Long-Term Care
Long-Term Care That Falls Short
Benefits from the government's new program won't cover the cost of a nursing-home stay.
By Kimberly Lankford, Contributing Editor
From Kiplinger's Personal Finance magazine, June 2010
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The new health-care-reform law contains many surprises, and one of them is a new, voluntary long-term-care-insurance program. Starting next year, employees of companies that choose to participate will be automatically enrolled in the Community Living Assistance Services and Supports Act (although they can opt out) and pay for it through payroll deductions. Other workers and the self-employed will be able to enroll on their own. Retirees are not eligible.
But don't give up a long-term-care policy you already own or decide not to buy one because you think you'll have enough coverage from the federal plan. For most people, this CLASS Act barely gets a passing grade.
Skimpy benefits. You would have to pay premiums for a minimum of five years before you would be eligible for a cash benefit of about $50 a day. To receive benefits, you'd have to be unable to perform two or three activities of daily living (the exact number is still being determined), such as walking, bathing or dressing, or be cognitively impaired. But that daily benefit would fall far short of covering the actual cost of long-term care -- which currently averages $219 per day in a nursing home, or $168 for eight hours of care by a home health aide.
The Department of Health and Human Services hasn't set the premiums yet, but the American Academy of Actuaries estimates that they could average as much as $125 to $160 per month (or as little as $5 a month for those below the poverty line). The high-end estimate is about the price of a private long-term-care policy for a fiftysomething but could provide only about one-third of the daily benefit amount.
On the positive side, you can't be rejected for coverage under the CLASS Act because of your health, so it could help people with medical conditions who don't qualify for private long-term-care insurance. And it does cover many services that aren't eligible for benefits under most long-term-care plans, including homemaker services, home modifications and transportation.
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Reader Comments (5)
Posted by: Eric Schubert at 05/12/2010 10:16:34 AM
Actually, depending on how this is ultimately set up, it could very much get a passing grade. Why? Most people have absolutely NO long-term care coverage today. This is coming at a time when America has entered an unprecedented age wave, where in many places old Americans will outnumber young ones. The key here will be to connect CLASS Act to supplemental private policies (absent mandated national coverage) so people have full coverage for Alzheimer's care and other needs.... www.changingagingblog.org
Posted by: Scott A Olson at 05/13/2010 10:51:10 AM
Most long-term care insurance policies today do pay benefits for homemaker services and home modifications. In fact, many of the leading long-term care policies today will even allow you to choose a family member to be paid to provide care for you. The CLASS Act's $50 per day "average benefit" will only cover a small portion of the $75,000+ per year most Americans pay for in-home care. Most people who want to protect their savings will still need to purchase long-term care insurance. One of the biggest problems we face is that most Americans still think that Medicare or their medical insurance covers the cost of long term care. The CLASS Act addresses this problem by making a very clear statement: You have to pay for your own long term care. You either have to pay for your own long term care by using your savings, the $50 per day CLASS Act benefit, long term care insurance, or a combination of these. Most of the ten million Americans who own long term care insurance, own it because they've seen friends or family have to spend down their assets before qualifying for Medicaid. The CLASS Act will help alert the rest of the country to the fact that they need to financially plan for their future long term care needs. There are 2 reasons the projected premiums for the CLASS Act are much higher than a comparable long term care insurance policy....www.LTCInsuranceShopper.com
Posted by: Scott A Olson at 05/13/2010 10:51:48 AM
There are 2 reasons the projected premiums for the CLASS Act are much higher than a comparable long term care insurance policy. 1) Anyone who is working (even just part-time) can enroll in the CLASS Act regardless of their health history. Enrollees with severe diabetes or crippling arthritis will pay the same amount for the CLASS Act benefit as those who are in perfect health. 2) Those who earn less than the federal poverty level will be automatically enrolled in the CLASS Act for only $5 per month (unless they opt-out). Their premiums are being subsidized by the rest of the enrollees.
Posted by: Jesse Slome at 06/08/2010 07:30:40 PM
Evaluation of the CLASS program is impossible until the Department of Health and Human Services establishes the cost (price), the benefits, qualification requirements and administrative details. It's understandable why people believe CLASS begins in 2011 -- because Congress showed income as part of Health Care Reform. But, the law actually says pricing must be done by October 1, 2012. Then it must undergo public comment - so stay tuned. The biggest mistake anyone who is age 50 or older can make is waiting for all these details to be revealed. If CLASS is attractive, you may no longer health qualify for a supplemental long-term care insurance plan. If CLASS is not attractive, you may face the same issue. Instead, why not consider a nominal individual plan that you can supplement with CLASS when it becomes available in 2013 or later. Because there's no need to health qualify for CLASS you get the benefit of both worlds without the risk. For the latest updates, may I suggest visiting the American Association for Long-Term Care Insurance's CLASS update page: www.aaltci.org/class Jesse Slome American Association for Long-Term Care Insurance
Posted by: Ross Schriftman at 06/09/2010 06:05:53 PM
The Class Act is NOT insurance. Participants will not get a policy. They will not even get a certificate of insurance. They don't even have an account in their name with the fund the Federal government will set up. They have no promises of future benefits. Who in their right mind would voluntarily send their hard earned money to a government that is already $13 trillion in debt with the hope that someday some government bureaucrat will determine that they are entitled to as little as $50 per day for their care? If a private insurance created a scheme like this they would be shut down by regulators. This is a fraud included in a piece of legislative malpractice incorrectly labeled the Patient Protection and Affordable Care Act. The Class Act's main purpose in including this was to make the CBO numbers look good. They counted dollars placed in the fund as revenue to the government and not policy reserves to pay future claims. People should purchase real insurance and not waste one dollar on this government debacle. Please note a correction in your article. Most private long term care insurance policies pay for home modification, homemaker services and other needs like care manager services in ADDITION to the daily benefits they pay. I own coverage. My Mother had coverage which paid for her home care until she died and as a long term care insurance specialist I would not recommend that my clients voluntarily sign up for such a bad program like CLASS. Even those that are too sick will find that the government will have no money to pay them 5 years down the road anyway.