The impact of the long term care funding crisis is felt most directly by the middle class. People that have worked their entire lives and have planned responsibly for the future through the purchase of a life insurance policy find themselves penalized when they reach the point that they require long term care. Compared to the 153 million Americans that own a life insurance policy, less than 10 million own a long term care insurance policy. Medicaid is the default funder of long term care services in this country, but the exploding population of seniors and a stagnant economy are significantly challenging the viability of the program to keep pace.
Seniors have an overwhelming desire to remain independent, and do not want to become a burden on their family or a ward of the state by entering Medicaid. Unfortunately, the current system to fund long term care has evolved into one that encourages seniors to impoverish themselves and move towards Medicaid as quickly as possible. Life insurance policies are unqualified assets for Medicaid eligibility and the owners must either surrender a policy with cash value to qualify, or if a policy is maintained it will become subject to asset recovery action by the state to claw-back monies spent by Medicaid on behalf of the individual. It would make more sense for the owner of a life insurance policy to convert its use to a living benefit that extends their ability to remain private pay and delays their entry onto Medicaid instead of encouraging them to abandon or surrender their policy to expedite their entry onto Medicaid.