One of the most recent heated political topics over the past few years has been Obama Care. The idea: No one should be without medical insurance. A little known section that was tucked away in Obama’s original health care law was the Community Living Assistance Services and Supports provision (CLASS). The idea: Uncle Sam would provide financial assistance to people who become functionally disabled and require long-term services and support if they pay monthly premiums into a government created LTC plan that would provide a stipend of $50 a day or more to help pay for LTC services.
On October 14, 2011, after a comprehensive federal study considering the overall costs and administrative problems created by CLASS, then Health Secretary Kathleen Sebelius, suspended that part of law due to long-term solvency concerns stating: “I do not see a path to move forward with CLASS at this time.” Then in early January of 2012 the House passed H. R. 1173 with a vote of 267-159 that wiped out CLASS before it even began.
While it can be of some comfort to know that the government wants to take care of me from the cradle to the grave, the realization is that it just isn’t fiscally feasible. It is too expensive and there are too many of us. Even if CLASS were to resurrect, the $50 daily benefit will fall way short of covering the actual costs.
The bottom line: We have to take care of ourselves. So how will we do it? What is the most economical way to provide for our statistically inevitable long term medical expenses?
1) Reimbursement – with this method of payment the carrier only pays the actual expenses relating to long-term medical care, up to the maximum monthly benefit. Most early versions of the life/LTC Combo Plans have this form of payment. All LTC annuities are based on the reimbursement format.
2) Indemnity – Only found in the Life/LTC Combo Plans. With this method of payment the carrier pays the monthly benefit based on a given percentage of the face amount of the life insurance policy, usually 2% paid out monthly for 50 months. The payment is the full amount of your long term care benefit regardless of how much you have in expenses. You can use the extra cash to help pay other non-LTC related expenses.
3) Accelerated Death Benefit (chronic illness) – This benefit is only found in the newer permanent life insurance policies and is usually provided at no upfront costs, however the back-end costs are a reduction or discount of the life insurance benefit. The trigger mechanism is the same as the indemnity or reimbursement plan; however, the benefit is paid in cash up to 24% per year of the face amount.