Friday, July 31, 2015

Update on other countries’ approach to long-term care

The U.S. is facing a crisis as millions of baby boomers are approaching the age when the possibility of needing long-term care skyrockets. Our government provides minimal care via Medicare, while you must be almost broke to receive Medicaid. The CLASS Act program, which was part of Obamacare, died before the law went into effect — a prediction I made while Washington’s wonks were muddling behind closed doors. And only a small percentage of boomers have long-term care insurance.

Other industrial countries are facing a similar shift in demographics. And last December I shared a report with you on how they’re coping. Here is an update on three of them …

The United Kingdom

Single-premium immediate annuities are popular among those who currently need long-term care and can afford them. They provide a guaranteed, tax-free income that can help fund LTC bills. Starting next April, the British government is phasing in new restrictions on access to public LTC benefits. Individuals will have to spend £72,000 (US$113,000) on LTC services and all but £118,000 (US$184,000) of their assets before government benefits start. Afterwards, the government will provide “full state support,” which has limitations. 


15% of those over age 40 have private LTCI. And to keep premiums down, waiting periods of 3 years for dementia and 1 year for other covered conditions are common.


Singapore has a mandatory saving plan for all workers that they can use for retirement, housing, and health care. Workers ages 40 to 69 are automatically enrolled in an ElderShield LTC benefits program. But the monthly benefit is only 400 Singapore dollars (US$293) per month; nursing home care in the country runs at least 1,200 dollars (US$878). However, participants have the option of contributing up to 600 dollars (US$439) into a private plan each year giving them up to 3,500 dollars (US$2,562) per month in benefits.


Based on those few brief observations, governments remain the provider of last resort for long-term care. And the trend seems to be shifting to requiring citizens to take on even greater responsibility for their own care. Their tools of choice: Immediate and deferred annuities, and private long-term care insurance.

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