C  The Journal of Risk and Insurance, 2009, Vol. 76, No. 1, 5-29 THE PRIVATE MARKET FOR LONG-TERM CARE INSURANCE IN THE UNITED STATES:AREVIEW OF THE EVIDENCE Jeffrey R. Brown Amy Finkelstein ABSTRACT This article reviews the growing literature on the market for private long- term care insurance, a market notable for its small size despite the fact that long-term care expenses are potentially large and highly uncertain. Af- ter summarizing long-term care utilization and insurance coverage in the United States, the article reviews research on the supply of and the demand for private long-term care insurance. It concludes that demand-side factors impose important limits on the size of the private market and that we cur- rently have a limited understanding of how public policies could be designed to encourage the growth of this market. INTRODUCTION Health insurance is a subject of perennial interest to economics and insurance re- searchers, as well as to the broader health policy community. Although most of the research attention has focused on markets for acute health care insurance, in recent years a small but growing literature has analyzed the private market for insur- ance against long-term care expenditures. Unlike standard, annual health insurance policies that primarily pay for the diagnosis and treatment of medical conditions, long-term care insurance policies are long-term contracts designed to help pay for assistance (at home or in an institution) with “activities of daily living” for individuals who have difficulty performing them due to physical and/or cognitive impairments. 1 Potential long-term care expenditures represent a significant source of financial un- certainty for most elderly households. For example, Brown and Finkelstein (2008) estimate that only about one-third of current 65-year olds will ever enter a nursing Jeffrey R. Brown is at the University of Illinois at Urbana-Champaign and NBER. Amy Finkel- stein is at MIT and NBER. Finkelstein can be contacted via e-mail: afink@mit.edu. We are grateful to the National Institute of Aging and the Robert Wood Johnson Foundation for finan- cial support and to two anonymous referees for helpful comments. 1 The “activities of daily living” (ADLs) are the basic tasks of everyday life, such as eating, bathing, dressing, toileting, and transferring (see Wiener et al., 1990, for more discussion of ADLs and how their measurement varies across countries). 5