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Would it be reasonable to project that the cost of long-term care and long-term care insurance in the US will go up as fast as health-care inflation, or at some rate closer to the general rate of inflation?

The long-term average rate of health-care inflation seems to be about 5.5%, whereas the general rate of inflation might be more like 2%. Today, a semi-private room in my area costs about $92k/year. So if I project to when I'm 90 years old, 40 years in the future, the cost would be expected to go up to about $800k if it goes by the rate of health-care inflation, but only $200k if it grows at the general rate of inflation. That's a big difference!

  • Good question. One thought: There is a real estate component to long-term care that might not be captured by using the health care inflation figure only. – Chris W. Rea Aug 29 '16 at 22:52
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    Assumptions about the economy, assumptions about future medicine, and assumptions about what treatments you do or don't want all play into this. I don't think there are simple answers. Even the insurance companies, who make their money partly by predicting this, don't look very far into the future with any real confidence. – keshlam Aug 30 '16 at 3:50
  • I understand the comments saying that it's hard to predict. However, we can do the same thing we do with other forms of inflation and look at historical data. There is no guarantee that the inflation rate for LTC will be the same in the future as it was in the past, but it would at least give us a reasonable guess. Simply throwing up our hands and saying we can't predict it isn't very helpful. When planning for retirement, you have to make some assumption for how LTC costs will go up, and it's obviously silly to assume zero inflation. – Ben Crowell Aug 30 '16 at 15:35
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Long term care insurance and the rates have not been and will not be easy to predict.

In 2002 the US Government started a program where US Government employees could purchase optional Long Term Care Insurance.

Employees were encouraged to buy early to lock in their rates. Of course medical costs went up, and the bonds didn't get the returns they expected. So employees found out that the promise to not raise rates was a fiction. The insurance company had a contract with the Government and when that contract was renewed all bidders could recalculate the rates. So even though the same company won the contract in 2009 and in 2016 the rates went up:

  • 2009, the premium rates jumped approximately 25 percent for more than 146,000 beneficiaries that had enrolled in an inflation protection option.

and then in 2016

  • Federal employees enrolled in the Federal Long Term Care Insurance Program got hit with an extreme case of sticker shock this week, when the Office of Personnel Management said that next year’s premiums would rise by an average of 83 percent.

Congress is calling for an investigation because:

“So this indicates a massive miscalculation in previous premiums and also maybe unaffordable for many people.”

The experts can't accurately predictL

recent analysis of the program, using updated assumptions based on identified trends and actual claims experience, indicated that the current FLTCIP premiums would not be sufficient to meet the future, projected costs of the benefits

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