An Introduction to
Long Term Care Partnership Programs
Produced by
The National Association of Health Underwriters
Long Term Care Advisory Group
• What is a Long-Term Care Partnership Program?
• Why is a Partnership Program important?
• Endorsed by state
• Help consumers see LTC Insurance as ASSET PROTECTION
• Provide relief for the Medicaid program
• Should assist in making long-term care sales
• How do partnership plans accomplish this?– It all comes down to who will be
responsible to pay for long-term care expenses incurred in the future.
WHO PAYS NOW?• State governors’ concerns today focus on
rising Medicaid costs• Medicaid: 47 percent• Out-of-pocket: 21 percent• Medicare: 17 percent• Private LTC insurance: 10 percent• Other: 5 percent
Let’s recap:
Medicaid:• Is 1965 public program for the poor
• Has now become the default payer of LTC costs
• Approves people either through the spend- down process or by artificial qualification
MEDICAID
• Generally pays for nursing home care
• Nursing home care is the primary driver today of increased Medicaid expenses
• Factor in the Boomers, and …
… SOMETHING HAS TO GIVE
MEDICAID AND LTC• Medicaid’s problems are not new
• Evidence in early 1980s that growing LTC expenses would over-burden this public program for the poor
• Study was appointed in the 1980s to investigate possible solutions to the coming crisis
RWJ FOUNDATION
• The Robert Wood Johnson Foundation commissioned a study in the 1980s
• Report issued in 1987
RWJ FOUNDATION
• The RWJ Foundation concluded that the best path for Medicaid to avoid a continued run-up in LTC expenses was to encourage consumers in the matter of personal responsibility by purchasing private LTC insurance to take the pressure off the Medicaid program.
LTC PARTNERSHIP PROGRAMS
• The result of this “encouragement” were insurance plans called LTC Partnership Policies
• States would give specific approval to LTC insurance contracts meeting certain standards
THE PARTNERSHIP PREMISE
• To reduce Medicaid expenditures by delaying or eliminating the need for people to rely on Medicaid
• Encourage purchase of private LTC insurance by giving an incentive for the consumer to buy
CONSUMER INCENTIVE
• By purchasing a LTC policy sold through the Partnership, asset protection from Medicaid would equal the amount of LTC insurance coverage
• This amount of assets would not have to be spent down to qualify for Medicaid
EXAMPLE• Consumer buys private LTCI with a total benefit
value of $250,000• Consumer needs care• Consumer uses LTCI first• If they use up the entire $250,000, their
application to Medicaid will allow them to keep that amount in addition to their primary protected assets like the home and car
• Based on the RWJ Study, four states decided to formally develop partnership programs and encourage consumers to buy LTC insurance
• Two distinct models emerged
PARTNERSHIP MODELS• Dollar-for-dollar: dollar value of the
protected assets equals the dollar value of benefits paid by LTC insurance contract
• Total Assets model: Required purchase of set minimum LTC coverage (6 years total) in exchange for complete protection of all assets
THE FOUR STATES
• Connecticut: dollar-for-dollar model
• California: dollar-for-dollar model
• New York: total asset protection
• Indiana: hybrid of the two
WHY NO MORE STATES?
• Concern that a public program was endorsing private insurance
• Believed it would increase Medicaid costs rather than reduce them by drawing attention to the program’s coverage
• Would mostly benefit wealthier individuals who could afford the private insurance
OBRA 1993
• The Waxman Amendment
• Prevented states from acquiring the Medicaid waiver necessary to activate a partnership plan
• Iowa was stopped in mid-development
WHAT HAS BEEN THE RESULT FOR THESE FOUR STATES?
• Average age of partnership policyholders is between 58 and 63
• Majority of policyholders held assets greater than $350,000 (excluding home)
• Majority of policyholders had average monthly incomes of $5,000 or more
WHAT HAS BEEN THE RESULT FOR FOUR STATES?
• Over 180,000 policies purchased
• Over 2,000 claims
• Less than 5 percent ultimately applied for Medicaid
CONNECTICUT• Latest year surveyed: 2003-04
• 34 percent of purchasers of partnership plans had assets between $100,000 and $350,000
• Average total benefit: $247,394
• 97 percent were first-time purchasers
NEW YORK
• Now offering 4 different partnership models
• 2 Total Asset Protection
• 2 Dollar-for-Dollar
• Still have minimum specified benefits, but now drawing broader appeal
CALIFORNIA
• Average age at purchase: 57
• 56 percent were female
• 97 percent were first-time purchasers
• 38 percent bought policies with a minimum 5-year benefit period
INDIANA
• Hybrid model: – Total asset protection if purchase made for
benefit amount of $188,000 or greater– Dollar for dollar protection for policies less
than $188,000
DEFICIT REDUCTION ACT OF 2005
• 1993 ban on LTC Partnership Programs lifted
and
• Changes made to Medicaid eligibility
DEFICIT REDUCTION ACT OF 2005
• LTC goals were:
– Make it more difficult to qualify for Medicaid program artificially, and
– Encourage people to look to another source for LTC expense funding
DRA ’05: NEW MEDICAID RULES
• All transfers must occur 5 years prior to Medicaid application date
• Penalty period now imposed from the date of Medicaid eligibility – not the date of the actual transfer
ASSET TRANSFERS
• Medicaid application date: August 1, 2006• Look-back window: retro to August 1, 2001• Transfer of $180,000 made February 1, 2002• Penalty! $180,000 divided by $3,300 = 54 months• Penalty used to be measured from date of transfer
– 2/1/02 + 54 months = eligibility on 8/1/06• NOW – Penalty applied as of 8/1/06 – eligibility
will be on 2/1/2011
NEW MEDICAID RULES
• Medicaid application can now be denied for person with home equity greater than $500,000 ($750,000 in some states)
• Annuities are now assets. Policyowner’s state of residence now required to be listed as a remainder beneficiary.
NEW PARTNERSHIP ACTIVITY
• Now – there will be more than FOUR states• Federal Medicaid waivers will be granted• Each state that wants to offer LTC partnership
policies must file a state plan amendment with the Department of HHS
• Unless related to this process, no additional state legislation is necessary
STATE PLAN AMENDMENT
• Policies cover state residents
• Policies are tax-qualified
• Policies adhere to NAIC provisions
• Policies contain specified inflation options
• LTC agents have appropriate training
• Insurers subject to reporting requirements
WHO’S READY TO GO?
• Colorado Massachusetts• Florida Michigan Oklahoma • Georgia Minnesota Pennsylvania• Idaho Missouri Rhode Island• Illinois Montana South Dakota• Iowa Nebraska Virginia• Maryland New Jersey Washington
GRANDFATHERED
• Connecticut
• California
• New York
• Indiana
CMS TEMPLATE
Clarification of:• Inflation protection (ages 61+)• Exchanges vs. grandfathering• Reciprocity• Agent training for certification• Uniformity
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