State Long-Term Care Partnership Programs

By Brian Seguin

Photo by Scott Meis Photography via Flickr

Long-term care refers to end of life care where a person can no longer take care of themselves. These people require either the assistance of a trained professional, such as a home health aide, to help them care for themselves in their home, or they need to be housed in a nursing home and cared for there. Since Medicare does not cover long-term care, people who require it need to either pay for it themselves, or if they have almost no savings and get a low enough monthly income that they qualify, they can apply for Medicaid which does cover it. If someone pays for it themselves and winds up spending all of their savings and still needs care, they can then apply for Medicaid to cover it if their monthly income is under the threshold set by their state in order to qualify for the program.

In the early 1980’s, states began to worry that as the baby boomer generation got closer to retirement age and might start requiring long-term care, it could cause increases in their Medicaid expenditures and thus budget deficits. One possible solution forwarded for this impending problem, and eventually implemented by four states in 1993, was the idea of state long-term care partnership programs. Under these programs states would incentivize their citizens to purchase private health insurance to cover at least part of the long-term care they may eventually require and thus spare Medicaid from covering some of the costs. Insurance companies who participated in the programs had to meet certain regulations of what type of care was provided and had to report certain data back to the states so they could effectively monitor the impact the programs were having.

Proponents hoped these plans would cause people to buy their own long-term care insurance coverage and hopefully never need to turn to Medicaid to pay for it. They also hoped this would stop the perceived threat of people transferring their assets (savings) to family members early in order to appear qualified for Medicaid. Of the four original states, California and Connecticut incentivized their citizens by allowing them to disregard assets they had above the threshold allowed to qualify for Medicaid in the amount that the partnership plan had paid towards their long-term care. In other words if a person purchased a partnership plan and it paid out $200,000 towards their long-term care, that person would still qualify for Medicaid even if they had up to $200,000 in assets over the amount usually allowed to qualify. This was called the “dollar for dollar approach.” New York required citizens to purchase more comprehensive plans that had higher lifetime benefits, and if they did they could disregard all of their assets in determining if they qualified for Medicaid, known as the “total assets approach.” Indiana allowed a “dollar for dollar” disregard if the person purchased a plan covering less than four years of care and a “total asset” disregard if they purchased a plan covering more than four years.

Opponents of this idea worried that these public partnerships would inappropriately promote private plans with limited values, and that they could lead to increases in Medicaid expenditures by allowing wealthier people who would purchase private long-term care plans anyway keep their assets and now have access to Medicaid that they wouldn’t have otherwise had. As a result of these fears part of the Omnibus Budget Reconciliation Act of 1993 (OBRA) required any state that started a partnership program after 1993 to recover any disregarded assets of a deceased Medicaid recipient from their estate. Although this Federal law did not apply to the four states already operating partnership programs and did not ban other states from starting their own programs, it effectively eliminated any other states from trying to start their own programs by removing the incentives for citizens to join. This is because although a person could keep some of their assets while still alive, and still qualify for Medicaid, the state would now have to take those assets from their estate. So there was no longer any incentive for a person to purchase a partnership plan which they may never need, and thus shift some of the potential costs of long-term care on private insurers rather than Medicaid.

The Federal government finally decided to give long-term care partnership programs another chance in 2005 with the passage of the Deficit Reduction Act (DRA). Parts of that bill removed the estate recovery requirement of OBRA and allowed states (other than the original four who have continued their programs and are again not subject to this bill) to start their own partnership programs provided they use the “dollar for dollar” approach. Insurance companies participating in these new programs will have to be certified by the state, using new federal guidelines, and will have specific data reporting requirements. The “dollar for dollar” approach is mandated to avoid the grant of Medicaid benefits to those who do not need or deserve them. This approach only allows beneficiaries to keep the amount of assets they would have presumably spent for long-term care themselves and then qualified for Medicaid anyway, had their partnership plans not paid that amount. The federal government has finalized its rule of what data needs to be submitted by partnership insurers after consulting with the National Association of Insurance Companies, insurance companies who issue long-term care plans, the four original states with programs, and consumers who purchase long-term care plans. The data collected is meant to cost insurers as little as possible while still allowing the federal government to accurately track the effectiveness of these programs. While no states or private insurers are required to participate in these partnership programs, as of August 2008, 13 states (in addition to the original four) are now offering partnership plans and 12 more are in the process of implementing them.