Planning In The New Longevity

Aging Into Uncertainty

How will we navigate the looming long-term care crisis ?

by Melissa Bova

Ms. Bova is first Vice President of State Affairs with the industry advocate Finseca. Her role is to help Finseca members better engage with government policymakers and advocate for the profession and financial security for all. Visit www.finseca.org.

As we confront the realities of an aging population, studies show that, on average, Americans turning 65 today have an almost 70% chance of needing some form of long-term care during their remaining years. This staggering statistic, coupled with Medicaid spending already surpassing $750 billion, highlights the profound challenge the United States must address.

The impact of the long-term care issue extends beyond individual households, affecting communities and placing strain on public resources. As a nation, acknowledging the urgency of this problem is the first step toward fostering a society that values the well-being of its aging citizens and ensures access to the necessary care and support. As individuals, older populations are struggling with the costs of long-term care, and the younger generation is grappling with how to support aging parents and, therefore, considering what will happen when they age as well. The gravity of the long-term care dilemma necessitates a concerted effort and a thoughtful, collaborative approach to develop effective, inclusive solutions that can stand the test of time.

Fortunately, as it does for so many other financial challenges, our profession can help lead us through this looming crisis. Armed with a nuanced understanding of financial planning and risk management, we can navigate the complexities of long-term care, offering tailored solutions that safeguard individuals and families against potential financial pitfalls. By promoting and implementing private market innovations, such as combining life insurance with long-term care coverage, we can bridge the gap between limited public offerings and the expanding need for comprehensive support.

A Diverse Array Of Approaches

At this point, particularly considering the magnitude of the issue, the current landscape of long-term care initiatives across the United States presents a diverse array of approaches and stages of development. But it’s no surprise that states are actively pursuing resolutions to tackle funding options for long-term care.

Washington stands out as the sole state to have implemented publicly funded long-term care. However, the drawback to initiatives like the Washington state model is that the $36,500 public benefit proves insufficient to adequately address an individual’s long-term care requirements. Moreover, the imposition of November 1, 2021, a one-and-done cut-off date for an exemption, has significantly impeded private-sector efforts to address the issue.

Fortunately, despite the deficiencies in the model, Washington state’s initiatives have sparked conversations, encouraging other states to contemplate and delve into this matter, seeking potential solutions of their own.

In California and Minnesota, comprehensive studies on long-term care are in progress, with California being 1.5 years ahead in the process and slated to wrap up on January 1, 2024, while Minnesota’s study was released recently.

The increasing cost of Medicaid in state budgets has been an impetus in conversations on how to fund long-term care. Without a federal solution, states are exploring their own ways to solve the problem. Connecticut, Massachusetts, and Michigan are looking at studies that would investigate the issue, though none have begun yet.

The increasing cost of Medicaid in state budgets has been an impetus in conversations on how to fund long-term care. Without a federal solution, states are exploring their own ways to solve the problem...

New York and Pennsylvania have introduced legislation similar to the Washington model in recent years, although neither has progressed further than the introduction.

Additionally, while it is purported that there are ongoing discussions in Oregon, Utah, New Mexico, Missouri, Illinois, and North Carolina about potential solutions to long-term care funding, there has yet to be any significant activity of note. The diverse approaches adopted by different states highlight the intricate nature of the issue and the varied strategies being examined to tackle the increasing demand for long-term care support.

Advisors Must Be A Vocal Part Of The Conversation

There is no question that states will be forced to tackle long-term care funding and availability through a state-funded model, tax incentives to obtain private long-term care, or somewhere in between. There is a unique opportunity for our profession to be part of those conversations—long-term care and chronic illness products are a far cry from the 30-year-old standalone products most legislators are familiar with, and it is imperative we come together to educate our legislative officials and be part of the solution to this problem.

At Finseca, our mission is, in our name, Financial Security for All. Our members work to pave the path to financial security for millions of individuals and families through holistic financial planning. From crafting personalized investment strategies to navigating insurance landscapes and retirement planning, they work collaboratively to ensure that every aspect of their client’s financial journeys is carefully considered and strategically aligned with their unique goals and circumstances. The reason why is captured by a recent Ernst & Young study, which exhaustively analyzed how life insurance — especially permanent policies, investments, and deferred income annuities — outperforms investment-only or investment-plus-other-products approaches in every combination.

Individuals and families with life insurance, investments, and guaranteed streams of lifetime income through things such as annuities are in a significantly better position to absorb the challenges that life throws their way. Addressing and planning for long-term care is part of that financial security. Private-market product innovations that combine life insurance with long-term care coverage offer attractive, affordable, and portable benefits to consumers. These innovative solutions can bridge the gap between the limited public offerings and the growing need for comprehensive long-term care support. They provide individuals and families with the flexibility to tailor their coverage to their unique needs and circumstances — a win for everyone.

It’s obvious that long-term care is a problem we must solve as a nation. But at the same time, it’s just as obvious that the financial security profession has a critical role to play in addressing this challenge. This professional has the tools and expertise to guide individuals and families toward solutions that provide the financial security and peace of mind they deserve. By promoting private market innovations and working alongside state initiatives, we can ensure that all Americans have access to the long-term care support they need while preserving their financial well-being. It’s a challenging road ahead, but together, we can navigate it and secure a brighter future for all.