The nation’s health reform debate has been raging for three years, but one of the most critical questions seems to have fallen by the wayside: The risk that a major long-term care need will devastate your savings.

The current system for financing long-term care is fragmented. The stressed Medicaid system is the nation’s largest insurer. Medicare provides limited coverage, and the commercial long-term care insurance business remains a struggling niche product for mass affluent buyers.

The Affordable Care Act (ACA) aimed to create a new “public option” for long-term care insurance, called the The Community Living Assistance Services and Support (or CLASS Act). The intent of CLASS was to expand coverage by providing a basic, inexpensive LTC option deployed mainly through the workplace.

CLASS was shelved by the Obama Administration late last year after actuaries concluded that the plan wasn’t workable. But that doesn’t mean the need we don’t need new approaches to long-term care.

Experts estimate that 70 percent of Americans over age 65 will need some type of long-term care. Of course, not everyone will require nursing home care – many seniors will receive care in community settings or from family members at home.

But those who do need nursing home care will be facing expenses that can be devastating. The median annual cost of a private nursing home room this year is $81,030, according to the 2012 Genworth/Carescout Cost of Care survey. That’s $15,330 more than in 2007, and a 4 percent five-year growth rate. The cost of in-home and community care is rising at a more moderate pace – and the cost of care varies tremendously around the country.

Self-insuring is an option, but could require allocating a substantial portion of household assets to pay for long term care, when that money could be earning a return and funding retirement for a spouse or heirs. Some families also rely on tapping home equity via a home equity loan or reverse mortgage.

Medicare will cover up to 100 days of skilled nursing care or rehabilitation if it is ordered by a physician. Medicaid covers nursing home and community-based care – but only if you are indigent or receive Social Security disability payments.

That leaves older Americans with a hodge-podge of problematic options—and few new solutions on the horizon from policymakers. I explore what’s next for long-term care this month at WealthManagement.com.

Tags | long-term care