Tag Archives: Partnership Program

Federal Legislation Allows States to Develop Long-Term Care Partnership Programs

Federal Legislation Allows States to Develop Long-Term Care Partnership Programs

President Bush signed the Deficit Reduction Act of 2005 into law on February 8, 2006. Among other issues, this legislation offers all states more latitude in the way they operate Medicaid programs. One of the most significant changes, as outlined in Section 6021 of the law, allows states to develop Long-Term Care Partnership programs. These programs permit individuals who have exhausted their private long-term care insurance to access Medicaid without the same means-testing requirements as other applicants. Any state that wants to develop such a partnership program must meet the extensive federal requirements outlined in the provisions. Private long-term care insurance policies are also subject to stringent requirements in order for the insured to be eligible for the program.

The first long-term care insurance partnership programs were developed in the 1980s to encourage people to buy private long-term care insurance instead of relying solely on Medicaid. The original programs were only permitted in California, Connecticut, Indiana, and New York and were designed to allow anyone who had bought a qualifying long-term care policy and used up their benefits, to retain a designated amount of assets and still qualify for Medicaid as long as they met all other eligibility criteria.

Under the Deficit Reduction Act, private long-term care policies must meet even more criteria than before, including federal tax-qualification, and having certain consumer protection and inflation provisions. Inflation protection is a major qualifying criterion under the current law. Purchasers of long-term care policies that are under the age of 61 must have a policy with compound annual inflation protection.  

When an individual purchases a long-term care policy, they are usually offered a choice of inflation protection riders. One is the simple inflation rider. In this instance, the policy’s original benefit amount is increased by a defined percentage (usually 3-5%) on an annual basis. Another option is the compound inflation rider.  In this case, the benefit amount is increased annual by a defined percentage of the current benefit amount, not the original benefit amount.  Compound inflation protection provides a rapid increase in the benefit amount, providing a larger pool for the insured to draw from. Although a 5 percent increase is what most insurance companies typically offer for compound inflation protection, the Deficit Reduction Act lets the individual states decide on the applicable percentage rate.  

Long-term care insurance purchasers between the ages of 61 and 75 must also have some level of inflation protection. However, the law has not defined what that level should be. The Deficit Reduction Act also mandates the U.S. Department of Health and Human Services to develop a reciprocity agreement that enables purchasers of private long-term care insurance to use their benefits in other partnership states.

Be sure to speak with an advisor to discuss your long-term care needs and whether your state offers a Long-Term Care Partnership program.

Long-Term Care Partnership Program Makes Policy Purchases More Attractive to Consumers

Long-Term Care Partnership Program Makes Policy Purchases More Attractive to Consumers

Few expenses can deplete a lifetime of savings as rapidly as the need for long-term care. The Long-Term Care (LTC) Partnership Program, a federally supported, state-operated initiative, helps individuals protect themselves against this possibility by encouraging them to purchase long-term care insurance policies.

Basically, the program works like this: An LTC Partnership Program-qualified policy will cover the cost of long-term care initially, after which time the policy owner will be able to apply for Medicaid to pay for additional long-term care services-but without having to spend down personal assets as would normally be required. By permitting individuals to protect a portion of their personal assets, the program is intended to provide an incentive to purchase a qualified long-term care insurance policy, a result that would benefit individual consumers and insurance companies, too, by creating a more active market for long-term care insurance.

At the same time, states participating in the program hope to save dollars by having more individuals pay at least a portion of long-term care expenses with policy benefits, thereby delaying the point in time at which Medicaid kicks in. Medicaid currently accounts for close to 49% of overall long-term care funding, while private health and long-term care insurance pay just over 7%, according to information from the National Conference of State Legislatures.

The LTC Partnership Program began in the mid-1980s. Currently, qualified policies are available for sale in 23 states, according to the Long-Term Care Partnership Program Technical Assistance Website. Most other states have programs in various stages of development or approval.

Program specifics will vary state to state. For example, some use a dollar-for-dollar model: If an individual purchasing a qualified long-term care insurance policy worth $150,000 exhausts policy benefits, he or she can qualify for Medicaid to pay for additional long-term care expenses without having to spend down $150,000 worth of personal assets. Other states use a total assets model: Individuals who purchase qualified coverage of at least a set dollar amount can protect all individual assets after they have exhausted policy benefits.

States set the requirements for qualified long-term care policy provisions. These may include whether qualified policies must be comprehensive or facility-only, and minimum daily benefit amounts.

Statistics on the ever-rising cost of long-term care services make it clear how great the need is for long-term care planning. According to Genworth Financial’s 2009 Cost of Care Survey, individuals needing long-term care services will see the following national averages:

• $183 per day for a semi-private room ($203 for a private room) in a nursing home that provides 24-hour-a-day skilled care.

• $2,825 per month for a private room in an assisted living facility providing assistance with personal care, as well as some medical care.

• $18 per hour for home health aid services provided by a non-Medicare-certified but state-licensed agency (for example, assistance with bathing, dressing, transferring, etc.).

• $46 per hour for home health aid services, sometimes including skilled care, when provided by a Medicare-certified agency.

• $10 per hour for adult day care services in a community-based setting.

Companies exploring adding a long-term care benefit to their voluntary benefits offerings should check to see whether partnership program plans are available in their states. The advantages of such policies-in a time when the need for long-term care services is on the rise, along with the cost of such services-can help make long-term care a voluntary benefit that employees truly welcome.