what is known about perceptions, as well as the role of age and marital status, is from studies of purchasers or potential enrollees of LTCI. No published or internet studies, however, were found that specifically examined how family life course as context is related to perceptions of risk, financing options, and resources. This study is designed to address this gap in the literature.

30 18 Methods Guiding Model This study was focused on examining the relationships between two dimensions of family decision making: family life course as context and perceptions as part of the decision process (see Figure B). Perceptions or feelings about financing long term care were examined in the context of the employee s family life course. That is, the chronological age of the employee within the context of their family relationships. Two questions were specifically addressed: What are the perceptions of individuals in regards to long term care risk, financing alternatives and resources? Is family life course as context related to employee perceptions about financing long term care? That is, are age, marital status, and parental status related to perceptions of long term care risk, financing alternatives, and resources? Figure B. Examining Family Life Course as Context and Financing Long Term Care Perceptions: A Family Decision Making Framework Decision Context Decision Process Perceiving Feelings Family Life Course Individual Age Age 39 and under Ages Ages Age 60 and over Family Characteristics Marital Status Parenting Status Risk Willing to take risk Threats to financial security Knowledge Solutions Responsibility Attitudes Knowledge LTCI Attitudes Self-Insuring Fit with Financial Goals Perceived Resources Financial Resources Social Capital Self-Efficacy