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. 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.
We are experiencing an explosion of aging Baby Boomers and longer life expectancies among seniors, but diminished financial resources across the board which has brought together a perfect storm of factors we must now confront. The simple fact is more responsibility is going to be placed back on the individual and their families to find the resources necessary to handle the costs of long term care. Private market solutions other than long term care insurance will be required.
Public policy, law makers and the realties that every family faces when confronted with the costs of long term care are now intersecting at a very precarious moment in our nation’s history. The vast majority of long term care is paid for by Medicaid. To qualify, the applicant must meet asset and income limits that would put them below the poverty line. A standard practice is to “spend-down” assets to meet these limits. For owners of a life insurance policy, they will often lapse or surrender their policy so that it will not either count against them as an asset, or expose their heirs to asset recovery action by the state to claw back the death benefit. But there is a better option for seniors that own a life policy than just abandoning an asset that they had made payments on for years and converting a policy into a Long Term Care Benefit Plan can’t be ignored.