Researchers question necessity, financial prudence of buying LTC coverage

Despite health care and aging experts’ best efforts to educate consumers on the importance of long-term care planning and/or insurance coverage, uptake of the policies traditionally has been notoriously low.

Add in the recent demise of the CLASS Act  — a provision of the health care reform law that would have created a voluntary LTC purchase program, but was shelved due to lack of funding — and you get lack of government support added to an apathetic public, not a great combination for boosting LTCI sales.

However, an online commentary from author and Forbes contributor Howard Gleckman points out that according to research by two economists, buying LTC in many cases may not only be unnecessary but also economically inadvisable.

The researchers, Jeff Brown and Amy Finkelstein, conclude that it LTC coverage doesn’t make much sense for low-income workers since they’ll be covered by Medicaid, or for high-income workers, since they can afford to purchase private care on their own without the benefit of LTCI.

In addition, Brown and Finkelstein calculate that LTCI costs more than the potential benefit, Gleckman writes. The pair find that a 65-year-old LTCI buyer would get back just 68 cents for every dollar paid in premiums. By comparison, buying a life annuity would pay dividends of 75 cents to 85 cents, the researchers find.

Still, Gleckman writes, LTCI is a pretty good deal for women, who would get 87 cents for ever premium dollar, compared to only 45 cents for men. That said, Brown and Finkelstein conclude that Medicaid would cover three-quarters of LTC benefits for a typical woman.

As Gleckman points out, it’s not like Medicaid is the pot of gold at the end of the rainbow in terms of comprehensive LTC coverage. But at the same time, it’s hard to deny the appealing aspect of the fact that it’s … well … free. And, in this economy, free counts for a lot.

What do you think? Is buying private LTC coverage necessary? Share your thoughts in the comments.