Long-Term Care That Falls Short

The new health-care-reform law contains many surprises, and one of them is a new, voluntary long-term-care-insurance program. Starting next year, employees of companies that choose to participate will be automatically enrolled in the Community Living Assistance Services and Supports Act (although they can opt out) and pay for it through payroll deductions. Other workers and the self-employed will be able to enroll on their own. Retirees are not eligible.

But don't give up a long-term-care policy you already own or decide not to buy one because you think you'll have enough coverage from the federal plan. For most people, this CLASS Act barely gets a passing grade.

Skimpy benefits. You would have to pay premiums for a minimum of five years before you would be eligible for a cash benefit of about $50 a day. To receive benefits, you'd have to be unable to perform two or three activities of daily living (the exact number is still being determined), such as walking, bathing or dressing, or be cognitively impaired. But that daily benefit would fall far short of covering the actual cost of long-term care -- which currently averages $219 per day in a nursing home, or $168 for eight hours of care by a home health aide.

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The Department of Health and Human Services hasn't set the premiums yet, but the American Academy of Actuaries estimates that they could average as much as $125 to $160 per month (or as little as $5 a month for those below the poverty line). The high-end estimate is about the price of a private long-term-care policy for a fiftysomething but could provide only about one-third of the daily benefit amount.

On the positive side, you can't be rejected for coverage under the CLASS Act because of your health, so it could help people with medical conditions who don't qualify for private long-term-care insurance. And it does cover many services that aren't eligible for benefits under most long-term-care plans, including homemaker services, home modifications and transportation.