Can we build a better long-term care program?

Last month a leading “think tank”, the Urban Institute, released a study proposing a new long-term care program.  A senior fellow at the Institute, Howard Gleckman, wrote, “Can we build better long term care insurance? The answer is yes, according to two important new studies.”

Unfortunately, the proposed program would cost a 65-year old about 85% more than what long-term care insurance costs today.  One of the proposed plans would pay for two years of benefits, after a 90-day Elimination Period. The plan would also include inflation protection. Without any government subsidies, the study estimated a 65-year old would have to pay $3,680 per year for this plan.

A 65-year old male, in average health, could get the same benefits today for only $1,541 per year.  That’s less than half of what the proposed program would cost.  Ironically, the study states that “relatively few people purchase private long-term care insurance because of high premiums.” Yet for all age groups the premiums proposed in this study would cost, on average, 87% more than long-term care insurance costs now.

Fortunately, 43 states in cooperation with the federal government have already launched a “Public/Private” Partnership for Long-Term Care. To help the middle-class plan for long-term care these states have approved for purchase a special type of insurance called “Long-Term Care Partnership Policies”.

A government-approved Long-Term Care Partnership Policy can protect most, if not all, of your assets from Medicaid spend-down and Medicaid estate-recovery.  A married couple both age 61, in average health, could share a Long-Term Care Partnership Policy with $250,000 of benefits. Their premium would be less than $100 per month per spouse. If they used all $250,000 in the policy, they could apply for Medicaid benefits and protect $250,000 of their countable assets from Medicaid.

If the couple wants to protect more assets they can buy more benefits for a higher premium. If the couple has less assets they can buy less benefits for a lower premium. The middle-class can target how much coverage they need based upon how much of their assets they want to protect from Medicaid. In all cases,