As of 10/05/2023
Long-term care – Forecasts, Federal and State Responses, and Regulations
What is it?
As the population in the United States continues to experience increased longevity, the nation is set to begin seeing the greatest number yet of Americans turning 65 in the year 2024.1 With this increased lifespan comes the rising need for long-term care.
What are governments doing to address LTC concerns?
Our latest Regulatory Roundup video provides an overview of federal and state level involvement in long-term care services.
What does it mean to financial professionals?
Understanding the various products that offer long-term care protection is essential for financial professionals who want to serve customers effectively. As new state programs are proposed and enacted, and federal involvement in long-term care is examined, understanding the options for Americans who inquire about long-term care protection is an important way to serve clients and build a business.
What does it mean to Lincoln?
Lincoln’s Government Affairs team continues to monitor proposed changes surrounding the long-term care issue at the federal and state level. We remain committed to helping our financial professional partners understand the latest changes on long-term care regulations and requirements and navigate long-term care products and services that help clients make informed and proactive decisions regarding their own long-term care.
Long-term care costs that are paid for by the government fall to Medicaid, which is partially funded by the states. Medicare, which is funded by the federal government, does not pay for long-term care.
The recently passed SECURE 2.0 Act includes an incentive that allows retirement plan participants to take penalty-free retirement plan distributions to pay for long-term care premiums and expenses. This is scheduled to take effect in December 2025.3
On April 18, 2023, President Joe Biden signed an Executive Order on Increasing Access to High-quality Care and Supporting Caregivers that addressed improving long-term care options for older adults and people with disabilities by improving the working conditions of the people who care for them.4
However, there are no current efforts in Congress to address the issue of federal involvement in long-term care, which leaves states to tackle this issue on their own.
Lawmakers, state officials and those in the long-term care industry are working to find solutions that address long-term care workforce shortages and low Medicaid reimbursement rates.
Medicaid only pays for LTC expenses after an individual has spent down assets. As the United States sees the eligible population increase in coming decades, Medicaid expenses at the state level are expected to continue increasing; thus, a number of states are considering public tax-funded LTC programs. Unlike the federal government, states are not allowed to run a deficit, so balancing their budgets can only be managed by raising taxes or cutting benefits.
That said, at least 12 states, mostly blue states, are looking at solutions to address the rising cost of elder care. Here are three states and the programs they're enacting to tackle long-term care issues for their residents.
With state Medicaid expenditures of $2.1 billion dollars annually (or 5% of the state’s total budget) related to long-term care costs, Washington took a bold step to address continually rising costs by establishing the Washington Cares Fund. Effective July 1, 2023, it allows beneficiaries to access up to $36,500 in lifetime long-term care benefits, paid for by a payroll tax of .58% on wages for those who work in the state.5 The benefit amount will be adjusted for inflation beginning in 2026, but with the rising cost of care, the lifetime long-term care benefit provided will likely not be enough to provide complete care coverage.
Individuals who purchased private long-term care insurance on or before November 1, 2022, were able to apply for an exemption in late 2022 to opt out of the WA Cares Fund. The opt out provision is no longer available. Over 500,000 Washington residents purchased private long term care coverage and chose to opt out of the program.
California passed legislation in 2019 to establish the Long-Term Care Insurance Task Force, which is exploring the feasibility of developing and implementing a culturally competent statewide insurance program for long-term care services and support.6
The Task Force recommended several options, which are currently under actuarial review and modeling, with a report due in January of 2024. There may be an option to opt out of the program, similar to what occurred in Washington. The types of products that would qualify, and the minimum level of coverage required, is not known.
Minnesota has a public/private partnership, which is another concept that could help fund long-term care expenses.7 Revised in 2015, the Minnesota Long-Term Care Partnership is a public/private arrangement between long-term care insurers and Minnesota’s Medical Assistance program. It enables Minnesota residents who purchase certain long-term care insurance to protect more of their assets if they later need the state to help pay for their long-term care. Minnesota’s approach gives its residents greater control over how they finance long-term care costs and helps reinforce the public safety net against coming demographic pressures.
The National Association of Insurance Commissioners (NAIC) Long-Term Care Actuarial Working Group is discussing potential modifications to the methods for evaluating LTC rate increases, such as additional substantial increases on older policyholders.
The mission of NAIC’s Long-Term Care Insurance Task Force is to: 1) monitor and evaluate the LTCI rate review process; 2) monitor and evaluate options to help consumers manage the impact of rate increases; and 3) monitor work performed by other NAIC groups to review the financial solvency of long-term care (LTC) insurers.2