Long Term Care Insurance: Yes or No?

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• Varying costs: According to American Association for Long-Term Care Insurance (AALTCI)’s 2016 Price Index, the costs for virtually identical policy coverage vary significantly from one insurer to the next. 
• Tax deductions and incentives: There may be some tax deductibility for the insurance premiums you pay as an individual (if you itemize deductions) to the extent that the premiums paid exceed 7.5% of adjusted gross income. Many states also offer tax incentives (credits/deductions) to encourage the purchase of insurance.
• Lapsed policies are a concern: About half of all long-term care policies lapsed before any benefits were paid; policy holders were unable or unwilling to continue paying their premiums.
• Costs never paid: Of those people who bought insurance and later entered a nursing facility, about half never collected a dollar from their long-term care policies.
• No benefits for other types of care: No benefits were ever paid to the many people who bought nursing facility coverage but instead received home care or entered a residential facility not covered by the insurance.
• Not enough to cover care: Long-term care insurance benefits are usually far below the actual cost of care. For many long-term care residents, LTC insurance benefits don’t cover the entire monthly bill, and even if it does, the benefits are often used up well before the need for care ends, so even with LTC insurance a family could still wind up depleting significant assets, and in many cases going broke.
• Medicaid related issues: There are numerous important Medicaid-related issues that must be considered and understood before purchasing long-term care insurance. For instance, it is very possible to buy too little or too much coverage.  For married couples who can only afford coverage for one spouse, it is also critical to understand which spouse should obtain the coverage.  Unfortunately, most insurance agents who sell long-term care insurance have no understanding of Medicaid nor the Medicaid-related issues that must be considered.  Whether you are a potential purchaser or an insurance agent who sells long-term care insurance, please read our Long-Term Care Insurance FAQ to get a basic understanding of these important Medicaid issues.

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Critter Corner: Is There a Federal Long-term Care Insurance Option?



 

Dear Commander Bun Bun,
 

I am 58 and still working. I understand that long-term care insurance through insurance companies is expensive, and that there are risks involved. I was wondering if there is government solution to long-term care insurance. I remember reading something about the CLASS act, which was part of Obamacare, and was signed into a law. Do you know what happened with that?
 

Thanks for your help!
 

Payton Foritt
 

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Dear Payton,
 

The Community Living Assistance Services and Supports Act (CLASS Act) that you mentioned was a U.S. federal law, enacted as Title VIII of the Patient Protection and Affordable Care Act. The CLASS Act would have created a voluntary and public long-term care insurance option for those who are employed.
 

The CLASS Act had been "a key priority" of the late Senator Edward "Ted" Kennedy. Under the CLASS Act:
 

• Enrollees would have paid a monthly premium, through payroll deduction;

• Enrollees would have been covered on a guaranteed-issue basis;

• Enrollees would have been eligible for benefits after paying premiums for five years and having worked at least three of those years;

• Enrollees would have received a lifetime cash benefit after meeting benefit eligibility criteria, based on the degree of impairment.

 

The goal of the legislation was to make long-term care more accessible and affordable for those who may need it in the future. According to Barbara Manard, a health economist with LeadingAge, the act would have created "a national insurance trust" with a potential "daily cash benefit on the order of about $50 to $75 a day, depending on your level of disability.”

 

However, the CLASS Act was never implemented, and was repealed as part of the American Taxpayer Relief Act of 2012. The repeal presents an indication that people need to take responsibility for their own personal planning and should not rely on government LTC insurance in the foreseeable future. For details on options to pay for long-term care, please see Mr. Farr’s article, “Long-Term Care Insurance: Yes or No?”.
 

Hop this is helpful!
 

Commander Bun Bun

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