LONG-TERM CARE PARTNERSHIPS COULD BLOOM AGAIN UNDER THE DRA

Matthew Gever

The 2005 Deficit Reduction Act (DRA) is expected to resurrect a once moribund tool that may help states reduce the costs of long-term care.

Long-term care (LTC) partnerships join private insurance with Medicaid to provide state-approved insurance protection against impoverishment from the costs of LTC. Consumers who buy qualified LTC policies get coverage for a selected amount of time. If the private policy is exhausted, they can continue their LTC under Medicaid without spending close to all of their assets, as is usually required by Medicaid.

Pioneered in the late 1980s in four states—California, Connecticut, Indiana and New York—with grants and technical assistance from The Robert Wood Johnson Foundation, the partnerships are intended to save states money by preventing or delaying the point at which the elderly and disabled turn to Medicaid to pay for LTC. The programs can also prevent financial disaster among LTC patients and their families.

“The problem is that many of our citizens felt they either had to sign away assets or be forced into poverty in order for them to qualify for Medicaid assistance for long-term care,” said Oklahoma Sen. Kathleen Wilcoxson, a sponsor of SB 1547, which established an LTC partnership in the Sooner State.

Total Medicaid spending on LTC grew from $30.5 billion in 1990 to $95.7 billion in 2004, according to an April 2006 report from the Congressional Research Service. Total LTC spending by all payers is expected to reach $419 billion in 2015—Medicaid is projected to pick up 56 percent of that.

Programs Expected to Mushroom

Soon after the partnerships were introduced, they became immensely popular among states. According to Avalere Health, some 30 states have considered or enacted legislation to establish a partnership.

Congress put a stop to that trend, however, by enacting a law in 1993 that protected the four existing programs, but prevented any new ones from being established. Critics said the partnerships would benefit only the more affluent and healthy Americans, diverting Medicaid funds from the most needy. The policies can be expensive and medical underwriting may exclude those with pre-existing conditions.

The DRA is expected to cause the partnerships to mushroom in number because it removes that 1993 moratorium.

The DRA does impose some changes on the partnerships, including placing more consumer protections on the policies. The DRA also requires states to use the “dollar for dollar” model of asset protection that is in use in Connecticut, California and Indiana. Under that model, purchasers who exhaust their private coverage may retain assets that equal (and do not exceed) the dollar value of the private policy.

In contrast, New York’s “total asset” model protects all of an individual’s assets once they exhaust their private benefits. It also requires that policies have a duration of three years, fairly rich benefits and broad inflation protection. State officials believe that this type of policy makes it less likely that a person would need to access Medicaid.

Jury Still Out

Data on the partnerships’ effect on Medicaid are so far inconclusive. Since the programs began, 251 policyholders in the four states have exhausted their benefits, according to an analysis by the Government Accountability Office. Of these, 119 (47 percent) have accessed Medicaid. A total of 899 policyholders have died while receiving private benefits, far more than have exhausted those benefits. It is possible that some of these policyholders would have had to access Medicaid if they did not have insurance. However, not enough data exists to determine if this would be the case.

Critics say many seniors could not afford to buy the policies. And an analysis by the Henry J. Kaiser Family Foundation found that many seniors would not qualify for policies. The report estimates that 28 percent of people ages 65-69 would not pass an underwriting test, increasing to 38 percent for those 75-79. Additionally, the majority of policyholders in California, Connecticut and Indiana have assets greater than $350,000, not including their homes, and have annual incomes of $60,000 or more. Therefore, the Kaiser analysts conclude, the partnerships are protecting people who would not have needed Medicaid in the first place.

Supporters say the states have clearly saved money. Estimates of Medicaid savings “were in the range of $15 million for the four states,” said Mark Meiners, director of the Center for Health Policy, Research and Ethics at George Mason University and the architect of the original partnership program.

Connecticut has saved $2.8 million under the program, according to David Guttchen, director of Connecticut’s Partnership for Long-Term Care. And the number of residents relying on Medicaid for nursing home care dropped by 6 percent between 1999 and 2004.

“During the 13 years the program has been in place, Indiana taxpayers have benefited from a 10 million to 12 million dollar savings, in nursing home costs that would have been paid with taxpayer dollars. Instead, those benefits were paid by commercial insurance companies,” said Carol Cutter, deputy commissioner of health for the Indiana Department of Insurance.