State Long Term Care Insurance Partnership programs are not likely to save any money for Medicaid and may even increase state Medicaid spending slightly, a new government report maintains.
A Government Accountability Office survey of the 4 states with existing LTC Partnership programs finds about 80% of current Partnership policyholders would have bought traditional LTC insurance if the state-sponsored policies did not exist. The remaining 20% said they would have paid for their own care if there was no Partnership program, the GAO says in its new report, “Long-Term Care Insurance: Partnership Programs Include Benefits That Protect Policyholders and Are Unlikely to Result in Medicaid Savings.”
Partnership policies enable individuals who buy qualifying policies to exempt some of their personal assets from Medicaid eligibility requirements.
[Under the Deficit Reduction Act of 2006, all states are now allowed to adopt a qualified LTC Partnership program, providing certain requirements are met. At least 25 states are developing Partnership programs, and Idaho has received approval for its program for the Department of Medicare and Medicaid Services.]
For its study, GAO used data from 2002 through 2005 from the 4 states that had Partnership programs at the time–California, Connecticut, Indiana and New York–along with other sources.
During the period, Partnership policyholders bought more extensive coverage than traditional LTC insurance policyholders, GAO found.
According to the agency’s report, both Partnership and traditional LTC insurance policyholders earned more and had more assets on average than did those without such insurance.
In 2 of the 4 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 bought their policy.
GAO’s analysis suggested that an individual could self-finance care–thus delaying Medicaid eligibility–for about the same amount of time as they could finance such care through a Partnership policy. GAO also noted, though, that some situations could delay or speed up Medicaid eligibility.
While most LTC policyholders potentially could increase Medicaid spending if they exhausted their benefits, the GAO concludes that few policyholders are likely to drain their benefits, due to their wealth as well as the likelihood that their policy would cover most of their LTC needs.
Commenting on the study, the Department of Health and Human Services argued that results were inconclusive because they did not account adequately for the effect that purchasing an LTC policy would have on estate-planning efforts such as asset transfers. HHS reasoned that people with Partnership policies are less likely than others to hide assets from Medicaid through transfers–an argument the GAO found unpersuasive.
There is not yet enough data to measure when individuals with Partnership policies would gain access to Medicaid if they had no such policy, GAO notes.
While some Medicaid savings could result from people who purchase Partnership policies instead of transferring assets, they are unlikely to offset the costs associated with those who would have otherwise purchased traditional policies, GAO argued.
In the 4 states that already have functioning LTC Partnerships, officials disagreed with some of the findings, largely because they believed many who did not buy LTC insurance would find ways to transfer assets to kin–and out of reach of Medicare and Medicaid. U.S. Health and Human Service Dept. officials made the same objection.
Tom McCaffery, chief deputy director of the California Long Term Care Partnership Program, told the GAO his department’s 2005 survey of individuals in the state with Partnership policies found 24% said they bought a Partnership policy as an alternative to transferring assets to qualify for Medicaid.
“We infer that at least this level of asset-transfer behavior exists among non-Partnership policyholders,” said McCaffery.
In response, the GAO argued that even if some individuals would have transferred assets and become eligible for Medicaid sooner without the Partnership program, “these savings are unlikely to offset the potential costs associated with policyholders who would have purchased traditional long term care insurance in the absence of the Partnership programs.”
Among other points, the GAO report argued that states that evaluated the impact of Partnership programs underestimated the percentage of individuals who would have bought traditional policies if there were no Partnership program.
Commenting on the findings, Iowa Sen. Chuck Grassley, the ranking Republican member of the Senate Finance Committee, observed that “a fundamental disagreement like that tells me that we need to analyze the question further.”