Long Term Care

Medicaid’s Critical Role in Providing Long-Term Care Coverage for Older Americans

Measuring the unpredictable and potentially catastrophic costs for retirees

A new study from the National Institute On Retirement Security reveals the complicated and burdensome process of finding care. Access the report here.

WASHINGTON, D.C., Jan 6, 2021 – With healthcare and long-term care costs rising at much higher rates than wages or salaries, it is becoming more difficult for Americans to afford the costs of long- term care. These unpredictable costs, combined with low levels of savings, mean many older American families find themselves forced to spend down their assets so they are eligible for long-term care coverage under Medicaid.

At the same time, the rules governing access to long-term care coverage through Medicaid are complex and vary widely from state-to-state. For most families, navigating this process is complicated and burdensome at a time when they likely are experiencing a health crisis.

A new report from the National Institute on Retirement Security (NIRS), Accessing Long-Term Care Coverage Through Medicaid: The Safety Net For Seniors Facing Unmanageable Costs, examines the complex rules and multiple pathways for receiving Medicaid coverage across the nation. The report focuses on the long-term care needs of older Americans and their options for accessing care. It also reviews an innovative long-term care social insurance program in Washington State that is projected to reduce Medicaid expenses and offers policy solutions to address the rising costs of long- term care.

This report is authored by Izidora Skračić, NIRS research intern, Tyler Bond, NIRS research manager, and Dan Doonan, NIRS executive director.

Financing Seniors’ Long Term Care

“Today, few individuals, employers, or governments have a plan in place to finance seniors’ long-term care needs, even as the cost of services is increasing,” said Dan Doonan, NIRS executive director. “Already, we know that retirement income and savings often are woefully inadequate to cover what can be prohibitively expensive long-term care costs.”

“As a result, too many older Americans are forced to spend down their savings so they can qualify for long-term care under Medicaid. This is an expensive, overly-complicated, and inhumane approach. We hope this report provides state and federal policymakers with new ways to think about providing long-term care as the nation ages,” Doonan explained.

The report offers four policies to address the unpredictable yet potentially catastrophic costs of long- term care needs:

  • Long-term care proposals should provide universal coverage based on need. Washington State is piloting a social insurance program to provide coverage for long-term care costs, and this could serve as an example for other states or even a federal program.
  • The programmatic bias toward institutional care over home or community-based care should be eliminated. HCBS costs less than institutional care and is generally preferred by beneficiaries and their caregivers.
  • A stronger focus on healthy aging for all should include the integration of healthcare and social services and accountable care systems focused on long-term health.
  • The ability of older adults to remain in their communities and live independently should be facilitated by public policy.

The report considers an innovative social insurance program in Washington State to address the challenge of long-term care needs. Under the program that launches in 2022, Washington residents will pay 58 cents of every $100 into the long-term care trust fund. After ten years, residents can claim up to $100 a day in benefits, with a lifetime cap of $36,500. While a lifetime cap of $36,500 may seem small, it could go a long way for the many older Americans with more manageable long-term care needs. Importantly, Washington State expects to reduce Medicaid costs with this program.

Long-term care (LTC) comprises a broad range of paid and unpaid care assistance that people need when experiencing difficulties completing self-care tasks. Some 69 percent of seniors will require some type of long-term services and supports. Long-term care insurance surged in popularity in the 1990s, but insurance companies exited the market in large numbers in the 2000s. The number of insurers selling long-term care policies shrank from over 100 in the 1990s to less than 15, currently covering only seven million Americans.

Excerpts From The Report

Today, few individuals, employers, or governments have a plan in place to finance seniors’ long-term care needs, even as the cost of services is increasing...


Long-term care (LTC) comprises a broad range of paid and unpaid care assistance that people need when experiencing difficulties completing self-care tasks, such as eating, bathing, housework, or taking medication. Aging, chronic illness, or disability are all reasons why individuals, seniors in particular, might need long-term care. The data show that 69 percent of seniors will require some type of long-term services and supports (LTSS).

This report emphasizes the importance of planning for long-term care at the individual level and at the state and federal levels.

Five factors highlight the urgent need for a systemic approach for improving the financing of, and access to, long-term care in the United States:

1. Healthcare and long-term care costs can be very high relative to both income and the level of savings that most Americans have managed to accrue.

2. The majority of current workers are not factoring long-term care costs into their retirement plans, despite the high rate of LTSS utilization by current seniors.

3. The country’s proportion of seniors continues to rise, which will cause the cost of pay-go financing to continue increasing.

4. Medicaid, a health insurance program originally designed for people of low income, has become the country’s primary payer for long-term services and supports.

5. The rising costs associated with Medicaid LTSS coverage have placed enormous pressure on state legislatures to seek ways to contain Medicaid costs through measures such as narrowing eligibility, imposing caps on individual spending, and eliminating optional services.

Pathways To Medicaid Eligibility

Medicaid eligibility is determined by federal and state law, where the federal government establishes minimum eligibility standards and states can choose whether and to what extent to expand eligibility beyond the minimum standards. Eligibility is determined based on categorical, financial, and functional eligibility criteria. This report largely focuses on the financial criteria and how they differ by pathway. As a result, all pathways are explained with seniors in mind; to simplify how Medicaid works for seniors needing LTSS, other groups eligible through the same pathways are omitted from this report.

Old Age or Disability Pathway – Mandatory

The only category that is federally mandated for Medicaid coverage are Americans receiving Supplemental Security Income (SSI). Individuals receiving SSI meet three basic criteria. First, they have low incomes; the maximum SSI in 2020 is $783 per month, i.e., 74 percent of the federal poverty line. Second, they have limited assets; usually $2,000 for an individual and $3,000 for a couple, in addition to non-countable assets and income disregards. Third, they do not have gainful work; if a person obtains gainful work, they lose their eligibility.

Because this pathway is mandatory, seniors who receive SSI fall into one of the program’s mandatory eligibility groups as determined by the federal government. The federal government also mandates that nursing facility services be included in the Medicaid benefit under this pathway, for all categorically needy populations, including seniors. All states implementing Medicaid must provide this pathway. However, eight states have opted for exception

Section 209(b); states can use financial and functional criteria different from the SSI rules, as long as they are no more restrictive than what the state had in 1972.




The National Institute on Retirement Security is a non-profit, non-partisan organization established to contribute to informed policymaking by fostering a deep understanding of the value of retirement security to employees, employers and the economy as a whole. Located in Washington, D.C., NIRS’ diverse membership includes financial services firms, employee benefit plans, trade associations, and other retirement service providers. More information is available at www.nirsonline.org. Follow NIRS on Twitter @NIRSonline.