Federal Long-Term Care Insurance Program Update
Stand by for an adrenaline-fueled topic: Long-term Care Insurance… provided to federal employees and the military! Yes, this topic is as sexy as it sounds, so I’ll keep it mercifully short, but you should read it anyway unless you’re not going to age.
Long-term Care 101
Medicare does not pay for Long-term Care (LTC)—full stop. Too many people think it does. Medicaid is insurance for the poor and can pay for LTC if all other resources are exhausted, but let’s assume that if you read personal finance blogs, you may not want a Medicaid-level experience in your last few laps around the sun.
If you need skilled nursing care for physical and or cognitive issues, you either pay for it yourself, buy insurance, or spend everything you have so Medicaid will pay for it. There’s more to the story, but those 3 options are what we should all know. The care can be at home, in an assisted living facility, or in a nursing home/memory care facility.
Long-term Care is expensive. In 2024, the national average was almost $118K per year. Self-funding is probably not an issue for supersavers, but most Americans probably can’t afford that. Long-term Care insurance isn’t cheap either, costing hundreds if not thousands per month.
Long-term Care is usually sold with certain parameters, such as:
- $150 per day (but care is often $300+ per day)
- Lifetime maximum of 2-5 years
- Some level of inflation protection
- Other riders like the option to purchase more coverage later
Long-term Care Insurance
Long-term Care Insurance has been a messy business over the past few decades. Many people saw their premiums increase to unaffordable levels as insurance companies tried to staunch their own bleeding in the face of rising LTC costs.
Until late 2022, the Federal Long-Term Care Insurance Program (FLTCIP) was an option for active and retired civil servants and military personnel, including some relatives of those personnel. In late 2022, the program stopped taking new applicants for a period estimated as 2 years in order to analyze and shore up the program. Last week, the program extended the pause for 2 more years. In 2024, some current FLTCIP policy-holders saw premium increases as high as 86%.
Thus, civil servants and military members will need to either shop the open market, take risk without insurance, or try to get on glidepath to self-fund. The FLTCIP wasn’t necessarily an incredible bargain, but many retirees found it to be affordable assuming the premiums didn’t increase drastically… except that the premiums have increased significantly each time OPM renewed the contract with the commercial provider.
Planning for Long-term Care
Long-term care is on the list of topics that we don’t generally talk about as families. Recommendation: talk about it now. This is not an issue that ages well. If you have family members who may need care, can’t afford it, and don’t have insurance, it’s time to talk to city, state, and county agencies that administer programs for the aging to understand what’s available.
A Medicaid Planning Attorney could be a good resource for helping shelter some family assets, but realistically, getting Medicaid involved implies a spend-down to poverty levels. Most states have some protections to protect against spousal impoverishment.
If you’re still in your accumulation years (read: under 60 and still working), it’s time to stress test your wealth projections for the costs of LTC. Saving a portion of one’s nest egg for end-of-life LTC probably won’t feel too satisfying at the time, but neither will asking our adult children to solve the problem for us.
Research Long-term Care Insurance. As with any insurance, it’s often best to start by talking to a brokerage rather than an insurance company. Both have an incentive to sell you a policy, but a brokerage should have access to multiple policies and may spend more time educating you and helping you compare options.
If you work with a financial planner, ask her/him to run scenarios for self-funding vs. the realistic cost of insurance, including robust premium inflation.
Focus on your health today. While clean eating, fitness, and other healthy lifestyle habits don’t guarantee against the need for LTC, it’s unlikely you’ll regret those choices along the way and you may suppress healthcare costs, freeing up dollars for Long-term Care Insurance or saving to self-fund.
Cleared to Rejoin
As is almost always the case, relying on the government to solve our problems is a lousy solution, so waiting to see what happens to the FLTCIP in 2026 probably isn’t a winning strategy. Steps you can take today: talk about this with relevant family members, explore local resources, read up on Medicaid in your state, and take care of that chassis you live in—you only get one!
Fight’s On!
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