What next for long-term care after CLASS act folds?

October 17, 2011

Kathleen Sebelius, Secretary of Health and Human Services REUTERS/Joshua RobertsThe federal government threw in the towel on creating a public option for long-term care coverage last week, and that would seem to be definitive for now.

In defeat, Health and Human Services (HHS) Secretary Kathleen Sebelius was doing the right thing in admitting the concept’s flaws and cutting the government’s losses of the proposal, which was a lesser-known component of the new health reform law. It was an attempt to expand the number of Americans with long-term care coverage by providing a basic, inexpensive LTC option deployed mainly through the workplace as an opt-out choice in benefit plans.

Republicans were overjoyed with the decision, obviously, since they have always seen CLASS as a budget trick to pump up the health law’s revenue and make the law seem less expensive than it is. (CLASS had been projected to generated $86 billion in revenue in the early years from premium payments made by policy holders whose coverage had not yet vested.)

But there is still the problem to solve about how we’ll care for our frail elderly in the years ahead, and it’s unclear what the path to a solution will be. After the shouting subsidies, we’re still left with an inadequate, patchwork system for funding long-term care in the U.S.

The Center for Retirement Research at Boston College (CRR) says about one-third of Americans turning 65 this year will need at least three months of nursing home care sometime during their lives.

Medicare covers only a small portion of long-term care needs, and the cost of a semi-private room averages $79,000 per year. CRR calculates that the mean lifetime exposure to long-term care costs for a 65-year-old couple is $260,000, with a five percent risk of a $570,000 expense.

Meanwhile, Medicaid remains the nation’s largest LTC funder, paying for more than 40 percent of all care. And the market for private LTC insurance continues to limp along, the victim of collective national denial and expensive policies.

About seven million Americans have private LTC coverage, according to LIMRA, the insurance industry research and consulting group. Although a 2010 LIMRA survey suggested that 20 percent of U.S. adults have some form of LTC coverage, the researchers thought that was “an overstatement” caused by confusion about what consumers do and don’t have.

And, while LIMRA says the number of LTC policies sold in 2010 jumped 11 percent, that gain came against 2009, when the economic crash produced numbers that were the worst since the early 1990s.

The LTC industry also suffered a bout of bad publicity in the past year — the result of double-digit rate hikes on existing policyholders and decisions by several major insurance carriers to exit the market.

Sales for the first half of 2011 are up a modest two percent, according to the American Association for Long-Term Care Insurance (AALTCI). “Sales should be down, considering the bad economy and the bad image surrounding the product — but they’re not,” says Jesse Slome, the association’s executive director.

Indeed, the recession has forced Americans to cut back on all kinds of insurance. For example, ownership of individual life insurance has hit a 50-year low last year, according to LIMRA data, with only 44 percent of U.S. households covered. “If Americans are cutting back on that kind of protection, you can imagine that long-term care insurance is a far lower priority,” a LIMRA spokeswoman says.

Following the demise of CLASS, Slome believes the government should consider steps to reform Medicaid funding of LTC, and create tax incentives to stimulate sales of private policies. “We need to change the rules so states aren’t going broke, and Medicaid is a program only for those who really can’t afford their own insurance — and provide incentives for middle-class people to get coverage.”


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

CLASS may be gone but ignoring the problem will not make it disappear.

That is why we call on all Americans between the ages of 52 and 67 (the sweet spot for long-term care planning) to take some personal responsibility and develop their own long-term care plan which could be setting aside sufficient savings, opting for some insurance protection to cover part of the cost or any of the other viable options. The American Association for Long-Term Care Insurance has 2 free consumer guides available at http://www.aaltci.org/long-term-care-ins urance-costs/ and no sign in is required.

Jesse Slome
American Association for Long-Term Care Insurance

Posted by jesseslomeltc | Report as abusive

Unfortunately, the ability to plan for old age may be long gone for many…expecting people who are underpaid (or out of work) and already in poor health to afford insurance and use other investments to save is not realistic–not to mention our poor economic climate. There needs to be a public option with mandatory enrollment for all so the healthy can subsidize the sick. We are a country that refuses to acknowledge individuals cannot afford on their own this expensive yet universal right–the right live out one’s days in dignity.

Posted by lcd2107 | Report as abusive

The CLASS Act should be a wakeup call to all citizens. We all have know for a very long time that if you live a long life, you will need help. Long Term Care is not just for nursing homes. it’s to help remain independent and hopefully at home for as long as possible. We must be self reliant and not dependant on others. Long Term Care Planning is Self Responsibility. We should not look for a hand out we should want to be self dependant. The CLASS Act was doomed from the start. LTC Planning using ether insurance or asset based vehicles with LTC benefits are available to the majority of us. Quit ignoring the facts. We had a Pope with Parkinson’s, a President with Alzheimer’s and Superman became a quadriplegic. It happens and we must be self reliant. The Government is not and never will be the answer.

Posted by Lee4ltc | Report as abusive

Jonathan Pond, Financial Planner, says that 90% of estates are spent this way: 1) nursing home, 2) IRS, 3) children, 4) grandchildren, 5) charity. More people are worried about the IRS taking their money than about having to spend it on a nursing home.

The Federal Deficit Reduction Act provided for every state to have a Partnership program to provide asset protection for those who buy qualified long term care insurance policies. http://www.partnershipforlongtermcare.co m/

An alternative to “lose it or lose it” LTC insurance are linked-benefit products, Life insurance or Fixed annuities with long term care riders. In most states if over 59 1/2 you can use qualified money (IRA/401k) to fund your plan. http://guidetolongtermcare.com/linkedben efit.html

Posted by Geomguy | Report as abusive