Long-term care -- and how to pay for it -- has been on the minds of the nation's elderly for most of the past decade. As life spans have increased and medical costs have climbed, the prospect of seeing the accumulated earnings of a lifetime drained away has become all too real for many people.

The insurance industry has been looking at the situation as well. Its early efforts to construct long-term-care policies were widely criticized as loophole-ridden and inadequate.

Today, despite the obvious need for such coverage and the finding by a recent study that more than 40 percent of Americans older than 65 could afford the coverage, only 4 percent have such policies today.

A variety of government programs have been proposed, but the costs -- $15 billion to $20 billion a year and up -- in the face of the current U.S. budget deficit make it unlikely any of them will be enacted soon.

So at the moment, the biggest payers of long-term-care costs are the elderly themselves and their families.

Insurers, aware that their early efforts did not serve themselves or their market very well, are trying again. Between 25 and 30 companies are entering the market each year, and a small but growing number of employers are signing up for group plans that their employees can buy into.

But a new study released by the Health Insurance Association of America (HIAA), a trade group here, suggests that the private market alone will never solve the problem, and unless some changes in policy are made, it will not even do as much as it could.

First, more than half the elderly cannot afford private insurance. Medicaid takes care of some, but because that is a program for the poor, only those who are poor or become so can use it. Second, tax laws, written before insurance of this sort existed, raise problems for both the insured and the insurer.

Third, unless confidence in the private market can be improved -- and then the market overseen to make sure that confidence is justified -- the policies will not sell.

"The long-term-care problem cannot be solved until the government takes a leadership role. ... Without that, we will never have a solution to this terrible social issue," said Stanley S. Wallack of LifePlans Inc., a long-term-care risk-management company that did the HIAA study.

Wallack noted that long-term care is a classic "insurable event," meaning that there is a relatively small risk that it will be needed, but if it does the costs are very high. About 10 percent to 12 percent of any age "cohort" spends 90 percent of the long-term-care dollars, he said.

So insurers would like to figure out a way to get the rest of the 40 percent who could afford it to buy coverage and would like the government to expand the scope of Medicaid to cover the remainder of the population.

Wallack estimated that such a program could be done at a cost to the government of around $3 billion to $4 billion a year.

Policies are already improving, he said, and as more people buy them and the risk is spread further, the coverage will become cheaper.

Whether or not these cost estimates are correct, some tax changes would make the policies more attractive.

For example, life insurers would like the law changed to make clear that "living benefit" payouts under life insurance policies would be treated like death benefits for tax purposes.

Normal death benefits are not subject to income tax and come under estate taxes under certain circumstances. If paid before death, however, it is possible that they could be treated as income. The Internal Revenue Service has not said how it views the issue.

Rep. Barbara B. Kennelly (D-Conn.) and others are pressing for the change.

One insurer, Connecticut Mutual Life Insurance Co. of Hartford, is set to add a "living benefits" rider to all its existing and new policies.

"The only issue is that distributions {of benefits before death} receive the same tax benefit to the customer as a death-benefit distribution," said Denis F. Mullane, company chairman. He added, "The reason is -- why would anyone want to discount the death benefit by 30 percent," which is the potential tax bite?

Insurers would also like payouts under long-term-care policies to be treated as medical insurance payments and not subject to income tax, and that premium contributions by employers in group plans be deductible.

They would also like the government to establish a definition of a "qualified plan" that would have to meet certain standards to obtain favorable tax treatment. This sort of "endorsement," they feel, would encourage people to buy in.

They also would like government help in educating consumers on the need for coverage.

Many critics of the U.S. health care system contend that the overhead and profit built into the private insurance system make it unnecessarily expensive and that a government-run program would be cheaper.

That may be true, but unless and until the government is willing to take on the cost of long-term care -- even if such a program would cost less overall than one with a strong private component -- private coverage is all most people can get, and the elderly and the "sandwich generation" caring for children and aging parents would welcome any kind of help.