As every governor knows, the fastest growing line item in virtually every state budget is Medicaid, and the fastest growing Medicaid program funds long-term care for the chronically ill or disabled.

Typically, the program pays for nursing home care for the indigent, but also pays for those who exhaust a lifetime of savings before defaulting to Medicaid. Unfortunately, some people with assets game the system, only appearing as if they are poor.

As our looming demographic, known as the baby boomers, ages, many more of us will need LTC, which means both the states and the federal government have a common interest in minimizing the imminent cost explosion of Medicaid.

In response, some powerful New York state legislators are backing a proposal called “The Compact for Long Term Care.” In order to qualify, the chronically ill must fulfill a commitment to pay for some of their own LTC costs, either through a minimum pledge of one-half of their non-home assets, or a maximum pledge equivalent to three years of nursing home costs.

In return, the state would pick up LTC costs on a dollar-for-dollar basis for those who meet the minimum pledge (i.e., the state would match the individual’s commitment), and all remaining LTC costs for those who fulfill the maximum pledge.

The compact holds political appeal: Proponents claim it promotes personal responsibility while its generous asset protections reassure middle-class constituents who fear having to sign over their future estates to nursing home administrators. Compact legislation passed the state Senate last year. Although it would have to pass the Senate again this year, that original passage indicates it has support. The compact may be good politics, but it’s bad policy. Under compact rules, you can’t participate until you’re sick enough to become legally disabled. At that point, if you have no LTC insurance you must quickly spend down savings in order to meet your pledge commitment.

While private LTC insurance coverage may be applied toward fulfilling the pledge, the compact does not require you to buy private insurance or do any other long-term financial planning. Realistically, this allows people to postpone serious planning and decisions about their family’s LTC needs until they face imminent health challenges. It’s the equivalent of deferring contributing to your retirement plan until the day you retire.

Upon closer scrutiny, the compact actually discourages families from taking individual responsibility for their retirement needs because the state promises to bail them out if they haven’t adequately prepared.

And it encourages gaming the system, such as maximizing the assets they put into their home, thereby sheltering them from the asset-based pledge contribution.

Like retirement, the best way to manage future LTC risk is to start early, not wait until the last minute to assess your needs.

Ironically, New York doesn’t even need this legislation; it is a leading participant in a public-private partnership program that encourages financial responsibility.

Unlike the compact, the Partnership for Long-Term Care rewards those who begin their LTC planning early by purchasing private insurance when they are healthy and during their peak earning years. If they have insurance under the partnership and exhaust their benefits, they can qualify for Medicaid while protecting personal assets equal to the value of the policy. The public benefits because qualifying private coverage pays for years of long-term care, preserving Medicaid dollars for the truly indigent and those who exhaust their private insurance.

Recognizing these facts, Congress recently voted to expand the partnership nationally, which means New Yorkers will soon be able to carry their partnership program with them if they move to another state.

So why would the legislature enact the compact when New Yorkers can already take advantage of the superior partnership program? One way to find out is to follow the money.

It is no secret that Medicaid-planning attorneys love the compact. The Elder Law Section of the New York State Bar Association offered supporting testimony and has published several glowing reviews of it.

These are the same folks who ran a cottage industry helping clients set up trusts and other legal barriers to block Medicaid from collecting millions of dollars in personal assets. Congress recently closed some of those loopholes.

Since the minimum pledge is based on assets, the compact would reinitiate this elaborate game, creating new demand for a host of seminars and other fee-based legal services and advice.

The better solution to long-term care needs is New York’s existing partnership program. Its elegantly straightforward incentives help people plan ahead for their own care while preserving Medicaid benefits for those who can’t.

Mr. Wrege is regional state affairs director of the Council for Affordable Health Insurance and president of Pulse Issues & Advocacy.