LTCI: Adrift in the LTC Sea

The Obama administration tabled the CLASS Act in October, 2011, citing funding problems. Medicare isn't designed for custodial LTC expenses, which leaves Medicaid as the federal government's backstop program for those who qualify. But the growing number of financially strapped persons requiring LTC—an estimated one-third of Medicaid's outlays in 2010—is straining that program's resources and states' budgets. Overall, the outlook for remedial LTC-funding action on the federal level is not good, says Howard Gleckman, author of "Caring for Our Parents" (St. Martin's Press, 2009) and resident fellow at the Urban Institute in Washington, D.C. "There is at the moment really no effort being made either by the Obama administration or in Congress to do anything about it," he says. "The Romney campaign has said nothing about it. So, in terms of policy initiatives, at the moment there is nothing."

Extended self-funding is not a viable option for most Americans, leaving a handful of potential funding mechanisms. Private LTC insurance gives insureds the most control over their benefit design but sales remain sluggish apart from the hybrid policies. Federal government civilian and military employees have access to competitively priced LTCI as part of their benefits package but market penetration remains low at an estimated 5 percent among eligible buyers.

State partnerships appear to be a viable solution for many consumers but fewer than 440,000 partnership policies were in-force as of year-end 2011. "The partnership has been one of the most disappointing busts in terms of an opportunity to really expand the marketplace," says Jesse Slome, executive director of the American Association for Long Term Care Insurance in Westlake Village, Calif. "It's a great concept. It really comes down to a real lack of understanding. I mean, you've got to market it."

The lack of a coherent policy from the federal and state governments hasn't stopped industry observers from offering their own solutions. William Galston, a senior fellow in the Brookings Institution's Governance Studies Program in Washington, D.C., discussed several possible LTC-funding proposals in the Fall, 2012 issue of Democracy: A Journal of Ideas. Given the confluence of budget deficits, policy disputes and political inertia, though, it's unlikely that private sector or government proposals will receive the attention needed anytime soon. The reef looms large…