President Obama recently canceled an unsustainable program that would have provided long term care insurance to seniors. The costs of private long term care insurance are accelerating.
Troubled health care reform program cut
Part of the health care reform laws that passed in 2010, the Community Living Assistance Services Act or Class would have provided a $50 per diem benefit to people who require daily health care and living assistance in the event of disability or illness, according to the Washington Post.
The program was viewed as unsustainable because it would have required insanely high premiums in order to meet the costs of long term care of the disabled or seriously ill, so President Obama axed the program on Oct. 14.
A growing necessity
Long term care insurance is not like regular health insurance, but rather insurance that covers costs of when a person needs daily assistance because of a chronic illness or disability.
Federal estimates, according to Daily Finance, indicate that those older than 65 have a 40 percent chance of having to be put in a nursing home. It’s estimated that by 2020, 12 million seniors will require daily care. Most of them will need to be cared for by family members, the cost of which currently results in $3 trillion in wage losses per year, according to MarketWatch.
The current annual costs of long term care range. A MetLife survey this year showed the annual cost of a nursing home was $87,235 on average. An assisted living facility costs $41,724 per year. An in-home health professional costs an average $21 per hour and “adult day care” services averaged $70 per day.
To make up the gap
Medicare, according to Daily Finance, only covers medically necessary care, such as in-home care or nursing home care by a medical professional.
According to MarketWatch, Medicaid does cover some long term care but is only extended to the very poor. It is also rapidly dwindling as federal and state budget deficits lead to cuts in benefits. Only about 12 percent of people 65 and older have private long term care insurance. Those who don’t have private insurance and can’t qualify for Medicaid usually have to pay out of pocket until they are forced to turn to Medicare.
Private long term care insurance is also getting more expensive. According to CNN, rates have jumped 25 to 30 percent in the past five years, depending on the provider. Increases have to be approved by state legislators, but insurers John Hancock and GenWorth Financial were asking for approval on premium increases of 40 percent and 18 percent, respectively, earlier this year. Insurers such as MetLife and Guardian Life are leaving the market, according to BusinessWeek.
However, there is good news for those who do purchase long term care insurance. According to the New York Times, the Internal Revenue Service has increased the deductions a person can take if their long term care insurance premiums exceed 7.5 percent of their adjusted gross income.