States given more flexibility to expand affordable LTC
A four-state program to help people buy affordable long-term care insurance may expand under greater flexibility given states by the Deficit Reduction Act of 2005.
Currently operating in California, Connecticut, Indiana, and New York, the Partnerships for Long-Term Care program enables people to qualify for Medicaid without first spending themselves into poverty. To participate, people must buy a long-term care insurance policy that contains at least the basic benefits required by the Partnership program. The idea is to encourage the purchase of a limited, and thus more affordable, amount of long-term care coverage, with the assurance that additional long-term care services will be provided as needed through Medicaid once the insurance coverage is exhausted.
The Partnerships program was started in the 1990s as a Robert Wood Johnson Foundation demonstration to determine whether combining public and private resources would help balance long-term care funding.
According to a Brookings Institution review of the program, early criticism prevented expansion beyond the initial four states. Policy-makers were troubled that a public program such as Medicaid would endorse private insurance products, which they believed to be beyond Medicaid's mission and could inappropriately promote products with limited value. There also was concern that the Partnership would increase Medicaid spending rather than reduce it as it was intended to do. The concern was that if wealthy individuals who would buy insurance anyway participated in the Partnership, they would keep their assets and have newfound access to Medicaid services, which are intended for low-income people. As a result of these concerns, Congress used the Omnibus Budget Reconciliation Act of 1993 to prevent new states from developing Partnership programs. That ban remained in effect until it was lifted in the Deficit Reduction Act of 2005.
The Centers for Medicare & Medicaid Services sent out a State Medicaid Director letter in June giving guidance to states wanting to submit a state plan amendment for a Partnership program.
Estate recovery exception
Center for Medicaid and State Operations director Dennis Smith said the legislation permits an exception to estate recovery provisions with respect to individuals receiving benefits under long-term care insurance policies sold in states that implement a Partnership program.
New Partnership state policies must meet specific conditions and the state Insurance Commissioner or other appropriate state official must certify that policies meet those conditions for the state to apply for the exception from estate recovery.
Dollar trade-off
States considering starting Partnership programs are looking to the four programs already in existence for guidance. In California and Connecticut, there is a dollar-for-dollar trade-off so that each dollar paid by the insurance company is a dollar of assets the policyholder can keep in addition to minimums permitted by state Medicaid rules.
Thus, if a long-term care policy has paid out $50,000 in benefits, the consumer can keep $50,000 in savings or investments and still qualify for Medicaid. Without the Partnership policy, the consumer likely would have to spend down nearly all of the $50,000 before becoming eligible for Medicaid payments for long-term care bills.
New York's total assets model requires a participant's insurance to cover three years of nursing home care, six years of home care, or a combination of the two to qualify as a Partnership policy. The Brookings Institution analysis said this minimum coverage is more generous than most products sold today and thus its premiums are higher. While this model requires greater premium commitment from enrollees than the dollar-for-dollar model, it provides protection of 100% of assets if participants exhaust their policies and require Medicaid services.
Indiana has developed a hybrid model that provides participants with total asset protection if they purchase a policy whose benefits value meets the threshold, or dollar-for-dollar asset protection if they purchase a minimum of a one-year long-term care insurance policy. New York also has developed a hybrid product in hopes of attracting lower-income participants.
The Deficit Reduction Act restricts new state Partnership programs to dollar-for-dollar asset protection, which enables policyholders to purchase shorter, comprehensive coverage.
At a National Medicaid Congress session earlier this year, Connecticut Partnership for Long-Term Care director David Guttchen talked about the four states' experiences. As of Dec. 31, 2005, he said, some 230,518 policies had been purchased and 186,278 were in force. In California, the median age of purchasers is 60, while Connecticut has an average age of 58, Indiana has an average age of 61, and New York has a mean age of 62.
There had been 3,332 claimants as of Dec. 31, 2005, with more than $125 million paid out in benefits. Some 157 claimants have accessed Medicaid. Mr. Guttchen said the program has saved Connecticut $2.8 million to date, and he projected that by 2020, it will be saving Medicaid 6.8% of its annual long-term care budget. Based on current Medicaid expenditures, a 6.8% saving in 2005 would have represented some $140 million.
Mr. Guttchen tells State Health Watch that based on reaction to his Medicaid Congress presentation and other calls he has received, he expects to see several dozen states working on developing Partnership programs.
Too soon to tell
When the Brookings Institution did its analysis, using data available through the end of 2003, it found that too few people had purchased Partnership policies and used Medicaid services to be able to evaluate the effects of the program on Medicaid budgets in the four states.
"As more policyholders use and exhaust their insurance benefits, more data will be available to evaluate whether the Partnership is meeting its goals (increasing insurance coverage rates, decreasing Medicaid expenditures or slowing their growth), and reducing the incentive to transfer assets to become Medicaid-eligible," the report said. It said state evaluation studies to that point could not answer key questions such as whether the policies were purchased by people who otherwise would not have bought insurance, whether the Partnership policies are a substitute for other LTC insurance policies, and if participants would have used Medicaid regardless.
Evaluation criteria
Mr. Guttchen tells SHW he evaluates success on several different levels. First, he says, is how well the program educates residents about long-term care in terms of the risks and costs they face without adequate insurance protection. "Most people don't want to or know to focus on this issue until it's too late and their options are limited," he says. He also evaluates his program's success in terms of creating specific insurance products and working effectively with private insurance companies and agents. "We have a unique role in both regulating and working with our partners," he says.
Finally, Mr. Guttchen looks at the number of policies sold and at the short-term savings for the Medicaid program. Over the coming years, he said, he looks for an increase in the rate of private insurance and a drop in consumers' out-of-pocket expenses and in Medicaid's costs.
Staff needed
Based on his experience with the program, Mr. Guttchen says it's important that any state wanting to create a Partnership program have dedicated staff available for the planning effort. In Connecticut, he said, the program has been housed in the state's Executive Budget Office, a position from which Mr. Guttchen has been able to reach out to other agencies and encourage them to come together to work on the program. "You need to get state agencies working together as partners before you can thinking about partnering with the private insurance industry," he says.
His advice to states just getting started is to look for seed money similar to what the initial four states got from the Robert Wood Johnson Foundation and provide dedicated staff for the first couple of years. "If you don't gain momentum and interest, it's hard to catch up," he says.
Because long-term care insurance doesn't lend itself to telemarketing and is best sold one-on-one, Mt. Guttchen says states must work to "win the hearts and minds of insurance agents."
Download the CMS letter to Medicaid directors at www.cms.hhs.gov/SMDL/SMD/itemdetail.asp?filterType=none&filterByDID=0sortByDID=1&;sortOrder=descending&itemID=CMS1184960. Contact Mr. Guttchen at (860) 418-6286 or e-mail: [email protected].
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