Managed Competition with Prefunding: The Solution for Long-Term Care?

Managed competition with prefunding could be a useful approach to long-term care. One version, described here, has two main components: First, people would be required to save over their working lives to cover a portion of the expected cost of a minimum required level of long-term-care insurance. Second, people would begin purchasing long-term-care insurance around the time of retirement from one of a number of competing insurers, under a system of managed competition. Potentially large social gains would arise from improving insurance arrangements, distributing long-term-care costs more equitably across and within generations, and eliminating many of the distortions inherent in the current Medicaid program.