Retirement & Financial Planning Report

The availability of long-term care insurance policies is continuing to decline even as the need for such care is growing, an interagency task force led by the Treasury Department has said.

“Approximately half of Americans turning age 65 today will need some type of LTC in their lives. The older a person is, the more likely it is that he or she will need LTC at some point,” it says, noting the general aging of the national population as much of the baby boom generation already is above that age and the rest will be within 10 years.

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It adds: “Private insurers began offering LTCI [long-term care insurance] in the 1970s in response to demand for financial protection against the risk of having to enter a nursing home. Sales of new policies peaked in the early 2000s, but have since declined as numerous insurers decided to exit the market due to the poor financial performance of the product line.”

Purchases of such policies peaked in 2002—when the government launched its own program for federal employees, the Federal Long Term Care Insurance Program—at 750,000 and have fallen steadily since, down to 57,000 in 2018 “even as the share of the population in the age group most likely to purchase private LTCI, those age 60 to 69, rose from 9.5% in 2010 to 11.4% in 2018.”

The report pointed out that the government does not recommend either before or against purchasing such insurance. But it noted that currently, much of the burden of providing for such care falls on the Medicaid program, which paid some $159 billion for such expenses in 2018 while LTC insurance covered only about $10 billion and individuals paid another $55 billion out of pocket.

There is also a substantial, but hard to quantify, amount of unpaid care provided by family members, it added.

It said that for the private LTC insurance market to meet the coming demand there will have to be more innovation in the way such insurance is designed and delivered. It gave as examples having LTC coverage as a rider to other types of insurance rather than as a stand-alone product; and policies with a more limited scope, for example to cover only nursing home care and only for up to a year, that would have lower premiums.

It also said there is room for better coordination of how such insurance is regulated, education and awareness programs regarding possible need for coverage, and tax incentives to purchase such protection.

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