Health care reform and long-term care

When President Obama signed health care reform into law earlier this year, the bill contained a historic number of changes that will affect health insurance and prescription drug coverage. Health care reform promises to be a major topic of interest for older Americans over the next several years.

As part of health care reform, the Community Living Assistance Services and Supports (CLASS) Act creates a voluntary employer-sponsored program, funded by employees, that is designed to allow people with long-term care needs to remain in their communities. The CLASS Act is expected to require individuals to pay premiums for at least five years before becoming eligible for benefits.

The insurance program is expected to pay a minimum daily benefit of about $50, although regulations are not finalized. The Department of Health and Human Services has until October 2012 to finalize the CLASS Act’s many details, including eligibility rules and average premiums.

We know, though, that the CLASS Act won’t pay for nursing home or other resident care. Neither will the other provisions of the new health care reform law. On the federal level, Medicaid provides a long-term care benefit. However, only individuals with minimal income and assets qualify. Medicare sometimes pays for limited nursing home care immediately following a hospital stay.

Now, after health care reform, how will you pay for potential long-term care costs? For many people, the answer is “the same way you pay for it now.” If you don’t qualify for Medicare or Medicaid long-term care and the $50 per day benefit payable after five years of contributions under the CLASS Act isn’t sufficient, you’re on your own. You can pay these expenses out of pocket of with long-term care insurance benefits.

Before making your decision, consider that the national average wage for a home health care aide averaged nearly $10 per hour in May 2008, with pay in some areas dramatically more than that. These rates figure to increase in the future, and they pale in comparison to nursing home and assisted living costs.

Knowing this, it makes sense to investigate long-term care insurance while you’re healthy. If you are still employed, ask your employer if it sponsors long-term care insurance. If not, talk to a licensed financial professional about private coverage. Either way, do your homework when buying individual insurance. Health requirements and premiums will differ from one long-term insurance company to another.

Jeff S. Waters is a financial adviser at Waters Wealth Strategies.  He can be reached at 358-7126 or by email at jswaters@waterswealthstrategies.com.