Is There an LTC Policy Provided by the Health Care Reform Act?
By Neal@Wealth Pilgrim on Apr 2, 2010 in Retirement Planning Guide
Should you even own an LTC policy?
Well… government is dying to sell you an LTC policy – but should you buy it? Will it create or reduce 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 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.
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 4 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 understand 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 fall 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 your considering that….here are some great carnivals and posts to check out this weekend…stay healthy!
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11 Comment(s)
By Lakita (PFJourney) on Apr 2, 2010 | Reply
Thanks for the mention!
.-= Lakita (PFJourney)´s last blog ..FHA Insured Loan Costs to Increase =-.
By Joe Plemon on Apr 2, 2010 | Reply
Thanks for the mention. Much appreciated!
By Mike - Saving Money Today on Apr 2, 2010 | Reply
Thanks for the mention…I appreciate it!
.-= Mike – Saving Money Today´s last blog ..What Would You Do For $5? =-.
By Evolution Of Wealth on Apr 2, 2010 | Reply
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 =-.
By Aaron @ Clarifinancial on Apr 2, 2010 | Reply
Looking at it on the bright side, adverse selection shouldn’t be too horrible because it is automatic and you have to take action to opt out – that’s something many people are bad at. $50 a day isn’t that much for LTC, but it beats a sharp stick in the eye (or a slippery shower with no grab rails, as the case may be). This will at least help people extend their savings.
But the biggie is how people will qualify for the benefit and if it will provide for intermittent custodial care in the home. That’s a huge concern for most people who think seriously about their own potential for assistance with activities of daily living.
Neal@WealthPilgrim Reply:
April 2nd, 2010 at 7:12 am
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? =-.
By Financial Samurai on Apr 2, 2010 | Reply
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 =-.
By Little House on Apr 2, 2010 | Reply
Thanks for including my link in your round-up!
.-= Little House´s last blog ..Why Don’t I Qualify for a Roth IRA? =-.
By Craig/FFB on Apr 2, 2010 | Reply
Thanks for the mention!
By Derek on Apr 2, 2010 | Reply
Thanks for the mention!
.-= Derek´s last blog ..Where Should I Keep My Emergency Fund? =-.
By Mrs. Money on Apr 3, 2010 | Reply
Thanks so much for the link! xoxo
By Simple in France on Apr 4, 2010 | Reply
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!