Overview of the Long-Term Care Partnership Program (09-SEP-05,
GAO-05-1021R).
In 2003, the most recent year for which data are available,
national spending on long-term care totaled $183 billion, and
nearly half of that was paid for by the Medicaid program, the
joint federal-state health care financing program that covers
basic health and long-term care services for certain low-income
individuals. Private insurance paid a small portion of long-term
care expenditures--about $16 billion or 9 percent in 2003. With
the aging of the baby boom generation, long-term care
expenditures are anticipated to increase sharply in coming
decades. The projected spending on long-term care presents a
looming fiscal challenge for federal and state governments. As a
result, some policymakers are looking for ways to reduce the
proportion of long-term care spending financed by Medicaid and
promote private insurance as a larger funding source. The
Long-Term Care Partnership Program is a public-private
partnership between states and private insurance companies,
designed to reduce Medicaid expenditures by delaying or
eliminating the need for some people to rely on Medicaid to pay
for long-term care services. Individuals, who buy select private
long-term care insurance policies that are designated by a state
as partnership policies and eventually need long-term care
services, first rely on benefits from their private long-term
care insurance policy to cover long-term care costs before they
access Medicaid. To qualify for Medicaid, applicants must meet
certain eligibility requirements, including income and asset
requirements. Traditionally, applicants cannot have assets that
exceed certain thresholds and must "spend down" or deplete as
much of their assets as is required to meet financial eligibility
thresholds. To encourage the purchase of private partnership
policies, long-term care insurance policyholders are allowed to
protect some or all of their assets from Medicaid spend-down
requirements during the eligibility determination process, but
they still must meet income requirements. Congress asked that we
provide summary information about the Long-Term Care Partnership
Program. We examined the demographics of program participants,
the types of policies purchased, and the benefits accessed by
policyholders. This letter formally conveys our findings.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-1021R
ACCNO: A36364
TITLE: Overview of the Long-Term Care Partnership Program
DATE: 09/09/2005
SUBJECT: Data collection
Eligibility criteria
Health care programs
Long-term care
Long-term care insurance
Medicaid
Statistical data
Program evaluation
Population statistics
Government and business
California
Connecticut
Indiana
Long-Term Care Partnership Program
New York
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GAO-05-1021R
September 9, 2005
The Honorable Charles E. Grassley
Chairman
The Honorable Max Baucus
Ranking Minority Member
Committee on Finance
United States Senate
The Honorable John D. Rockefeller, IV
United States Senate
Subject: Overview of the Long-Term Care Partnership Program
In 2003, the most recent year for which data are available, national
spending on long-term care totaled $183 billion,1 and nearly half of that
was paid for by the Medicaid program, the joint federal-state health care
financing program that covers basic health and long-term care services for
certain low-income individuals. Private insurance paid a small portion of
long-term care expenditures-about $16 billion or 9 percent in 2003. With
the aging of the baby boom generation, long-term care expenditures are
anticipated to increase sharply in coming decades. The projected spending
on long-term care presents a looming fiscal challenge for federal and
state governments. As a result, some policymakers are looking for ways to
reduce the proportion of long-term care spending financed by Medicaid and
promote private insurance as a larger funding source.
The Long-Term Care Partnership Program is a public-private partnership
between states and private insurance companies, designed to reduce
Medicaid expenditures by delaying or eliminating the need for some people
to rely on Medicaid to pay for long-term care services. Individuals, who
buy select private long-term care insurance policies that are designated
by a state as partnership policies and eventually need long-term care
services, first rely on benefits from their private long-term care
insurance policy to cover long-term care costs before they access
Medicaid. To qualify for Medicaid, applicants must meet certain
eligibility requirements, including income and asset requirements.
Traditionally, applicants cannot have assets that exceed certain
thresholds and must "spend down" or deplete as much of their assets as is
required to meet financial eligibility thresholds. To encourage the
purchase of private partnership policies, long-term care insurance
policyholders are allowed to protect some or all of their assets from
Medicaid spend-down requirements during the eligibility determination
process, but they still must meet income requirements.2
1Long-term care includes nursing home services, home health, personal care
services, assisted living, and noninstitutional group living arrangements.
You asked that we provide summary information about the Long-Term Care
Partnership Program. As agreed with your staff, we examined the
demographics of program participants, the types of policies purchased, and
the benefits accessed by policyholders. On August 18, 2005, we briefed
your staff on this information, and this letter formally conveys our
findings. Enclosure I contains the slides we provided during our briefing
with some revisions to incorporate updated information.
To do our work, we interviewed officials from the four states that offer
Long-Term Care Partnership Programs-California, Connecticut, Indiana, and
New York-and reviewed their quarterly reports and other official
documents. While all four of the states with partnership programs collect
some information on their programs, the states do not all collect the same
information. The programs began in different years and data reported by
the states are based on different time periods. Therefore, in some cases,
we report information only for those states that had available data. Based
on discussions with state officials and reviewing documentation on
uniformly collected insurer data and surveys of policyholders, we
determined that the information we report was sufficiently reliable for
our purposes. We also examined reports on the program from the
Congressional Budget Office, the Congressional Research Service, and other
research organizations. We provided a draft of the enclosure to officials
in the four partnership states for their review. They provided us with
technical comments that we incorporated as appropriate. We conducted our
work from July through September 2005 in accordance with generally
accepted government auditing standards.
Background
The Long-Term Care Partnership Program began in 1987 as a demonstration
project funded through the Robert Wood Johnson Foundation. As part of the
demonstration project, four states-California, Connecticut, Indiana, and
New York-developed partnership programs.3 These programs are designed to
encourage the purchase of private long-term care insurance, especially
among moderate income individuals, thereby potentially reducing future
reliance on Medicaid as a funding source for long-term care services.
Based on the most recently available data, there are over 172,000 active
partnership policies in the four states.
2The definition of assets differs between the Long-Term Care Partnership
Program and Medicaid. The Long-Term Care Partnership Program uses the term
assets to denote savings and investments, and excludes income. For
purposes of Medicaid eligibility, assets include both income, which is
anything received during a calendar month that is used or could be used to
meet food, clothing, or shelter needs, and resources, which are anything
owned, such as savings accounts, stocks, or property.
3In general, federal statute limits most states from implementing new
partnership programs. To protect assets under the Long-Term Care
Partnership Program, participating states exempt some or all assets from
Medicaid's estate recovery requirement, which generally requires
adjustment or recovery from an individual's estate for the costs of
medical assistance provided. With the enactment of the Omnibus Budget
Reconciliation Act of 1993, states were no longer allowed to disregard
estate assets from recovery unless the practice had been approved as of
May 14, 1993.
The four states vary in how their partnership programs protect
policyholders' assets. The programs in California and Connecticut have
dollar-for-dollar models, in which the dollar amount of protected assets
is equivalent to the dollar value of the benefits paid by the long-term
care insurance policy. For example, a person purchasing a long-term care
insurance policy with $300,000 total coverage would have $300,000 of
assets protected if she were to exhaust the long-term care insurance
benefits and apply for Medicaid. New York's program requires the purchase
of a comprehensive long-term care insurance policy, covering a minimum of
3 years of nursing home care and 6 years of home and community-based care,
but offers total asset protection for all of the purchaser's assets at the
time of Medicaid eligibility determination. Indiana's program uses a
hybrid model that allows purchasers to obtain dollar-for-dollar protection
up to a certain benefit level as defined by the state; all policies with
benefits above that threshold provide total asset protection for the
purchaser.
Demographics of Program Participants
The average age of partnership policyholders at the time of purchase
ranged from 58 to 63 in Connecticut, Indiana, and New York. The median age
of partnership policyholders in California was 60. Most partnership
policyholders were female, married, and purchasing long-term care
insurance for the first time. In California and Connecticut surveys of
persons who purchased a partnership policy, most policyholders reported
being in good or very good health. In the three states that surveyed a
sample of partnership policyholders-California, Connecticut, and
Indiana-the majority of policyholders in each of these states reported
that their total assets were greater than $350,000.4 About half or more of
the policyholders in each of these three states also reported average
monthly household incomes of greater than $5,000.
Policies Purchased
In 2004, the number of partnership policies purchased ranged from about
4,000 in Indiana to nearly 10,000 in California. The number of partnership
policies purchased each year has increased significantly since the
programs began in the early 1990s, though there has been a decline or
leveling off in the number of policies purchased in recent years. State
partnership officials from two states reported that the reason for the
decline in sales of partnership policies in recent years is not specific
to partnership policies but is reflective of overall trends in the
long-term care insurance market. Most partnership policies are
comprehensive, covering both nursing home care and home and
community-based care, and are bought individually rather than through
group or organization-sponsored programs. While most applications for
partnership policies were approved, approximately 16 percent were denied.
4In a policyholder survey, California and Connecticut instructed
policyholders to exclude the value of homes and cars when reporting their
assets. Indiana instructed policyholders to include the value of their
homes.
The amount of coverage purchased by partnership policyholders varies
across the four states. The average daily benefit amount for nursing home
care in Connecticut was approximately $188 per day. The most common daily
benefit amounts purchased
for nursing home care in Indiana were $110 and $120 per day. These amounts
were calculated using the daily benefit amounts at the time of purchase
and are not adjusted for inflation.5
Average premiums for partnership policies differ across states and are
based on age and benefits purchased. For example, in Connecticut average
annual premiums for a comprehensive policy covering 1 year of care with a
$200 daily benefit amount range from $1,500 for a 55-year-old purchaser to
$3,400 for a 70-year-old. If the 55-year-old purchased the same policy
with a 3-year benefit period rather than a 1-year benefit period, the
annual premiums would have been $2,500.
Data from Indiana suggest that when consumers are given the incentive of
total asset protection, they are likely to purchase more insurance
coverage. Prior to 1998, when Indiana introduced total asset protection as
an option in addition to dollar-for-dollar asset protection policies, only
29 percent of policies purchased had total coverage amounts large enough
to trigger total asset protection. In contrast, in the first quarter of
2005, 87 percent of policies purchased were large enough to trigger total
asset protection.
Benefits Accessed by Policyholders
Less than 1 percent of active partnership policyholders are currently
accessing their long-term care insurance benefits. Since the programs
began, 251 policyholders in all four states have exhausted their long-term
care insurance benefits. Of those 251 policyholders, 119 (47 percent) have
accessed Medicaid. The remaining 53 percent have not accessed Medicaid.
According to interviews with state officials, this may be because they are
spending down income or unprotected assets, their health has improved, or
their families provide informal care. More policyholders have died while
receiving long-term care insurance benefits (899 policyholders) than have
exhausted their long-term care insurance benefits (251 policyholders),
which could suggest that the Long-Term Care Partnership Program may be
succeeding in eliminating some participants' need to access Medicaid.
However, it is difficult to determine whether and to what extent the
Long-Term Care Partnership Program has resulted in cost savings to the
Medicaid program because there are insufficient data to determine if those
individuals who have purchased partnership policies would have accessed
Medicaid had they not purchased long-term care insurance benefits.
Comments from Partnership States
We provided a draft of the enclosure to officials in the four partnership
states for their review. They provided us with technical comments that we
incorporated as appropriate.
5Most partnership policies are required to have inflation protection. For
example, New York generally requires inflation protection; however,
purchasers age 80 or older are not required to have inflation protection
as part of their policies.
- - - - -
As agreed with your offices, unless you publicly announce the contents
earlier, we plan no further distribution of this report until 30 days
after its date. We will then provide copies of this report upon request.
In addition, the report will be available at no charge on the GAO Web site
at http://www.gao.gov.
If you or your staff have any questions about this report please contact
me at (202) 512-7119 or [email protected]. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. GAO staff who made major contributions to this report are
Krister Friday, Clare Mamerow, and Anna Theisen-Olson.
John E. Dicken
Director, Health Care
Enclosure - 1
(290470)
*** End of document. ***