The Long-Term Care Insurance Conundrum

Long Term Care Insurance

A major concern for many service members is the decision to buy long-term care (LTC) insurance. LTC insurance pays for services (usually in-home but can also be at a facility) required to care for a person who can't take care of himself. It covers costs associated with feeding, clothing, toileting, mobility problems, bathing, or continence issues.

LTC issues are not covered by any health plans, Tricare or Medicare. They can be covered under Medicaid, but that becomes its own problem since you first have to meet the financial need requirements for Medicaid. For most with a form of pension income, like military retirees, your retired pay may disqualify you for Medicaid eligibility.

Whether to buy LTC insurance is a tough choice because of several reasons.

  • Premiums are expensive. If you buy it while you are "young," it's much cheaper but chances are you will paying forever before you use it. If you wait until you are closer to the age where you may need it, it will cost a fortune or you may not qualify for the insurance because of older age health reasons.
  • Will you need it? The older we get, the more likely we will need it. University studies have indicated almost 70 percent of people over age 65 will need long-term care assistance at some point. By the way, not only seniors need long-term care. Younger people may need it as the result of an accident or illness.
  • The LTC insurance industry is in flux. In earlier years, the insurance companies miscalculated the demand and costs of the benefits. LTC companies have gone out of business, merged with larger companies, or raised their premiums to meet the greater demand from policy holders.
  • The scare factor. If you need long-term care assistance, it is very expensive. A full-time, assisted living facility can run upward of $80,000 a year -- yikes! Go to this government site to look at the various costs in the country.
  • Finally, which form of insurance do you choose? Insurance companies are getting creative as they try to best address the long-term care needs of people. Choosing the right policy is confusing.

As is often the case, it's those in the middle who get squeezed in this decision. If you have few assets, you may qualify for Medicaid. If you have plenty of assets, you will pay as you go when an LTC need arises.

For those in the middle, assess your assets and project your ability to cover the costs for LTC services -- $25,000 to $80,000 a year. What happens if you use up your assets on your spouse's LTC needs and you are left to fend for yourself? Is paying $2,000 to $7,000 (a general range) a year in LTC premiums worth the price?

Learn more about LTC insurance on the MOAA web site with the LTC Insurance Primer.Check the Federal Long Term Care Insurance Program site if you are a federal/military employee or retiree. Other LTC information sites are the American Association for LTC Insurance and this Consumers Report magazine article.

For readers who are also MOAA members, don't forget the MOAA LTC Buying Service. Call 800-698-7943 for details.

-- Shane Ostrom is one of MOAA's deputy directors for benefits and financial education.

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