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Protecting consumers and medicaid from catastrophic long-term care costs

How financial challenges in the long-term care industry may shift costs to policyholders and medicaid


Long-term care insurance (LTCi) is a financial product that promises over 7 million policyholders benefit payments for long-term services and supports (LTSS)—such as home and community-based services or services provided in assisted living and nursing home facilities—should they experience a high need for these services. LTCi plays an important role in protecting beneficiaries against the risk of spending their income and assets on expensive LTSS, and relying on Medicaid; but the current LTCi environment threatens Medicaid spend-down protections for policyholders who experience rate increases.


With support from the Anthem Public Policy Institute, we researched and identified the implications—for Medicaid—of increasing stability of the funding pools that protect private long-term care insurance policyholders against carrier insolvencies.

Activity in both public and private sectors has revealed concerted movement toward establishing a long-term care model that is accessible to consumers and sustainable for state Medicaid funds. On the public side, states have shown varying levels of progress with some introducing legislation and others in the process of developing their own long-term care offerings. For states that have not yet made changes, federal organizations such as the National Association of Insurance Commissioners (NAIC) provide an important road map that can serve as a guide.

In 2017, NAIC enacted changes to the Life and Health Insurance Guaranty Association Model Act, legislation that originally provided guidance to states on how to structure their guaranty funds. These adjustments were meant to further strengthen and protect state guaranty funds from assuming millions of dollars of liabilities related to insolvent carriers.

Adopting the Model Act provisions will strengthen the structure of state guaranty funds to reduce consumer risks and minimize additional liabilities to Medicaid, should consumers need to rely on that program in the absence of their coverage. In addition to strengthening guaranty funds, states can further address risk by considering policy options to strengthen LTSS financing outside of the Medicaid program (e.g., considering models similar to Washington state’s new “public long-term insurance”).


Prior to COVID-19 there was significant movement forward on state-based models. While that momentum has generally slowed as stakeholders re-focus their efforts, these problems will persist post the pandemic, as will the need and drive for solutions.

While continued public and private activity will hopefully offer more options to a wider range of consumers for financing their long-term care coverage, continued challenges in older policies and the absence of full adoption of the NAIC Model Act amendments leave consumers and Medicaid at risk. The extent of this risk requires additional analysis and work.

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