Long-Term Care Options Change Again

What are your plans for long term care? Is it the “I won’t need it so don’t worry about it plan?” That is not a plan, of course, and if you are leaning in that direction (or just sticking your head in the sand), I encourage you to read why I bought long term care insurance and predicting the costs of long term care. That may jolt you back into a state of reality. (Sorry – someone had to do it!)

The federal government recognized that across the full spectrum of seniors and boomers, long term care was an unresolved problem. Its answer was the Community Living Assistance Services and Support Act, a/k/a the Class Act, which was made a part of what now has become known as “Obama Care.” The goal was to create a plan for a basic level of care ($50-$75 per day), paid for by user premiums. The government would administer the plan but without the contribution of tax dollars. Class Act participants would pay reasonable monthly premiums.

This past week, the Administration announced that it would not attempt to actually implement that Class Act. Although technically still part of Obama Care, without rules in place to create and operate the plan, it is DOA. This was not unexpected because most experts inside and outside government believed that it would be too expensive to be sustainable.

Let’s be more specific: Once the actuaries started crunching numbers, they determined that the monthly premiums would be so high that only the wealthier workers would participate. With so few participants, the government would end up having to subsidize the program which it cannot afford to do.

This is unfortunate because so many of us need an affordable option to address long term care risk. Counting on Medicaid is a particularly sad alternative because of the requirement that you spend yourself into the poor house first.

One option that is gaining some traction in the U.S. is a hybrid annuity/long term care insurance product. These are sometimes marketed by the different insurance companies as a “life care annuity”  (LCA), a “living care annuity”, a “total living coverage annuity” or simply as “annuity care.”

In a typical LCA product, the policyholder (you) pays a single premium for a deferred annuity with a long term care “rider.”  (Compared to an immediate annuity, a deferred annuity doesn’t begin paying benefits until sometime in the future. ) The annuity value will increase from the single premium amount by a minimum guaranteed interest rate.  That guaranteed interest rate will usually be less than for a simple deferred annuity because you are also paying for the LTC rider by premiums that are withdrawn from the annuity interest earnings each month.

When a LTC claim occurs, daily or monthly LTC benefits are paid in accordance with the terms of the hybrid insurance contract. The maximum benefits may be equal to the accumulated annuity value divided by the number of days (or months) of a defined time period, e.g., a two year benefit period. The maximum lifetime LTC benefits may be equal to two or three times the full accumulated annuity value.

If the LTC benefit is not needed within a defined period (e.g., 8–10 policy years), you may be allowed to annuitize (pay out over time) the accumulated annuity amount or withdraw that amount as cash without paying any surrender penalty.

Right now we are sticking with our LTC polices from MetLife but if things change, we will be looking at hybrid annuity products also.

If you haven’t spent much time exploring long term care problems and solutions, the Department of Health and Human Services has a very good clearinghouse site for long term care information.

Here is an article on the demise of the Class Act: CLASS is Killed: But How Will We Pay for Long-Term Care Services?


  1. PW says

    For the past 30 years I have been a caregiver for husband’s parents (12 years) and my mom (30 years) and my husband’s aunt and uncle (12 years) some have been simultaneous and I still suffer from the immense physical, mental,financial and emotional drain. Those that were “government” workers with nice big pensions and wonderful retiree benefits were not a problem, and they had saved close to $500,000 and since they got a nice annual pension they were fine. My mom ended up having to go on medicaid, she had little savings and lived on social security as my dad died at age 62, she lived to be almost 94. We were able to take care of her until the last year and when she went into a nursing home we spent down her savings and some of ours and when those were exhausted she went on Medicaid. We had to sell her home to get her on Medicaid, I don’t know why people think that seniors keep their assets, they don’t. Just about any and all assets she had had to be spent down. As a result of all this caregiving, my husband and I lost our own huge savings account, and LTC for us in not affordable. On the other side, I get calls all the time from friends and family that want to “protect” the assets of sick seniors so that the heirs keep the $ and tax payers bear the burden. And there are many eldercare attorneys that willingly and even legally advise ways to protect assets so the tax payers pay. We didn’t pursue the loopholes, we were glad to pay out of our own pockets and theirs for caregiving so the taxpayers did not. The queston is: why pay for long term care when the eldercare attorneys provide loopholes for the taxpayers to pay for Medicaid for nursing homes?

    • Doris says

      After reading your comments, I wonder why you would risk losing or spending your own retirement savings to care for those relatives. I am going through the same scenario right now with my husband’s mother. She is 88 years old, has a host of physical problems and we presently have her in a town home not far from where we live. After two years of living by herself, we see she can no longer cope with every day needs and she will be entering a medicaid facility in the very near future. She and her husband never owned anything in their lives, always rented , no home or even savings to count on for the future. She has only the SS she draws on her late husband’s wages which barely leaves enough for extra’s —thankfully , her health insurance is covered under her late husband’s plan.
      Should I feel guilty because my in-laws did not properly prepare for the golden years? No, I don’t—and I also spent years working over time and night shift work so I and my husband would have not have to watch every penny in retirement. We invested wisely , bought our home, invested in real estate and through careful planning, do have enough to not be a burden to our family and children. I think you should have pursued the loopholes that are in fact, legal, so you would not spend down your own savings. Of course, what you did was admirable but quite foolish from my perspective.

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