Medicaid was signed into law in 1965 by President Lyndon Johnson as a safety net to provide health care to the indigent and disabled. Over the years it has also become the major payer of long-term care services for the elderly in the United States: More than 10 million Americans now require long-term care annually and Medicaid funds at least two-thirds of all spending for nursing home care today. In 2009, $240 billion was spent on long-term care services, and Medicaid accounted for 43 percent of total expenditures. By comparison, just $45.6 billion, or 19 percent, of long-term care services was paid “out-of-pocket” by consumers.
The current Republican proposal would cut $750 billion over ten years by transforming Medicaid into a block grant program that would provide $11,000 per year for each enrollee. And now a crushing blow for both long term care providers and seniors– on August 1, 2011 CMS enacted an unprecedented across the board reduction in LTC reimbursements from Medicare and Medicaid of 11.1% for 2012.
Providers of long-term care services such as nursing homes, assisted living communities and home health agencies, as well as state governments, are realizing that there is tremendous value for the consumer in converting life insurance policies to help pay for the costs of long-term care. By converting a life insurance policy instead of abandoning it, the policy owner’s care can be covered by the monthly long-term care benefit payouts and the life insurance asset can be spent-down in a Medicaid-compliant fashion — while preserving a portion of the death benefit during the extended time period.