Well…the government is dying to sell you an LTC policy – but should you buy it? Will it create or reduce your money stress?
Few people know this, but the new health care reform act provides a long-term care insurance provision. The government-run program was created by a provision in the bill known as the Community Living Assistance Services and Supports Act of 2009. They are calling it CLASS.
Here’s the way it works:
If you are working you’ll be automatically enrolled in the program unless you opt out. The government will make it easy on you – they’ll automatically deduct the premium from your pay. How nice.
The plan has no exclusions for age or pre-existing conditions and will pay you $50 a day if you are unable to perform activities of daily living.
Is this LTC policy any good?
Like the entire health care reform bill, there is a great deal of ambiguity surrounding this LTC policy, but I can already tell you that it’s dangerous and it stinks. Why?
First let me tell you why it stinks.
1. It’s a voluntary program. The people who need it will buy it. The people who don’t, won’t. That means lots of sick people will enroll and eventually that will drive costs up as well as premiums. Read “Before you get an LTC insurance quote.”
2. $50 a day is a drop in the bucket. It’s just not enough to cover your costs. Most people who need long-term care spend four times that amount.
3. There is a saying that “the devil is in the details,” and it’s true. The real value of an LTC policy is a function of how much you get and how hard it is to get it. I haven’t seen any clarification of how badly impaired you have to be in order to collect. I also haven’t seen any indication of what the premiums will be.
4. Most government programs are more expensive and provide less to the end user than private programs. I expect this government program to be no different.
Now, let me tell you why this government-provided LTC policy is dangerous.
It’s dangerous because too many people are going to become complacent. They’re going to buy the coverage without understanding it. Then, they’re going to think they are adequately covered when they aren’t. As I said earlier, $50 a day is hardly anything when you consider the real cost of providing long-term care.
Generally speaking, I don’t think everyone needs an LTC policy. Specifically, I’m telling you not to buy into this LTC policy until we all get more information.
Just don’t make the mistake of signing up for this and falling into a false state of security. What do you think? Should the government provide us all with an LTC policy? Do you think they have to because we’re not taking care of this ourselves?
While you’re considering that…
Here are some great carnivals and posts to check out this weekend…stay healthy!
The Borrow and Pay Back Method
How to Pay Off Your Mortgage Early
7 Things Worrying the Middle Class
Making money blogging about lifestyle design
Insuring the Uninsured Is Worth It
Discipline Your Way Out Of Debt
What is Valuable May Not Have Any Worth
Five Reasons Why a Penny Saved is Better than a Penny Earned
Estate Planning: Get Your Financial House in Order
How Much Do You Need for Retirement?
Foreign Savings Accounts and CDs (Not Just For Those Abroad)
Comparing Crown Ministries & Financial Peace University
Health Care Reform Bill Guide
Your Options under the Health Care Reform Bill
How to Get Out of Credit Card Debt
How to File Taxes For Less or Free
Credit Card Rewards Are Good Unless…
Optimizing Our Cash Flow System
Job loss…save money or get out of debt?
Want a Free e-Course and Report on how to invest like a genius?
Just subscribe to Wealth Pilgrim and they are yours for free. Don't waste another day being confused about how investments work or how investment advisors work or how investment advisors work. Take back control of your financial life once and for all - for free!
Click Here to Sign Up For Our Free Newsletter!
Neal Frankle is a Certified Financial Planner™ with over 25 years experience. Subscribe today and tap into this wonderful, free resource!
{ 11 comments… read them below or add one }
Thanks for the mention. Much appreciated!
Thanks for the mention!
.-= Lakita (PFJourney)´s last blog ..FHA Insured Loan Costs to Increase =-.
It’s starting to sound like this is comparable to the Social Security disability benefits? People are automatically enrolled and think that they are covered if they become disabled. Let’s hope the LTC program doesn’t make it as difficult to collect as the ssi program. If people are waiting a year or two and having to apply 4 or 5 times, I’m pretty sure it really won’t help too many people.
.-= Evolution Of Wealth´s last blog ..Life Insurance’s Recent Overhaul =-.
Thanks for the mention…I appreciate it!
.-= Mike – Saving Money Today´s last blog ..What Would You Do For $5? =-.
Joel,
I hadn’t considered the similarities to SSI but of course you right. Nice insight man.
Aaron,
Maybe they’ll make the program so difficult to qualify for that it will actually fund itself.
Of course, that would require some thinking on the part of the government…..
.-= Neal@WealthPilgrim´s last blog ..Is There an LTC Policy Provided by the Health Care Reform Act? =-.
Thanks for including my link in your round-up!
.-= Little House´s last blog ..Why Don’t I Qualify for a Roth IRA? =-.
Neal, don’t be so cynical. $50 a day can buy me 49 McDonald’s double-doubles every single day for life!!! That’s sweat suga!
Best, Sam
.-= Financial Samurai´s last blog ..Riding Rocketships For Greater Success =-.
Thanks for the mention!
.-= Derek´s last blog ..Where Should I Keep My Emergency Fund? =-.
Thanks for the mention!
Thanks so much for the link! xoxo
Yipes! I’m out of the country and have been somewhat lax about monitoring that health bill! The LTC information is certainly going to be an issue. I tried pricing that for my parents years ago and it was so expensive for anything that would actually be useful. I’m worried that this is just a silly loop that’s going to make the company that provides this insurance for the government some cash–at the taxpayers’ expense. $50 a day is, indeed, nothing!