A Smarter Way Forward

According to a U.S. Department of Health and Human Services study, more than half of Americans turning 65 today will need some type of long-term care (LTC). More than 20% will likely need care for five or more years.

With a median cost of $105,852 for a one-year stay in a private nursing home room, long-term care is costly. And with 10,000 Americans turning 65 every day, many lawmakers are seeking ways to help. The state of Washington passed the nation’s first publicly operated LTC insurance program in 2019. It is funded by an employee payroll tax. California is now studying options for a similar program.

These proposals are well-intentioned but will be costly to taxpayers and provide limited benefits. It is critical that any new government-run program coordinate with and build upon the existing foundation of private LTC insurance.

Millions of Americans are covered by private LTC insurance today, and ACLI members paid out nearly $12 billion in LTC insurance claims in 2019.

Consumers find private LTC coverage to be invaluable. Studies show that up to 99 percent of LTC insurance customers retain their coverage every year.

In recent years, the LTC insurance market has changed for the better. Innovative new options, led by “hybrid” LTC insurance policies that combine cash-value life insurance and annuities with LTC coverage, are providing consumers with stable premiums and more flexible options for managing their financial security.

Still, too many Americans lack LTC insurance coverage. Lawmakers are right to consider the best way to help their aging constituents. But instead of an insular government-run plan, they can build a more efficient, cost-effective and beneficial system by including private market options.

One priority is to ensure that state or federal plans are compatible with existing private market eligibility rules and benefit periods. Then, the private LTC insurance industry could create affordable products to enhance public coverage. A recent study suggested public/private partnerships where states could design LTC programs that sync up with private LTC plans, providing a seamless transition of care that leaves no gaps in coverage.

Promisingly, the state of Washington has recently passed legislation to better align its public plan with private LTC coverage.

Long-term care coverage is a critical component for financial and retirement security. Working together, regulators, lawmakers and life insurance companies can design solutions that integrate with existing LTC private options, so more consumers can get the coverage they need and deserve.