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Regulation and Compliance > State Regulation

GAO: LTC Partnerships May Not Help Medicaid

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State long term care insurance partnership programs are unlikely to result in savings for Medicaid and may even increase state Medicaid spending slightly, according to officials at the Government Accountability Office.

A GAO survey of the 4 states with existing LTC Partnership programs — California, Connecticut, Indiana and New York — found that about 80% of current partnership policyholders would have bought traditional LTC insurance if partnership policies did not exist. The remaining 20% said they would have paid for their own care if there was no partnership program, John Dicken, a GAO director, writes in the GAO LTC Partnership program report.

Originally, federal law limited states’ ability to set up LTC Partnership programs.

The Deficit Reduction Act of 2006 lifted the restrictions, and at least 25 states are now in the process of developing partnership programs.

Idaho recently received approval for its program from the Centers for Medicare & Medicaid Services.

In states that have LTC Partnership programs, individuals who buy the qualifying policies and exhaust private benefits can keep some of their assets even if they end up using Medicaid nursing home benefits.

For the GAO study, GAO analysts used 2002-2005 data from the 4 original partnership program states.

During the period, partnership policyholders bought more extensive coverage than traditional LTC insurance policyholders, Dicken writes.

Both partnership and traditional LTC insurance policyholders earned more and had more assets on average than residents without LTC insurance had, Dicken writes.

In two of the partnership states, more than half of partnership policyholders over 55 had a monthly income of at least $5,000, and more than half of all their households had assets of at least $350,000 when they purchased partnership coverage.

“Because of the amount of insurance partnership policyholders generally purchase and their typical income and assets, few partnership policyholders are likely to ever become eligible for Medicaid, which suggests that the partnership programs are likely to have a small impact on Medicaid spending,” Dicken writes.

Although the partnership programs are not likely to reduce states’ Medicaid expenditures, the programs do offer some benefits for some consumers, Dicken writes.

“Even if individuals do not end up using their partnership insurance or Medicaid, the availability of asset protection may provide peace of mind for those who fear the risk of having to spend their assets on their long-term care,” Dicken writes.

Commenting on the study, officials at the U.S. Department of Health and Human Services argue that the GAO review was inconclusive because the GAO did not account adequately for the effect that purchasing an LTC policy would have on estate-planning efforts, such as asset transfers.

People with partnership policies are less likely than others to hide assets from Medicaid through transfers, HHS officials argue.

Dicken calls the HHS argument unpersuasive.


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