Kohl and Akaka Release GAO Study on Federal Long-Term Care Insurance

WASHINGTON - U.S. Senators Herb Kohl (D-Wisc.), Chairman of the Senate Special Committee on Aging, and Daniel Akaka (D-Hawaii), Chairman of the Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia, today released a Government Accountability Office (GAO) study of the Federal Long Term Care Insurance Program (FLTCIP).

The GAO study, conducted at the request of Kohl, Akaka and Senators Joseph Lieberman (D-Conn.), Susan Collins (R-Maine), Bob Corker (R-Tenn.) and Ron Wyden (D-Ore.), analyzed interest in offering long-term care insurance policies to federal workers and the reasons behind the large FLTCIP premium increases in 2009. According to the study, key changes have been made to the program including the introduction of new benefits, modifications to the program's investment strategy and revisions to the formula used to calculate the insurance carrier's profit payment.

"This report shows that while we're heading in the right direction with federal long-term care insurance, there is still work to do to guarantee that consumers have adequate protections and that premiums won't skyrocket down the road," Kohl said. "Managed properly, long term care insurance can provide a valuable opportunity for many people planning for a secure retirement."

"The rate increases raised serious concerns about the management of the Federal Long Term Care Insurance Program and poor OPM oversight and communication with enrollees," said Senator Akaka. "As the need for long-term care has increased, it has become more and more critical that this important program is stable and affordable for our federal enrollees. I am pleased that this report shows a renewed commitment at OPM to effectively oversee this program and to make sure federal employees have accurate information about their benefits and the strength of the program."

As of April 30, 2011, FLTCIP had 229,689 enrollees, making it the largest private long-term care insurance program in the nation. Under the voluntary program, which began in 2002, enrollees pay the full cost of their premiums.

As the number of elderly Americans continues to grow, particularly with the aging of the baby boom population, the growing demand for long-term care services is expected to strain federal and state resources. Accordingly, the federal government has taken steps to increase options for individuals to pay for long-term care costs, including the creation of the FLTCIP.

Individuals who need long-term care services but do not qualify for Medicaid or lack long-term care insurance must pay for the services directly out-of-pocket. In 2009, national spending on long-term care services, including nursing home and other assisted-living services, totaled about $253 billion. Most of that total - $183 billion - was paid for by government programs, primarily Medicaid, while nearly 20 percent, or $46 billion, was paid out-of-pocket by consumers, and 6 percent, or $16 billion, was paid by private insurance.

According to the GAO report, in 2010, the average annual cost for care in a nursing home exceeded $83,000 and the average annual cost for care in an assisted-living facility was nearly $40,000. In addition, the average hourly rate for a home health aide in 2010 was $21 an hour. Studies have found that individuals use on average about 17 hours a week of home care, which results in an annual cost of about $18,500.

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The GAO report, "Long-Term Care Insurance: Carrier Interest in the Federal Program, Changes to Its Actuarial Assumptions, and OPM Oversight," can be found here:  http://www.gao.gov/products/GAO-11-630