NCPA - National Center for Policy Analysis

Long-Term Care Offers Promise, Pitfalls

August 26, 1999

The importance of long-term care to voters was reflected in the recently passed tax reduction package, which gives an extra personal exemption to people caring for relatives at home and allows a deduction of the full cost of buying one's own long-term care (LTC) insurance. Formal long-term care services totaled $115 billion in 1997. The government paid two-thirds of the bill -- with Medicaid providing the lion's share and Medicare paying more limited amounts.

The insurance has pluses and minuses:

  • LTC insurance is sold with what appears to be a "level premium," meaning if you start at $200 a month, that figure will never go up.
  • However, while individual policies' premiums can't be raised companies can raise all similar policies within the same state.
  • The National Association of Insurance Commissioners (NAIC) has twice tried to regulate the (usually) small companies that jack up LTC rates as much as 50 percent in two years, but with no success.
  • Still, observers say, many larger companies, including Travelers Life & Annuity, GE Financial Assurance, Unum and John Hancock Mutual Life, offer LTC policies which are more expensive initially than so-called "bargain" plans, but whose premiums have never gone up on existing policy holders.

Industry experts say the best plan is to steer clear of low- priced policies, and get a history of the insurer's rate increases. For more information, prospective buyers can refer to "Long-Term Care Planning" ($18.50) from the United Seniors Health Cooperative (800-637-2604).

Source: Jane Bryant Quinn, "Is A Backlash Brewing in LTC?" Newsweek, August 30, 1999.


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