NCOIL model may offer respite for middle-class Americans struggling with long term care costs

We see it in the headlines almost every day. Between the senior population already in the long term care system and the baby boomers now hitting the Social Security and Medicare age at a rate of more than 10,000 per day, it is now safe to say that the long term care funding crisis has arrived.

In the midst of the most persistent economic downturn since the Great Depression, the long term care demand of seniors is growing at a much faster rate than the supply of resources to pay for their care. This demographic and economic disconnect will likely force the government to raise barriers to entry for the three primary entitlement programs: Social Security, Medicare, and Medicaid. It may also result in reduced benefit levels and push more of the responsibility for retirement and long term care funding back on the individual — and the individual’s family.

The wealthy can absorb long term care costs. Government-subsidized care is available for the poorest. But what about the middle class American who doesn’t fit into either of these categories? A small percentage of people have had the foresight and resources to prepare in some degree through long term care insurance. Unfortunately, in the years when sales should have been skyrocketing, they’ve been declining, and the twin trends of rate increases and carriers exiting the market have been severely disruptive.

A much larger number of people in this category own life insurance, leaving them free to use that asset to pay for long term care. Yet over 90 percent of all life insurance policies lapse or are surrendered, and most middle market policy owners are unaware that they can use their insurance policy’s death benefit as a living benefit.