Fifteen years after the federal CLASS Act—an ambitious attempt to create a government-run long-term services and supports (LTSS) system—collapsed under insolvency concerns, the United States remains without a coherent solution to long-term care, even as a rapidly aging population drives demand to crisis levels. That unresolved policy failure, and the growing consequences for patients, families, providers, and the workforce, was the focus of a Dec. 12 virtual discussion convened by the Leonard Davis Institute of Health Economics (LDI) at the University of Pennsylvania, bringing together four leading experts in aging and long-term care.

“A 65-year-old will incur an average of more than $120,000 in paid care expenses over their lifetime, and about 15% of older adults spend more than $250,000 on long-term care, with families today paying for about a third of that care themselves,” said moderator and LDI Executive Director Rachel M. Werner, MD, PhD, as she opened the virtual session, which had more than 700 registered viewers. “The costs of long-term care are large and can disrupt even the most well-planned retirement, and families often have to step in as unpaid caregivers to fill that gap.”

“Today, we will examine how we can apply lessons from the past, leverage the numerous policy ideas that have been proposed, and be mindful of the current political landscape to develop a sustainable system for caring for aging Americans,” Werner said.

Joining her in the discussion were Richard G. Frank, PhD, Director of Health Policy and Senior Fellow in Economic Studies at the Brookings Institution and former Assistant Secretary for Planning and Evaluation in the US Department of Health and Human Services; R. Tamara Konetzka, PhD, Professor of Public Health Sciences and Medicine at the University of Chicago and a member of the Medicare Payment Advisory Commission; and Narda Ipakchi, MBA, Vice President for Policy and Programs at the SCAN Foundation.

The fast-moving discussion ranged across a variety of LTSS topics, including Medicare, Medicaid, and the stunted private long-term care insurance industry; the history of where the Community Living Assistance Services and Supports (CLASS) Act of 2010 went wrong; the catastrophic and disruptive expenses families routinely face as a member ages into infirmity; and the plight of unpaid family caregivers whose own health is often severely affected by their efforts to fill a desperate gap.

“We don’t have a comprehensive or rationally planned system for long-term care financing in the US,” Konetzka said. “It’s a patchwork of funding sources, much of which evolved by historical accident, and a patchwork that leaves many gaps. Medicare does not directly cover long-term care. There is a private market for long-term care insurance, but it covers an almost trivial percentage of current long-term care spending. That leaves Medicaid. On average, states spend about a third of their Medicaid budgets on long-term care.”

“The real gaps in that patchwork are probably for the middle class,” Konetzka continued. “These are families often struggling to piece together sufficient hours of privately paid long-term care combined with unpaid family care just to muddle through. But there is a large body of research establishing that unpaid caregiving comes with its own direct and indirect costs to caregivers and to society in the form of lost productivity and wages.”

11,000 Turn 65 Daily

According to the Health and Human Services Administration for Community Living and the Urban Institute, about 4 million Americans turn 65 each year—roughly 11,000 every day—but the current US long-term services and supports system leaves a large share of them unprotected as they age into infirmity. Research shows that about 70% of people who reach age 65 will develop severe long-term care needs, yet only about 48% will ever receive paid LTSS. That means roughly 22% of older adults—about 880,000 people from each annual cohort of newly 65-year-olds—will experience serious functional impairment but receive no formal long-term care services at all, relying instead on unpaid family care or going without needed support.

The current private long-term care insurance market is not designed to deliver medical or custodial care to frail older adults who need it most. Instead, it operates as a profit-driven system that follows a Catch-22 logic. Individuals most likely to need long-term care are often denied coverage precisely because their need makes them unprofitable, while those who are accepted are selected because they are unlikely ever to use the benefits they are paying for. As a result, the people who need long-term care insurance the most are systematically excluded from it.

“What happens is that insurers plan to cover the average person, and if they don’t get an average draw of the population, they are prone to lose money or have to continuously raise premiums to catch up,” Frank said. “Actuaries and economists call this adverse selection. To limit the consequences of that problem, insurers do things like underwrite policies. That means a nurse or social worker is sent to an applicant’s home to take a family and medical history to judge whether the person is likely to be at high risk for needing services. If they are, they are underwritten out of eligibility. Urban folklore tells us that many people who approach a broker are often discouraged from even applying for long-term coverage. These dynamics help explain why the private market for long-term coverage has not prospered the way other insurance markets have.”

Potentially Promising Signs

Beyond noting the many daunting challenges and past failures in the long-term care field, the panelists also pointed to potentially promising signs for the future. One was the growing de facto use of the Medicare home care benefit in a quasi-LTSS way, enabled in part by the program’s lack of an explicit duration cap. The suggestion is that the home care benefit could be a latent platform for LTSS and that its current de facto use offers proof of such a platform’s operational feasibility.

Another cited positive was Washington State’s recent launch of the WA Cares Fund, the nation’s first state program requiring workers to contribute to a state-run long-term care insurance benefit. Created under the state’s Long-Term Services and Supports Act in 2019, the program is designed to help working Washingtonians cover the costs of long-term care services that traditional health insurance and Medicare typically do not cover. Self-employed individuals can opt in voluntarily. A worker earning $50,000 pays about $290 annually. The lifetime benefit is $36,500 and can be used for in-home care, nursing home and assisted living care, home safety evaluations and modifications, assistive technologies, and family caregiver support, including payment in some situations. Payroll tax collections began in 2023, and benefit payouts become available in July 2026.

“With its mandatory long-term care insurance strategy, Washington State government is able to de-risk the market somewhat for private long-term care insurance,” Ipakchi said. “People are required to participate, and there’s a payroll tax associated with it. As a result, some supplemental private long-term care options can become more affordable and attractive to residents.”

Pointing to the Washington program’s $36,500 benefit, Frank noted that it does not cover the full cost of long-term care but is significant as a starting point and a concept to build on.

The Most In Need

“Sometimes we don’t need the full loaf,” Frank said. “Sometimes we can still help people even if it’s not complete. But then you get into the tension of how much is enough, and what happens to the people who are most in need. Do you leave them in the lurch? That’s what makes the issue so hard to solve.”

Overall, the challenge of designing a viable approach to financing effective long-term care in a country undergoing a demographic inversion in aging is complicated by the vast amount of data now available on the topic. Since at least the late 1960s, government agencies, insurance companies, academic researchers, and other stakeholders have repeatedly tried—and failed—to develop a sustainable, broadly accessible system for financing long-term services and supports. This effort has largely been driven by policymakers’ recognition that Medicare and private insurance are structurally incapable of covering long-term care needs.

Ipakchi’s SCAN Foundation has recently completed a project designed to help policymakers quickly understand the evolution of proposed LTSS reform legislation over the past 35 years and move forward without having to reinvent the wheel.

The SCAN Foundation was created in 2007 by the Senior Care Action Network, a Medicare Advantage health maintenance organization that is among the nation’s largest MA plans, serving beneficiaries in six western states. The foundation is an independent philanthropy and public charity focused on improving how society supports older adults, particularly in home- and community-based settings, by funding research, policy work, and community initiatives.

Compendium of 35 Years of LTSS Documents

In April, in collaboration with the LeadingAge LTSS Center at UMass Boston and ATI Advisory, the SCAN Foundation published the Compendium of Federal Long-Term Services and Supports (LTSS) Financing Policy Options. Free to download, the document is a comprehensive policy resource that organizes and summarizes federal LTSS financing options and is designed as a practical tool for policymakers and stakeholders working on LTSS reform.

However, all three panelists said the near-term political environment appears unfavorable for major LTSS legislation.

“We have to keep in mind that things might change,” Konetzka said. “And hopefully at some point, this problem will be taken seriously again and actually addressed.”

Ipakchi agreed, calling for “building a coalition across the fields of aging, disability, labor, and potentially others. This is an affordability issue that is resonating strongly in public messaging right now.”

“Only a Crisis…”

Quoting from Milton Friedman’s Capitalism and Freedom, Ipakchi continued: “Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.”

As the session wrapped up, Werner asked the panelists to share their recommendations for near- and long-term measures to improve the LTSS system.

Konetzka
– Short term: Expand the Medicare home care benefit incrementally but meaningfully.
– Long term: Shift LTSS responsibility more squarely toward Medicare to reduce state inequities and protect middle-class families, likely with subsidies and a new public–private structure.

Ipakchi
– Short term: Conduct small-scale experiments such as caregiver stipends and supports for near-eligible populations to better understand what people value while avoiding deeper divisions among advocates.
– Long term: Create a universal social insurance model designed around lived experience rather than Beltway assumptions.

Frank
– Short term: Move toward an entitlement-like home and community-based benefit, potentially through an expanded Medicare home benefit.
– Long term: Reevaluate institutional care in a post-COVID context, acknowledging that nursing homes and similar settings may still be necessary for people with dementia and for those without family caregivers.

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