Long Term Care, Who Pays For It?

Long term care (LTC) is overwhelming family and government budgets as we speak, and the problem is set to explode as another generation enters their twilight years. As a society we continue to struggle with who and how to pay for such care.

Today, paying for LTC falls into two schools of thought for those without LTC insurance. In one camp the government (Medicaid) pays for care once an individual has exhausted most of their resources. What many do not realize is that in exchange for Medicaid assistance in covering the cost of long term care, the individual’s estate must repay the government. (In 1993 the law was amended, requiring mandatory estate recovery.)

The other school of thought is that the government pass a payroll tax to pay for LTC, much like Medicare and Social Security payroll taxes. The state of Washington recently passed such a law. In general though, any time the government has attempted to pass a LTC payroll tax it has failed, the citizens rebel.

But what if the Washington State LTC insurance model is passed in other states? The citizens of Washington were given a choice, pay about a half percent payroll tax to fund their LTC needs in the future, or opt out of the state program by purchasing their own private LTC policy. 400,000 Washingtonians chose private LTC insurance.

The reality is that most government social insurance programs are broke, or will be very soon. Something has to give. The number of individuals requiring very expensive long term care will only increase as time goes by. The smart money will choose to insure themselves with a private long term care policy, protecting their estate for future generations.