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Should California set up a state LTCI program?

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A state lawmaker in California wants policymakers to look into the possibility of setting up a long-term care insurance (LTCI) program aimed at middle-income resident.

The lawmaker, Assembly member Ian Calderon, D-Industry, Calif., has introduced Assembly Bill 332. The bill calls for the state’s insurance commissioner to convene a task force to “examine the components necessary to design a statewide long-term care insurance program.”

The A.B. 332 task force would have to list options for establishing the LTCI program and assess the feasibility of each option in a report to be completed by Jan. 1, 2017.

The task force would include government officials, at least one representative from a labor union representing long-term care workers, and “key senior health policy and long-term care insurance stakeholders.”

The bill would let the insurance commissioner seek and use private funds to pay for the work of the task force.

The task force would consider whether the state could put an LTCI program in the existing state disability insurance program and pay the benefits through the same mechanisms the state now uses to pay paid family leave benefits.

In A.B. 332, Calderon seems to assume that, at least in some ways, a California public LTCI program might resemble the CLASS Act voluntary long-term care (LTC) benefits program. The program, which was created by a section of the Patient Protection and Affordable Care Act of 2010 (PPACA), was found to be actuarially unsustainable, in part because the program would be voluntary, and in part because people who were working but already qualified to receive LTC benefits would be eligible to participate in the program.

Calderon suggests in his bill that a California LTCI program could have a mandatory enrollment system with a voluntary opt-out option.

Hawaii created a public LTCI program panel in 2013. 

The authors of the social LTCI program study resulting from the Hawaii law found that using tax incentives to encourage the purchase of traditional LTCI coverage could backfire, by reducing state revenue and helping higher-income residents more than lower-income residents.

The authors also concluded that setting up a premium-funded public program would be difficult, in part because of constitutional issues, in part because of the possibility that many residents might opt out of a voluntary program or flee from the state to escape from a mandatory program, and in part because few older adults with disabilities have ever had much income or wealth at any point in their lives.

The authors cite statistics indicating that only about half of adults who have disabilities in their 70s had annual per capita incomes over $30,000 when they were in their 50s, before they were disabled. Only 25 percent had incomes over $50,000 at that point in their lives, the authors of the Hawaii study say.

Only about 25 percent had more than $100,000 in total wealth years before they were admitted to a nursing home, according to the Hawaii study authors.

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