2014: a critical year for the future of long-term care in AmericaArticle added by Chris Orestis on March 12, 2014
Chris Orestis

Chris Orestis

Portland, ME

Joined: August 21, 2010

As the long-term care funding crisis continues to get worse, the fact that this solution is no longer a secret will be a key factor in addressing the situation.

2014 will be a critical year for long-term care in America. When Medicaid was created on July 30th, 1965, the entire GDP of the United States was $791.1 billion, and no one could have predicted that by 2013 the U.S. would spend over $2 trillion on health care in a single year.

Today, Social Security, Medicare and Medicaid are all in the red and creating havoc for government budgets at the federal and state levels. According to the Chairman of the Federal Reserve, this has become the number one concern about the future of the U.S. economy. State budgets have been impacted particularly hard by shrinking tax dollars and growing Medicaid enrollment brought on by the economic crisis and an aging population.

Over 10 million Americans now require long-term care annually and Medicaid is the primary source of coverage. According to the Kaiser Family Foundation, Medicaid spent $427 billion in 2011, almost doubling since spending $240 billion in 2009. With 10,000 baby boomers turning 65 every day for the next 20 years, the United States has officially crossed the tipping point into the long-feared era of the “long-term care funding crisis." New approaches to fund long term care must be encouraged, and converting life insurance policies into a long-term care benefit plan is an option that has grown into a mainstream and accepted financial solution.

In 2009, Conning and Company analyzed the emerging use of life insurance policies to pay for long term care as part of their Strategic Research Series. In the paper they surmised: “Both state governments and the long-term care industry are working to find a solution to the budgetary threat to Medicaid created as aging baby boomers impoverish themselves in order to have the state pay for long-term care. What is new is the concerted effort to integrate life insurance policies and long-term care providers. This new source of funds represents a potential alignment of long-term care providers and state governments.”
According to the National Association of Insurance Commissioners (NAIC), there is $27.2 trillion of in-force life insurance in the hands of 152 million Americans. Too few of these policy owners understand their legal rights of ownership and do not possess the knowledge of how insurance works. When their original need for a policy has run its course, the vast majority of owners simply walk away from what may be one of the most valuable assets they own — for nothing in return. Life insurance is legally recognized as personal property, and the owner has the right to use their asset in a number of ways, including converting the policy to a long-term care benefit plan while still alive.

States are under tremendous budget pressure to keep pace with exploding demand to cover long-term care needs with taxpayer money. They are quickly realizing the savings that can be found for their beleaguered budgets by delaying entry onto Medicaid through the use of life insurance policy conversions into long-term care benefit pans. State legislative leaders across the country are taking action with consumer protection disclosure laws and legislation to encourage consumers to convert their life insurance to pay for long-term care as an alternative to abandoning their policies. Policy owners are being encouraged to use their legal right to convert an in-force life insurance policy into a long-term benefit plan and direct payments to cover their senior housing and long-term care costs.

Legislation specifically endorsing the long-term care benefit plan concept has been introduced in the state legislatures of CA, FL, KY, LA, MA, ME, NJ, NJ and passed into law in TX all in 2013. As 2014 unfolds, we will see: more states introduce this consumer protection/disclosure measure; the media will continue to report on this rapidly growing financial option for seniors; licensed insurance agents, financial advisors and elder law attorneys will integrate this option into their services to help families grappling with the costs of care; and assisted living, home care and skilled nursing care providers will continue to embrace and spread the word to families — that if they own a life insurance policy it could be the key to helping them pay for care.

As the long-term care funding crisis continues to get worse, the fact that this solution is no longer a secret will be a key factor in addressing the situation.
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