Long-term care expenditures now exceed $200 billion a year and growing fast. State Medicaid programs pay the lion’s share and cover a far broader range of institutional, community, and home-based services than Medicare. To encourage folks to buy long-term care insurance and take pressure off taxpayers, the new Deficit Reduction Act of 2005 (DRA) allows any state to create a Long-Term Care Partnership Program.
The Long-Term Care Partnership Program – a public-private partnership between states and private insurance companies – helps reduce Medicaid expenditures by delaying or eliminating the need for some people to rely on taxpayers to pay for long-term care services. The idea was developed in the late 1980’s and early 1990’s with support from The Robert Wood Johnson Foundation (RWJF).
Here’s how it works:
1. To qualify for Medicaid, applicants must meet certain eligibility requirements, including income and asset requirements. Traditionally, Medicaid applicants cannot have assets that exceed certain thresholds. They must deplete (“spend-down”) their assets until the Medicaid financial eligibility threshold is met. Many folks, particularly wealthier individuals, hire elder law attorneys to find ways to legally hide or divert assets so heirs get the bulk of their assets while taxpayers pay for nursing home care.
2. Under the Long-Term Care Partnership Program, individuals are encouraged to buy long-term care (LTC) insurance policies that meet state and federal standards on private LTC coverage and consumer protections.
3. If the privately insured individual eventually needs long-term care services, they first rely on benefits from their private long-term care insurance policy to cover LTC costs before they access Medicaid.
4. To encourage the purchase of private LTC coverage, long-term care insurance policyholders are allowed to protect some or all of their assets from Medicaid spend-down requirements during the eligibility determination process. They still must meet income requirements for Medicaid.
5. Four states now have Long-Term Care Partnership Programs: California, Connecticut, Indiana, and New York. Since 1993, federal law had limited the program to these states. The Deficit Reduction Act of 2005 (DRA) now permits any state to participate. (The DRA also made a number of other LTC-related changes to Medicaid.)
To learn more, check out:
– Medicaid’s Long-Term Care Insurance Partnership Program, a detailed report from the Congressional Research Service (CRS).
– Who Will Pay for Long Term Care?: Insights from the Partnership Programs, an excellent book edited by Nelda McCall at Laguna Research Associates.