The Wall Street Journal: States Ease Use of Life Policies for Elder Care

By Kelly Greene

State lawmakers are encouraging elderly residents to use life insurance as a way to pay for long-term care—and lower the Medicaid tab in the process.

The strategy marks a tacit endorsement of so-called life settlements, a practice in which policyholders sell their policies at a discount in the secondary market and the buyer takes over premiums and consequently collects the death benefit.

Texas Gov. Rick Perry signed a law Friday that gives state Medicaid officials the authority to tell people applying for help they can sell long-held life-insurance policies to a third party to pay for custodial health care of their choice. Those who do so would remain eligible for Medicaid when those funds run out.

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