Structured for Success

Jun 15, 2023

Most Americans recognize the need to save for retirement. However, too few are addressing their potential long-term care (LTC) needs, which creates a major threat to their financial and retirement security.

About 70% of Americans ages 65 and older will need long-term care at some point in their lives. An unexpected need for long-term care can wipe out a lifetime of retirement savings.

Lawmakers in the state of Washington attempted to address this concern by creating the Washington Cares program in 2019. The program has since faced an array of structural problems resulting in a lengthy delay. A payroll tax to fund the Washington Cares program is now scheduled to begin on July 1. The tax will not apply to thousands of Washingtonians who received an exemption by purchasing a private LTC policy.

Washington’s struggles with plan design and private opt-outs have helped illuminate a very important retirement planning issue. There is growing recognition that both public and private programs play important roles in providing LTC protection. LTC carriers have learned a lot in recent years, especially about the importance policyholders place on LTC coverage. Moving forward, putting this knowledge and experience to use could be the difference between a successful and unsuccessful public LTC program.

For example, states should empower consumers and prioritize education about state program limits and the true cost of LTC. For example, cost of care research shows that in Washington state, a year of home care costs over $75,000; an assisted living facility costs about $72,000; and a semi-private nursing home costs more than $113,000. With LTC needs averaging two to three years, Washington Cares’ maximum benefit of $36,500 is only a partial solution. Without knowing the true cost of care, many state taxpayers could mistakenly think the program would address all their potential LTC needs.

Both public programs and private LTC policies play important roles in providing LTC services. A public LTC program that is structured to integrate with private LTC solutions means more consumers will get the personalized coverage they need.

Jan Graeber

Jan Graeber is Senior Actuary at the American Council of Life Insurers (ACLI). She is responsible for industry advocacy on long-term care, risk classification, and supplemental benefits before federal and state policymakers, the National Association of Insurance Commissioners, and other groups that influence insurance policy, laws and regulations.

John Mangan

John Mangan is Vice President & Deputy, State Relations at the American Council of Life Insurers (ACLI). He is responsible for state legislative and regulatory affairs in California, Idaho, Nevada, Oregon and Washington. He also leads the ACLI’s state advocacy team on the issues of state-run retirement plans and independent contractor proposals.