Figuring out the best strategy for long-term care is complicated. (istock)

If you’re a federal employee or retiree who participates in the Federal Long Term Care Insurance Program, you have until Sept. 30 (Friday) to decide whether to accept a premium increase or choose less expensive options.

On Tuesday, I had a special online chat with Carolyn McClanahan, a physician and certified financial planner. McClanahan, who does not sell long-term care insurance, answered questions from readers who are not sure what options would work best for them for the federal long term care program. Here the transcript of the chat.

McClanahan couldn’t get to all the questions during the online discussion, so she agreed to answer more in this forum. (For regular newsletter readers not interested in long-term care information, more content, including details about today’s live online chat on Social Security, follows the Q&A section.):

I just enrolled in the Federal Long Term Care Insurance this past May. As I understand it, my premiums will not go up (at least this time.) I am 45 and I signed up now to lock in a decent rate. Wondering if I should keep it?

McClanahan: Yes, keep it. The policy pricing now has taken low interest rates into account, so the premiums should be stable for a while.

I’m 62 with no health issues and have been in the FLTCIP since 2001. My policy is for $265 daily benefit with a 4 percent automatic compound inflation option and unlimited benefit period. I’m thinking of changing the unlimited benefit period to 5 years and keeping everything else the same to reduce premium cost. Does this make sense?

McClanahan: This depends. Most likely you will not need more than five years of care but there are outliers. If you have a good pension and truly need care more than five years, there is a good bet you will be in a facility, and if your pension and Social Security can cover that, you don’t need life-long benefits. Given that, if you want to leave a legacy or want to stay in your home until you die, you will want to keep the unlimited benefit.

What is the downside to simply taking the paid up option for the federal, long-term care? Having paid into the plan for 16 years.

McClanahan: That paid up option won’t pay for much care. If you end up needing care, the return on your premiums will be very much worth having kept it. It is much better to lower the benefit amount so you can continue to afford the premium.

The options include reducing the annual inflation percentage. How do the percentages proposed compare to the actual inflation rates for the benefits the plans provide?

McClanahan: Because of low inflation in general, the national rates for assisted living facility five year growth is only 2.16 percent and private room nursing is 3.51 percent, according to the 2016 Genworth Cost of Care Survey. [For a home health aide, the five-year rate of inflation is been 1.28 percent.]

Considering how badly John Hancock handled their fiduciary duties that brought us such huge increases, what do you think the long-term viability is for this type of insurance. Will these steep increase make them whole, that is be able to continue to pay claims?

McClanahan: Actually, no one would have predicted that interest rates would stay this low for this long, and that is what messed everything up. The policy pricing now has taken low interest rates into account, so the premiums should be stable for a while.

My husband (early 70s) has a comprehensive plan (includes home health aides) with a five-year term; I (early 60s) have a facilities-only plan with an unlimited term. Because we paid for 5 percent comprehensive inflation adjustment, our daily benefit amount is now more than the average cost of nursing home care in our area (per Genworth report). We are thinking of cutting back to the 2.2 percent inflation adjustment since it would be okay for our daily benefit amount to go down somewhat. My husband thinks choosing the 3.9 percent inflation adjustment might be better because if inflation increases in future, we won’t be able to increase the inflation adjustment without going through underwriting. Any suggestions?
https://www.genworth.com/about-us/industry-expertise/cost-of-care.html

McClanahan: Depends on your health. If you are healthy and have longevity in your family, stick with the 3.9 percent. If you have significant health issues that may result in a claim in the next 5 to 10 years, you would be okay with the 2.2 percent rate.

I’m 62, in good health, and have no family to care for me in a long-term care scenario. So, it sounds like maintaining my “unlimited” LTB would make more sense than reducing it to 5 years while keeping the ACIO the same (4 percent). 

McClanahan: Unlimited makes great sense if you can afford it! I have a client who says she wants to make certain she can get in the Taj Mahal Nursing Home for life and did the same thing.

Should your current income (i.e. Social Security, pension) figure into your decision? If so, how?

McClanahan: Yes. This is one of many factors you should consider. If you have a great pension, agree to move into a facility once costs of home care get too high, and don’t care about leaving a legacy (if you haven’t saved a load of money) you might be able to self insure.

With the ever increasing premium hikes and/or benefit reductions, should one even continue in the plan? What amount of money does one need to self-insure?

McClanahan: If you are in the plan, you should continue the plan. You got in at a younger age and it will never be cheaper for you. Consider maintaining at least a couple years coverage. The good news – the policy pricing now has taken low interest rates into account, so the premiums should be stable for a while. You can go to the Genworth site to look up the cost of care in your area.

I currently have the 5-year, 5 percent inflation, $255/day option. The premium will be $536 a month to keep the same coverage, $429 for the 4.2 percent inflation option, or $323 for a 2.95 percent inflation option. Which option is best? I am 67 and in good health now.

McClanahan: You have great coverage. Given your age and health, if you can afford it, I would go for the 4.2 percent inflation rate.

If I have the option of taking 2.2 percent, 3.9 percent or 5 percent inflation protection plans, and obviously the higher the inflation protection, the greater the cost to me, which is the “knee in the curve” for best financial sense? I am in great health, early 60s.

McClanahan: Depends on your starting benefit. If you are ahead of average costs, you can go with the 3.9% or 5%. The 5% is better if you can afford it because you can always cut back later. If you are behind average costs, stick with the 5% if you can afford it. Given your age and health, don’t do the 2.2% option.

I currently have federal long-term care insurance at the 5 percent ACIO. Since I am in my mid-60s, I definitely intend to keep the policy, but the cost increase at 5 percent is prohibitive. If I were to reduce it to 3.9 percent or 2.2 percent would I have the option to dial it back up to 5 percent?

McClanahan: You will be locked in without underwriting. Don’t go with the 2.2 percent option given your age unless you have health issues that you think may result in a claim in less than 10 years.

Does your advice to choose the higher inflation rate also apply if your current daily benefit amount is higher than the average cost of nursing home care in your area? (I’m healthy and in my early 60s.) I have unlimited coverage (facilities only), so if my DBA is higher than my costs, the extra money is lost.

McClanahan: You do the “mid-tier inflation rate” but given your age and health, I wouldn’t go with the lower tier.

I am 74 and in good health. I have the 3-year, 5 percent ACIO option. I am single and have no family to support my care. I am considering the 3-year 4.25 percent option. The 5 percent ACIO option appears expensive, although I could afford it. What do you think?

McClanahan: My concern is that being in good health, you may need care longer than three years. Many people don’t realize that if you use your policy judiciously, the higher benefit will make it last more than the three years. If you can afford it, the 5 percent is the better option. You can always reduce the inflation rate in the future if needed.

I’m 49 and have been in the LTCP from the beginning, my current coverage being 5 years with 4 percent ACIO. I’m healthy, now married with two young kids. It’s hard to balance the need to avoid burdening the wife and kids with any future LTC for myself with the large premium increases I would experience for current coverage or even for reduced ACIO to 2.65 percent. Plus, I’m thinking the wife should get private LTC insurance at some point. So, I’m leaning toward retaining my current premium but reducing the ACIO to .9 percent, and possibly using the “savings” for private insurance for her. Is this a reasonable analysis?

McClanahan: This one is tough! This depends on many factors… I recommend talking to an hourly fee-only planner or an independent LTC specialist to help figure this out. It would be important to make certain all your other coverage is good, because right now, disability and life insurance are much more important. Since you have to make your LTC choice soon, you should go with at least the 2.65 percent inflation rider as you can always reduce it later.

Live chat today
Join me live today at noon (ET). The main discussion is about Social Security. My guest will be Emily Guy Birken who wrote this month’s Color of Money Book Club book “Making Social Security Work For You.”

Here’s my review of the book.

To participate in the chat today click this link.

Color of Money Long Term Care Coverage This Week
Recent Color of Money columns about the Federal Long Term Care Insurance Program

Your strategy to contain the costs of long-term care

Tough questions about long-term care insurance

Financial news you can use
Retirement columnist Rodney Brooks Monday newsletter this week: 71 percent of Americans aren’t saving enough for retirement

One reason why people don’t have enough?

As Brook writes, “According to the Consumer Financial Protection Bureau, more people are entering retirement with more debt than ever, especially mortgage debt.”

Would you quit your job for a principle?

An elementary school lunch worker in Pennsylvania said she quit her job because she didn’t like a new policy that refused hot lunches to students whose lunch accounts were delinquent. Some of those children with negative balances were likely poor whose parents could not afford to pay.

For last week’s Color of Money Question of the Week I asked: If you were this lunch worker, would you have quit?

Here’s what some of you had to say:

Ed Vanlangendonck of Minden, La.: “What a cowardly way for the school to address this situation. No employee should be asked to take a school lunch from a child regardless of the reason. It’s not the child’s fault, and children have enough things to worry about these days without being singled out in the cafeteria. I can’t say that I would quit my job over this, but I can say that I would probably get fired because I couldn’t follow through with it, and would probably fight it on some higher-level. Shame on them!”

Kim Anstine of Frederick, Md.: When I first heard of this story, I thought the child was going without food, but he was going without a hot lunch and instead was being given a cheese sandwich. He is not going hungry. I have been looking for a job for a couple years so for her to give up her job for this seems silly. She is making a mountain out of a molehill.”

“I most certainly would have done what the school lunch worker did,” wrote Leslye Burgess of Ashburn, V\a. “She is to be commended for what she did.”

Willa Jean Harner of Newville, Pa.: “I commend the worker for quitting in protest, but it seems to me that the school administration could devise a better way to handle their policy. I advocated for and worked with kids for years—hope that I would have the fortitude to quit in such a situation.”

Linda Adams of Horseshoe Bend, Idaho: “I absolutely would have quit. It was bad enough to have to take the lunch away from the child; but to then have to throw it in the trash? How in the world does that serve anybody? It is cruel and stupid. I bless the woman that quit her job and hope she is able to find another one.”

Readers may write to Michelle Singletary at The Washington Post, 1301 K St. NW, Washington, D.C. 20071, or michelle.singletary@washpost.com. Personal responses may not be possible, and comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read previous Color of Money columns, go to washingtonpost.com/business.