The first group selected to enter the arena in the Healthcare Hunger Games are seniors, says Chris Orestis, Executive Vice President of GWG Life.
In an opinion piece publishedd in Newsmax, Orestis assesses the American Health Care Act (AHCA) and the 2018 Federal Budget released by the Trump Administration that are likely to have a major impact on how seniors pay for long-term care.
Medicaid has evolved for many as the first resort when it comes to long-term care costs, Orestis writes.” Today, Medicaid covers 40% of all long-term care costs, a percentage that is on the rise,” he writes. “In fact, Medicaid covers 65 percent of the costs for 1.4 million people in nursing homes in the United States. With an aging population, and more middle-class seniors who are failing to plan for the costs of care looking to jump onto Medicaid, the need to control these costs is now a major priority.”
The key question that must be answered in the midst of this long-term care funding crisis is—how do you rein in these costs, Orestis asks.
There is an untapped resource for many seniors in life insurance policies bought years before that they are being forced to abandon in order to qualify for Medicaid. There are states now that will allow seniors to exchange their policies for long-term care benefits. These states want policy owners to obtain the full value of a life insurance policy through the Secondary Exchange Market instead of lapsing or surrendering them back to the insurance company that often offers them little or nothing in return. With these exchange funds, the person in need of care can open a private long-term care benefit account that would protect the money and use it exclusively for senior care expenses. Similar to how a Health Savings Account (HSA) works, this Senior Health Planning Account (SHPA) would provide for a tax-free rollover of the life policy’s full market value obtained from the secondary market exchange.
“When you consider that seniors are abandoning a staggering $200 billion of life insurance face value annually, it quickly becomes obvious that this kind of private market innovation can be a very powerful financial solution,” he writes.
“Seniors don’t want to be a financial burden on their family or spend down to below the poverty level to jump onto Medicaid. They want access to information and options that will allow them to remain financially independent and able to afford to pay for their own care.”
Tax incentives will propel the exchange of life insurance policies into living benefits that will keep seniors private pay. “Combining this kind of market-based innovation with smart tax policy is a path towards curbing the growth in Medicaid and achieving real reforms in the Healthcare Hunger Games,” he writes.