As the population ages, legislators are worried about the burden they will likely place on the Medicaid system for their LTC services. There have been several incentives for planning ahead: Partnership programs, expanding on-going consumer awareness campaigns, and supportive educational Web sites. In addition, if you do NOT plan ahead, it is tougher to rely on Medicaid.
The Deficit Reduction Act of 2005 lifted the ban on Partnership programs and at least 21 states have proposed or enacted legislation authorizing Partnerships (1). The intended consequence of the Act was promoting LTC insurance market growth through both the "carrot" and "stick" approaches:
Stick = tougher to qualify for Medicaid,
Carrot = educate and motivate personal responsibility.
Partnership programs, which allow individuals who purchase private LTC insurance to qualify for Medicaid when the coverage of their original plan has run out without "spending down" their assets, encourage people to take responsibility for their future LTC needs. (Note, however, that people must still qualify for Medicaid on an income basis.) The hope is that these Partnerships will increase LTC insurance spending in the private sector, thus, potentially lightening the burden on Medicaid.
A new Partnership Initiative was introduced in 2007. States are working to develop reciprocity agreements that allow individuals who purchased a Partnership policy in one state to qualify for Medicaid in another. The uniformity provision implies that Partnerships must have the same policy requirements as nonPartnership plans. There are also specific requirements related to inflation protection as a function of the buyer's age at policy issue (2).
The new Partnership initiative leaves many questions unanswered. Rules are getting more complicated, yet uncertainty is not eliminated. The insurance industry cannot promise how much or what kind of reciprocity/portability there will be, and states cannot promise that they will continue to maintain their Partnership programs in the future. Medicaid eligibility requirements may change, or federal or state government could discontinue Partnerships in future. From a consumer standpoint, the Partnership initiative may lead to a better understanding of Medicaid, but may also delay the purchase of LTCI until a state's Partnership implementation is complete.
Recently, a bill was introduced that would allow employers to offer long-term care insurance to employees under a flexible spending account or cafeteria plan. Employees would thus be able to pay for long-term care insurance on a pre-tax basis (3). It appears that the legislative forces combined with employers' willingness to partially fund LTC benefits, would benefit all parties involved. And this gets us one step closer to true group long-term care.
Why is true group long-term care so important?
- Many Americans will have no way to pay for long-term care services when they are needed.
- Insurance for long-term care will not become widespread if only available on an individual basis, which means that the change will need to come first from employers.
- Group coverage needs to include employer contributions to make it affordable to employees and vesting to make it affordable to employers.