Federal Long-Term Care Insurance Plan Is Short-Term Thinking

The new long-term care insurance proposal that Democrats have included in a Senate health overhaul bill would produce about $58 billion in revenue for the government over the next 10 years, according to the Congressional Budget Office (CBO).

The $58 billion could be used to offset the cost of the national healthcare program. "Legislators must be salivating at a potential source of income with absolutely no potential for expenses for years to come," explains Jesse Slome, executive director, of the American Association for Long-Term Care Insurance, the industry professional trade organization.

Monthly premiums paid by individuals would account for the $58 billion. Premiums would vary by age but are expected to average about $65 per month ($780 a year). Under the proposed program, no one would be eligible for benefits until they have paid premiums for five years - a reason the CBO estimates the program would net revenue for the government for its first 10 years." The CBO generally does not estimate the cost of programs beyond 10 years, the period covered by procedural "pay-as-you-go" rules requiring legislation to be budget-neutral.

"When has a government entitlement program accurately estimated income and projected expenses," Slome queries. "The CBO already estimates that premiums will be insufficient and will likely need to be increased to maintain the program's solvency. The government already runs a disability insurance program through the Social Security Administration, but it is very difficult to qualify for that program and there is a backlog of people who have appealed Social Security's initial decline of their benefits."

According to the Association some 8.25 million Americans have already purchased long-term care insurance on an individual basis or through their employer. "Some 400,000 new policies are now sold each year," as more people understand the need to plan for the risk of needing care. Millions of others will be able to use the built-up value of their homes through a reverse mortgage.

"Another underfunded entitlement program where the real cost won't be known for 10 or more years simply shifts the financial obligation to the next generation," Slome says. "That's long-term care planning of the worst kind."