GUEST BLOGGER
Phyllis Shelton, President, LTC Consultants and LTCiTraining.com
America has a choice to make. There’s no way that public dollars alone can pay the long-term care bill for the baby boomers, 95% of whom have no coverage for long-term care, in addition to the 16 million younger adults being added to the Medicaid rolls by health care reform beginning January 1, 2014. Taking that route means families need to know they will pay higher property tax, higher sales tax and higher tuition, and there may not be scholarship money for their children… in order to pay for Medicaid.
Here’s the real kicker: after surviving the mortgage crisis, families can still lose their homes to estate recovery because they didn’t plan ahead for long-term care.
There is a solution, but very few know about it. It’s a public-private partnership that is already set up in about 40 states that allows the private sector to pay for long-term care first and makes Medicaid the payer of last resort, without making people spend most of their money to access Medicaid.
This solution definitely works. In the four states that have piloted this program since the early 1990s, fewer than 500 people out of more than 325,000 have had to rely on Medicaid to fund their long-term care.
But the key to making this work fast enough is for these plans to be offered in the workplace so most Americans have access to long-term care insurance with limited or no underwriting and lower premiums. By getting employees of all ages involved, we will build a huge body of private sector dollars that will pay for long-term care later on or sooner if it's needed. A 25-year-old can get a Partnership LTC plan with inflation coverage for less than a latte a day. Because it’s insurance and not a savings plan, the 25-year-old could pay one premium of $60, be in a motorcycle accident and receive $100,000 in tax-free benefits that his health insurance would not have provided.
The CLASS Act in the Health Care Reform legislation is trying to do this, but the benefits are structured wrong. It has a low daily benefit with inadequate growth for inflation and an unlimited benefit payout.
Those who understand Medicaid know that if the person can’t make up the difference between the benefit and the charge at claim time, he or she spends personal resources quickly and goes on Medicaid right away.
The better path is to have a higher daily or monthly benefit with 5% compound inflation and a shorter benefit period so that insurance has a chance to pay at least the first two or three years of care. That would be enough to keep most of the 80 million baby boomers off Medicaid for long-term care and free up state dollars to pay for education and the other vital services they provide.
Producers need to learn quickly how to make it easy for employers to offer long-term care insurance as a voluntary benefit to employees and their families. Individual products with underwriting concessions and premium discounts are most commonly used. They should also encourage employees to ask their employer for long-term care insurance.
Phyllis Shelton is the author of three books and has been featured in the Wall Street Journal, Newsweek, CNNfn, National Public Radio and a PBS documentary on care giving. She is currently on a seven-city tour training financial professionals how to help employers offer these plans.
NAIFA's Point of View
- NAIFA has a number of concerns with the CLASS program including:
- Benefits will be insufficient to pay for LTC needs
- Program is unsustainable (CBO, Medicare Actuary, American Academy of Actuaries)
- Misperception that it will pay full cost of assisted living or nursing home-type care
- Yearly adjustments to both premiums and benefits (to maintain solvency) will create additional confusion
NAIFA supported alternatives:
- Increase awareness of long-term care planning needs
- Increased funding for the HHS Long-Term Care Clearinghouse
- Expand State Partnership Program that allows participants to keep some or all of their assets if they apply for Medicaid after using LTCi benefits
- Allow LTCi to be included in employer-sponsored cafeteria plans and flexible spending accounts so premiums can be paid with pre-tax dollars
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