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The Benefits of Long-Term Care Insurance and What They Mean for Long-Term Care Financing

In September 2002, LifePlans wrote a white paper on behalf of America’s Health Insurance Plans (AHIP) that presented findings demonstrating the benefits of having a long-term care (LTC) insurance policy at that time. Various data sources were used to analyze the impact of having this insurance on the policyholders, their caregivers and public funding sources. Now, twelve years later, we have more recent data to determine whether or not some of the original findings still hold true and to detail a number of additional benefits that LTC insurance offers policyholders.

Currently, more than 10,000 people a day are turning 65, and they have little but their own resources to rely on to pay for future LTC costs. To qualify for public payments through the Medicaid program, individuals must first impoverish themselves by depleting their assets to pay for care. If they do so, they often cannot receive care in the setting of their choice because Medicaid restricts the providers it will cover and still maintains its preference for nursing home settings. Moreover, roughly half of Medicaid expenditures are made by the states, and this is one of the fastest growing items in state budgets. A growing share of state funds used to pay for LTC diverts needed public investment and assistance from other populations.

LTC insurance has had—and will continue to have—a positive impact on hundreds of thousands of policyholders and their families, and it is already leading to reductions in public expenditures on LTC. A number of major recent studies over provide new information about the role of this insurance and its effects. As a result, stakeholders are looking for ways to encourage the private sector to play a more meaningful role in paying for LTC.  Key points include: A 60-year-old would have to put aside $1,666 a month over 22 years to pay for the same amount of services that would otherwise be covered by long-term care insurance with a monthly premium of $188. Individuals who are covered by long-term care insurance reduce their out-of-pocket costs by $3,000-$5,000 a month (depending on the service setting) compared to those without coverage. Individuals with long-term care insurance receive on average 35% more hours of care than those without coverage. Most individuals with long-term care insurance said their coverage provided greater access and flexibility with their choice of care setting.