Long-term Care Update

What you need to know about LTC legislation and state programs

By Christine McCullugh

I’m often asked to clarify points on the various pieces of long-term care (LTC) legislation being considered across the country. As a 30+-year veteran of the LTC industry I am thrilled that LTC planning is a trending topic in the U.S. The more we examine LTC — the risk, need and solutions for funding it — the better off we will all be. And as brokers, the better we can consult with our clients about their choices.

For me, that starts by looking at the reality of long-term care as a need. While we are able to provide products that may allow clients to opt-out of proposed state legislation, that’s not the only reason to look at this important benefit. 

The need for long-term care is real, and most individuals aren’t aware of their risk or what pieces of their insurance, retirement and wealth arsenal can be deployed to pay for it. So, let’s start right there — where legislators are starting, and where we each need to begin when considering our LTC solutions.

These are the facts:

  • 70% of us will require long-term care in our lifetimes while…
  • Only 10% of us have LTC insurance to pay for it.
  • LTC is not restricted to older individuals: of those that receive care, 44% are under 65 years old. 
  • The average cost and duration of care in the U.S., by care setting is:

o   Home care, three years average stay @ $63,629/annually for a total of $190,887

o   Assisted Living, three-year average stay @ $55,620/annually for a total of $166,860

o   Nursing Home, 2.4-year average stay @ $111,657/annually for a total of $267,976

  • Health insurance, Medicare and disability insurance will not pay for long-term care.
  • Medicaid can help cover LTC costs after an individual has depleted or “spent-down” their assets to the poverty level.

What are the options for paying for long-term care expenses?

  • Public LTC Plans: As these roll out there’s likely to be a gap in coverage between the average amounts needed and the state plan maximum coverage numbers. LTC insurance is a good option to close that gap.
  • Self-Fund: Knowing the likelihood of needing care, and its cost – planning to self-fund by saving adequately is an option.
  • LTC Insurance: Traditional and hybrid life+ LTC products are popular and effective ways to cover costs.
  • Retirement Funds: Individuals may choose to tap into their retirement wealth to pay for LTC.
  • Medicaid: After spending-down assets to the poverty level individuals may qualify for assistance through state Medicaid programs.
  • Relying on Family: For generations family members have cared for each other and shared expenses for long-term care needs. 

LTC Legislation | An Overview and Deep-Dive on California

LTC is one of the biggest budget busters for Medicaid. As legislators face a wave of aging baby boomers with a 70% likelihood of requiring long-term care and a significant disparity in coverage for it (only 10%), they’ve recognized the need for a solution to preserve Medicaid. That solution is coming in the form of a state LTC plan funded by a payroll tax. 

Washington state led the way, passing the first ever public LTC program funded by a .58% payroll tax on W2 workers. An idea with great intent, but the lifetime benefit amount is only $36,500 a year, which will fall short of the annual cost of long-term care for most individuals. Twenty additional states are considering similar laws. 

What is the California LTC Task Force? 

The state of California passed Assembly Bill (AB) 567, establishing the Long-Term Care Insurance Task Force in the California Department of Insurance to explore the feasibility of developing and implementing a LTC program. In December of 2022 the AB567 Feasibility Report was completed and submitted by actuarial firm Olyver Wyman. An actuarial report is scheduled to be completed by Wyman for a 12/14/2023 review date.

The CA LTC task force developed and proposed five possible plan designs to the legislature at the end of 2022. Though there’s a great deal of information and differences in these five plan designs, this table provides a very high-level view of the benefits offered by each — for more in-depth information visit their website.

What does this mean for California employers and employees?

While we won’t know for sure until it happens, it’s likely that a long-term care bill will be proposed and voted into law. Employers and employees or just employees may both be subject to paying a new payroll tax to fund this program. 

Brokers, why talk to clients about LTC now? Legislation has sparked conversation.

  • Legislation and tax mandates have sparked nationwide conversations on the need for long-term care planning. Ensure you provide accurate information to your clients. 
  • Employers can bring in group products that provide favorable perks only available through an employer. 
  • Enrollment window for 2023 (the likely opt-out deadline for some state’s tax mandates) is closing rapidly, as this is a product with a long timeline for implementation that enrolls off-cycle. Starting conversations now allows for a better opportunity to secure a 2023 enrollment slot. 

Retirement and wealth management discussions need to include LTC options for consideration. When planning for your future, consider what your solution will be for funding your long-term care needs and take steps to put your plan into action now. Don’t forget to communicate about your LTC wishes with your loved ones so everyone has clear expectations and an understanding of your choices.

Christine McCullugh is president of LTC Solutions, Inc., in Redmond, Washington.

She grew up in upstate New York and graduated from Rochester Institute of Technology (RIT) . McCullugh started her LTC career with American Express LTC in Boston, providing individual LTC. In 1996 she started LTC Solutions, Inc. and is recognized by insurance companies, benefit brokers and employers as a national expert in group LTC insurance. 

McCullugh is a speaker and consultant helping shape the future of LTC insurance. She provides expertise with the most up-to-date information of the LTC market. She’s been actively involved with the Washington State Trust Act providing industry and employer insight. March 2021, Christine testified at the Washington Senate Health and Long-Term Care Committee HB 1323 supporting an amendment to extend the opt out to 12/31/21. This provided more time for the committee to study opportunities for greater coordination between the private market and the trust program. McCullugh attends and provides information to the California Task Force. 

She is also a member of the National Association of Insurance and Financial Advisors (NAIFA) – LTC Study Group. This group develops suggestions for states LTC needs that blends public and private sector to solve the growing need of LTC. 

2023 LTC Solutions celebrates 27 years in business with the certification of Women Owned and WBENC (Women’s Business Enterprise)



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