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California officials probe long‑term care financing for the "overlooked middle"
Summary
At a joint Budget Subcommittee hearing, state officials and advocates described a growing financing gap for long‑term services and supports and outlined a new state initiative to study options for middle‑income older Californians who do not qualify for Medi‑Cal but cannot afford private long‑term care.
Assembly Budget Subcommittees 1 and 2 held a joint hearing on long‑term services and supports, focusing on the so‑called “overlooked middle” of older Californians who are too wealthy for Medi‑Cal but lack the resources to pay for long‑term care.
State and nonprofit witnesses described gaps in federal and state coverage and previewed an interagency study that will deliver policy options to the Legislature in 2026. "Medicare does not cover most long‑term care services such as custodial care provided in nursing homes," said Susan Phillip, deputy director for Health Care Delivery Systems at the Department of Health Care Services, noting Medicare’s limits for custodial and home‑and‑community services.
Lawmakers and advocates said the population of older Californians with unmet long‑term care needs is large and growing. Sarah Steenhausen, deputy director of policy research and equity at the California Department of Aging, described the department’s Long Term Services and Supports Financing Initiative, which has adopted a working definition of the “overlooked middle” as households with incomes roughly 139% to 500% of the federal poverty level—about $21,600 to $78,000 for a single older adult—who would be unable to afford an estimated $50,000 per year in LTSS without compromising basic needs. CDA estimated about 3,860,000 Californians age 60 and older fall into that cohort in 2023.
Panelists reviewed prior federal and state efforts to address financing. Phillip summarized federal history and state feasibility work: a federal plan under the Affordable Care Act was dropped in 2011 amid actuarial concerns; California contracted with actuarial firms, including Milliman and Oliver Wyman, and has produced feasibility reports and task force analyses to evaluate state options. States such as Washington have pursued payroll‑tax financed public LTSS benefits, panelists said, and California’s study will examine multiple financing and program design choices.
Advocates and researchers underscored the near‑term pressures on Medi‑Cal and home‑and‑community services, pointing to demographic trends and rising care costs. Trinh Phan of Justice in Aging and Sarita Mohanty of The SCAN Foundation urged short‑term reforms—among them, altering Medi‑Cal “share of cost” rules to prevent people who are just over income limits from becoming uninsured—while longer‑term financing options are studied.
The Department of Aging said the initiative will publish interim products over the next year and deliver a final report to the Legislature in June 2026. The study will include population projections, caregiver capacity and workforce analysis, surveys of older Californians about needs and preferences, and policy options that consider both program design and potential fiscal tradeoffs.
Lawmakers pressed officials about priorities and timing. Chairs Jackson and Addis framed the discussion as part of the state’s Master Plan for Aging and urged continued cross‑agency collaboration.
Looking ahead, the state will continue feasibility and actuarial work and stakeholder engagement; the initiative’s authors said it will not produce a single solution but a set of options to consider in the budget and legislative process.
