The financing of long-term care is an issue of growing concern for many Americans. The demographic make-up of our population is changing, creating a looming crisis in providing–and, most importantly, financing–long-term care services.
Medicaid is now the primary payer of long-term care services and as a result, state and federal governments bear a tremendous financial burden for these services. Aging baby boomers will exacerbate this problem. Elderly individuals often believe, mistakenly, that Medicare pays for long-term care costs.
Long-term care costs consume about two-thirds of a typical state’s Medicaid budget. With states running deficits, Medicaid cannot continue to support these outlays. It is critical something be done now to encourage people to plan privately for their long-term care needs, just as they do for their other retirement needs.
Partnerships an Answer
Long-term care partnerships offer consumers an alternative to “spending down” their entire life savings by forming a partnership between Medicaid and long-term care insurers. These partnership programs provide access to affordable private long-term care insurance for individuals of moderate income who may not have been able to afford private coverage in the past.
Consumers who purchase these partnership policies receive a predetermined level of benefit for long-term care services through a private insurer. If the benefits under the private plan are exhausted and the individual still requires services, Medicaid will be available, but without the requirement to spend down all assets, as is usually required to meet Medicaid eligibility criteria. Under most partnership programs, the individual is permitted to retain assets equal to the amount of benefits purchased under the policy, and Medicaid becomes the payer only after the long-term care partnership benefits are exhausted.
For the first time, there are long-term care partnership bills pending in both chambers of Congress. S. 2199, introduced by Senator Larry Craig (R-Idaho), and the companion bill H.R. 1941, sponsored by Representative John Peterson (R-Pennsylvania), take the very important step of allowing long-term care partnership programs to be offered on a favorable basis in all states, bringing affordable access to private long-term care insurance to millions of Americans.
States Lead the Way
Four states–California, Connecticut, Indiana, and New York–currently offer long-term care partnership programs. They have proven effective in providing affordable coverage for consumers who otherwise might have been dependent on Medicaid for long-term care services. Sales of long-term care partnership policies have risen dramatically in states where they are allowed, meaning more individuals will utilize partnership benefits rather than turning to their state’s Medicaid program for assistance with long-term care needs.
Unfortunately, the Tax Act of 1993 (known as the Omnibus Budget Reconciliation Act) contains a provision that prevents additional states from launching long-term care insurance partnership programs on a favorable basis. At least 19 other states have passed resolutions or actual legislation that would enact state partnership programs if the current impediment in federal law is removed. Passage of S. 2199/H.R. 1941 would allow these and other state partnership programs to move forward.
A wide range of partnership policies is available, some offering coverage for a single year and others for a lifetime, and they contain many of the same features as non-partnership policies. They offer average Americans some affordable financial protection for their home and life savings if they are in need of future long-term care services.
Long-term care services are becoming increasingly expensive for individuals and state governments. Long-term care partnership programs are an important part of the solution. They not only provide a strong foundation for retirement planning, but also allow more Americans to have greater control over their futures.
Janet Stokes Trautwein is vice president of government affairs for the National Association of Health Underwriters.