Treatment of Life Insurance as an unqualified asset for Medicaid eligibility

Over 10 million Americans now require long term care annually.  Medicaid is the primary payor of long term care services in the United States.  The national average cost of a nursing home is $72,000 per year, for assisted living it is $38,000, and for home healthcare services it is $21 per hour.  Most people will drain all personal savings and assets paying for long term care in their first year of usage. 

In 2009, Medicaid spent $240 billion on long term care services accounting for 43% of total expenditures.  By comparison, $45.6 billion or19% of long term care services was paid “out of pocket” by the consumer.  States spent on average 16% of their annual budgets on Medicaid making it the second biggest budget item behind only education. Medicaid and state budgets have been impacted particularly hard by shrinking tax dollars and growing Medicaid enrollment brought on by the economic crisis and an aging population.

States have begun looking for alternative ways to stimulate private dollars to help pay for the costs of long term care and reduce the pressure on Medicaid budgets.  One example has been the unanimous passage by the National Conference of Insurance Legislators (NCOIL) of the Life Insurance Consumer Disclosure Model Law requiring that life insurance companies inform policy owners they have a number of options to consider instead of abandoning an in-force policy.  Among the options in the law is the right to convert a life insurance policy into a long term care benefit plan. 

An Assurance Benefit will convert any form of life insurance to pay directly for the costs of long term care in a nursing home, assisted living and home healthcare. 

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