Long Term Care Insurance - Essay Example

 Long Term Care Insurance Introduction Long Term Care insurance policies help many individuals to receive the expensive nursing homes and assisted living facilities. Long term insurance solves one of the biggest fears of Americans to spend all their life savings on expensive nursing costs and medical bills. However, insurance is a way through which Americans can cover their expenses at an old age. Most of the financial advisors would advice insurance policies yet the long term care insurance has received lesser popularity than expected. Only about 7 million Americans have bought the policy. This paper will analyze the reasons why most Americans still decline the purchase of long term care insurance and what impact does the CLASS act have on the current long term care system of America. There are many reasons why retirees have suddenly started to consider the worth of long term care insurance policies. The main reason is however the dramatic increase in the insurance premiums (Johnson, 2005). Buying insurance policies for long term care is basically gambling where risks, cost, and benefits can be calculated. These policies are not like the other insurances where the costs and risks are low but benefits are high; such as fire insurance. The insurance policymakers use tactics to sell their insurance policies by touting scary advertisements about probabilities of seniors spending life in nursing homes. Where the insurance premiums are too high, the benefits are comparatively lower. With insurance premiums of about $2500 annually, 60 year olds and other Americans do not purchase the insurance policies (Gleckman, 2011). The second main reason is due to several misconceptions that Americans have about long term care and insurance policies. The lack of awareness programs have led to many misconceptions which were highlighted during several surveys that took place recently on why Americans won’t buy long term care insurance. The biggest misconception that people had was that Medicare is going to cover their long term care. The truth is it does not due to the current system of long term care, the benefits provided by Medicare and Medicaid has reduced (Meiners, 2012). Many Americans also believe that they are too young to buy long term care insurance while others also believe that long term care is already included in their health insurance policy; it is not. Most people who have Medicare insurance believe that they have access to long term care as well (Gleckman, 2011). Due to lack of awareness, many Americans have not bought long term care insurance. The third important reason is the low benefits that come with long term care insurance. More than 60% of the seniors discharge from nursing homes within 90 days. Statistics show that only about 3.7% of American seniors are currently living in nursing homes (Gleckman, 2011). This means that they aren’t really benefitting from the insurance at all. Moreover, most insurance policies have the 90 day rule according to which these policies won’t cover the long term care of insurers who have not been in nursing homes till 90 days. Insurers would receive the benefit after 90 days and in regard to the statistics this shows that most insurers would not receive any benefit at all. On an average, American seniors live in nursing homes for about one or two years. This is why they don’t purchase the expensive insurance policies (Meiners, 2012). The Community Living Assistance Services and Support (CLASS) Program was created to provide individuals the assistance with daily activities and with long term care services. However, the CLASS Act has been analyzed as a poorly designed act. The CLASS Act was a government administered program which was for all working citizens. It provided a lifetime benefit of $50 a day minimum in course of an illness, disability, or cognitive impairment which would disrupt a person from living independently. The major problem with this act was the funds from which the benefits were to be paid. The program’s solvency was at question and the U.S. Department of Health and Human Services concluded that the act would be actuarially sound for just 75 years (Colello, 2013). Currently, Medicaid paid for almost half of the long term care needs and it is funded by the federal government and the state and yet it suffers economic pressures. In this condition, the CLASS Act would lead the Congress in a massive budget deficit. After the demise of the CLASS Act, there were just two ways through which individuals could pay for their long term care; private insurance and personal savings (Darnel, 2010). The defect and demise of the CLASS Act has had a negative impact on the current system as long term care is expensive and the insurance policies are not improving in the near future. With the CLASS Act being removed, the dependence of the long term care is on private insurance policies. Currently, several individuals have reliance of long term care services through their private savings or insurance rather than coverage from the government. The government is currently failing to provide any sorts of long term care benefits. With such a situation, the future of long term care system in America is likely to go down. Millions of Americans would need long term care but there will be no aid from the government (Darnel, 2010). The current health reform in the U.S. will have a major impact on the future of healthcare. Long term care providers will also look for sources of revenue when even Medicaid will shrink. Thus, the long term care is highly becoming a problem in America as more and more people are eligible to long term care but the services are expensive and there is no government aid. Long term care insurance policies are expensive and provide lesser benefits than any other health insurances which are why only 7 million people in America actually own it. Policy makers must look for a solution which solves the growing problem of long term care provision breaking through America’s healthcare system. The current reforms have had a negative impact on the long term care service; this has become worse after the demise of the CLASS Act. References Colello, K. (2013). Community Living Assistance Services and Supports (CLASS): Overview and Summary of Provisions. Congressional Research Service Darnel, B. (2010). Perspectives on the Community Living Assistance Services and Support (CLASS) Act. Milliman Research Report Gleckman, H. (2011). Why people don’t buy long-term care insurance? Forbes Johnson, R. (2005). Is Private Long-Term Care Insurance the Answer? Center for Retirement Research Meiners, M. (2012). Should you purchase long-term care insurance? The Wall Street Journal Read More