Retirement & Financial Planning Report

A recent report questioned the value of offering incentives for people to buy long-term care insurance, one of the types of insurance available to federal employees for which there is no employer-paid contribution.

The report by the Center for Retirement Research looked into patterns of purchasing LTC coverage, concluding that commitment among potential consumers is “low” despite the potential for incurring high costs for nursing home care and other forms of long-term care.

Employee organizations have proposed from time to time that creating such an incentive would increase enrollment in the Federal Long Term Care Insurance Program, for which enrollees must pay the full cost of premiums–like the FEDVIP vision-dental insurance program but unlike the health insurance and life insurance programs. However, no formal steps have been taken to subsidize premium costs, largely out of concerns about the cost to the government.

The study noted that some states offer subsidized long-term care insurance programs as a way to relieve the potential burden on their Medicaid programs, which often step in to pay for long-term care that is not insured and that the individual can’t personally afford.

It found that overall, the more assets a person has and wants to protect, the more likely that person is to buy LTC insurance. It concluded that the value of the subsidy generally was not sufficient to spur people to buy the insurance, with lower-income persons again the most reluctant.

In the state programs, it added, subsidizing LTC coverage purchases actually can increase costs, since those most likely to buy the insurance would have otherwise paid more out of their own pockets before resorting to Medicaid coverage.