State tax incentives and partnership programs for long term care insurance have not stimulated LTC insurance sales in the states that offer them, a researcher concludes. Many states have been using incentive programs to try to boost LTC insurance sales to help ease a potentially significant financial crisis for Medicaid due to the aging of the baby boom generation, notes the researcher, David Nixon of the University of Hawaii Public Policy Center.
The aim of the incentives is to help the federal government and the states to restrain the explosion of Medicaid costs. However, they have had little or no success, Nixon believes.
Using regression analysis of data collected by America’s Health Insurance Plans, Washington, Nixon found the effect of either individual or employer tax incentives on purchases of LTC insurance appeared to be negligible. Even states with relatively generous tax incentives saw no detectable increase in sales of the policies, he says.
In fact, tax incentives are so small in comparison to the total cost of LTC premiums that they probably “have not induced a single new person to purchase long term care insurance” in the states that offer them, Nixon writes.
State tax subsidies for individual policies vary from $30 in Missouri to $250 in North Dakota, based on a $1,000 yearly premium, Nixon’s study found.
State “partnership” programs, which permit consumers buying qualified private LTC insurance to protect some assets against future Medicaid claims, also appear to have little or no effect on consumer behavior, Nixon writes.
“It remains an open question how many of the partnership purchasers would have applied for Medicaid in the absence of the state program,” observes Nixon.
Rather than state incentives, it appears that financial, health and family structure factors appear to be the main forces that drive LTC insurance sales, Nixon writes.
For instance, “states with relatively more wealthy seniors experience significantly more long term care insurance sales,” the report states.