Long-Term Care Insurance, Again

Some more thoughts on long term care insurance.

The Center for Retirement Research at Boston College has a piece on Medicaid and long term care. It's by Howard Gleckman, a visiting fellow at the Center. I've known Howard for years as a senior correspondent at Business Week's Washington D.C. Bureau. It's well worth reading.

I want to highlight one section of his report, on long-term care insurance:

One way to reduce the taxpayer burden of long-term care is to shift costs to individuals by encouraging them to purchase private long-term care insurance. In 2006, Congress expanded the Partnership Act, which allows seniors who purchase long-term care insurance to increase the amount of the assets they may protect while still becoming eligible for Medicaid. For example, if an individual purchases a $300,000 long-term care policy, he could retain assets up to $300,000. Under the new provisions, 22 states plan to begin such programs in 2007. However, in the four states that have operated a Partnership program for many years, results have been disappointing. In part, the low demand for long-term care policies is a result of their cost. A high-end policy for a 62-year-old couple can cost between $7,600 and $11,500 per year.

That's a lot of money, and cost matters.

A few years ago, the Kaiser Family Foundation tried to calculate whether long term care insurance was a practical financial product for middle class families. Here's the study

The study's first pass on the data suggested that three out of four married couples (with the head of household between ages 35 and 59) could theoretically afford LTCI. Premiums are much more affordable when younger. Yet on a closer look, only one in five is well covered in other key areas, like saving for retirement, life insurance, health insurance, and disability insurance. Those other investments should take precedence.

As for older people, premiums are so steep that it's much harder to afford comprehensive coverage. The more affordable pared down products don't offer meaningful estate protection, according to the report. The Foundation calls for a greater emphasis on lower cost policies geared toward keeping people in their home as long as possible.