Impact  |  Society of Actuaries

Creating a future of accessible, affordable long-term care in America

Envisioning a Future of Accessible, Affordable Long-Term Care in America

More than half of Americans over 65 will need long-term care, placing an enormous burden on patients, their families and taxpayers. Maddock Douglas and the Society of Actuaries (SOA) want to change that. Together they are working to transform the industry by envisioning innovative financing solutions, increasing public awareness and advocating for regulatory changes to ensure widespread coverage for long-term care.

The Challenge

Inject innovative thinking into the long-term care industry by radically redesigning financing models to raise consumer demand and extend coverage to the majority of Americans.

The Impact

Projections show that demand for redesigned long-term care coverage could outstrip demand for traditional products within three years, and actuarial models demonstrate significant potential for government savings, creating a strong case for regulatory change that would make coverage increasingly attractive and accessible to more people.

The Story

According to the US Department of Health and Human Services, a person turning 65 today has a 69% chance of needing long-term care at some point in their lives, and that care can be extremely expensive. In 2018, the average annual cost of a private room in a nursing home was about $100,000, and in-home care is no more affordable at an average of about $50,000 for an aide. For most individuals, these costs are paid out of pocket, using income, savings or other assets. 

The SOA identified these barriers to quality care and saw an opportunity to lead the industry in transformative solutions to long-term care challenges. They approached Maddock Douglas for help in exploring answers to this most critical question: how can we rethink long-term care coverage to make it accessible and affordable to more Americans?

As a first step, the SOA and Maddock Douglas invited industry thought leaders and insurance experts to form a collaborative think tank, convening in October 2015 to brainstorm new solutions to current needs.

Cindy Malone facilitating a group discussion

Cindy Malone facilitating a group discussion

From more than 80 ideas, the group selected two new concepts for further development and consumer testing: LifeStage Protection, a term life insurance policy for the customer’s younger, prime-incoming years that converts to long-term care coverage when the customer is older, and Retirement Plus, similar to a 401(k) but with expanded contribution limits, flexible fund usage and built-in long-term care insurance.

One-page description for LifeStage Protection concept

One-page description for RetirementPlus concept

Findings from qualitative and quantitative testing pointed to a significant market opportunity. Conservative projections indicated sales of 300,000 policies for each concept by year five, with consumer demand for both LifeStage Protection and Retirement Plus projected to surpass desire for traditional long-term care products within three years. Consumers clearly can envision a need for these products now and in the future. Particularly compelling is the concepts’ ability to combine products that meet both present-day (term life insurance or flexible retirement savings) and future (long-term care coverage) needs.

Actuarial modeling shows the potential for significant government savings, largely because fewer people would rely on Medicaid to fund long-term care if they were to purchase products such as LifeStage Protection or Retirement Plus instead. In this scenario, net government spending could decrease by 40-50% for policyholders of products like these, a benefit outweighing the loss in government tax revenue from these tax-advantaged products.

White papers written by the Society of Actuaries and Maddock Douglas to illustrate the opportunities created by the tested long-term concepts

White papers written by the Society of Actuaries and Maddock Douglas to illustrate the opportunities created by the tested long-term concepts

With this work, the SOA has established itself in the vanguard of long-term care innovation and propelled industry thinking forward. However, major regulatory and tax code shifts, as well as advocacy within the industry, are required to make these concepts marketplace realities. Both the SOA and Maddock Douglas continue to speak at conferences across the US to spread awareness, publicize the initiative and socialize the concepts. Ultimately, we hope to develop or facilitate partnership opportunities that will spark industry interest and drive regulatory change.