State Medicaid Partnership Plans Advance In Congress

By Trevor Thomas

High-net-worth residents of Connecticut, Indiana, New York and California are fortunate in that their states have long term care insurance programs offering private coverage that protects at least part of their assets once their policy benefits run out.

Residents of others states dont have that option. In those states, recipients risk the loss of all their assets in order to qualify for Medicaid.

The state partnerships ended when Congress passed the Omnibus Reconciliation Act of 1993, which amended the Social Security Act to bar such programs. That legislation reflected the view of many in Congress at the time, who were convinced that LTC insurance was strictly a tax shelter for the rich.

The federal ban against state LTC insurance/Medicaid partnerships soon could be removed. Sen. Larry Craig, R-Idaho, and Sen. Evan Bayh, D-Ind., introduced legislation in February that allows states to adopt LTC insurance partnership programs.

President George W. Bush has indicated he would sign such legislation if passed by Congress. However, it is uncertain whether the bill, introduced as S. 2077, will come to a vote this year, says John Greene, legislative director for federal and regulatory affairs for the National Association of Health Underwriters in Arlington, Va.

Insurance industry lobbyists are hoping the Senate Committee on Aging will take up the bill soon. But the committee, and indeed Congress itself, have a lot of other things on their plates right now, and they face a relatively short legislative session to consider them, notes Greene.

“They have only 90 days in this session,” Greene says. “That gives them enough time to do appropriations and not much else.”

Although supporters see the bill as a chance to boost sales of LTC insurance, not all producers are sure the legislation would make much of an impact.

“My associates in states where they do have it [the legislation] say they rarely do sell the plans,” points out Marybeth Prescott, a LTC insurance specialist at Prescott Brokerage Services, Centerville, Mass. Therefore, she is not convinced a partnership program in her state would increase sales.

Currently, partnership policies are available in only 4 states: California, New York, Connecticut and Indiana. These were grandfathered when the ban against new policies went into effect.

(Note: New York allows all assets to be shielded, but model state legislation proposed by NAHU and other groups proposes states provide dollar-for-dollar coverage, similar to the plans used in California, Connecticut and Indiana.)

In the 4 states where partnership plans are permitted, 160,000 policies have been sold in the last 10 years, and only 72 of those policyholders have qualified for Medicaid benefits, Greene says.

“So that suggests the policies work well,” he says.

Partnership plans “have a certain socioeconomic market,” observes Walter J. Robinson, a producer with Sipco/Booth Financial, Norwalk, Conn. For example, “the partnership plan in Connecticut makes sense for those who have a larger income stream,” he says.

Greene agrees. “Policies are really aimed at the middle classtweeners who have more assets than can qualify for Medicaid but not enough to pay out of pocket,” he says.

And there are inherent limits to the use of this type of plan, Robinson points out.

“It only protects assets in the state where you buy it. If you move to another state, your plan will pay a claim but wont protect those assets from Medicaid.”

Robinson says Congress was shortsighted when it enacted a ban on such partnerships. If they existed in all states, Medicaid might achieve big savings.

“Every partnership plan is financial relief to Medicaid,” Robinson says. “Every dollar that a LTC plan pays out is a dollar that system isnt paying out.”

Editors note: This article is reprinted from the March 2004 issue of Ltc e-Wire, an online publication of National Underwriter Life & Health edition.


Reproduced from National Underwriter Life & Health/Financial Services Edition, March 5, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.