Partnership Long-Term Care Policies
4-Hour Refresher Course
Chapter 1
Partnership LTC Program Creation
Our grandparents did not anticipate ever needing care in a nursing home. If they lived into their eighties or became ill it was likely that a family member, often a daughter, would take care of them for the last years of their life.
Times have changed. Today their daughters work outside of the home and may live in another state. Families also tend to have fewer children today than they did a generation ago, so there are fewer family members to share the responsibilities associated with caring for an elderly or sick family member. As families found themselves needing to care for an elderly member, they began to turn to paid care in private homes, and eventually, this evolved into facilities offering various long-term care options, including care in a nursing home, assisted living facilities, and home care services.
Care for an elderly or sick member is expensive. Nursing home care is the most expensive, but care in assisted living or in other facilities is expensive too. Today’s families need to consider long-term health care as part of their planning for a financially secure retirement. If an individual fails to consider the costs of health care in their final years, they may find all their previous financial planning efforts quickly eroded by long-term nursing care costs. Financial planning is only complete when health care issues are fully considered.
With the baby boom generation aging and the cost of services going up, paying for long-term care is an issue of pressing importance for policymakers who fear Medicaid applications will outpace the program’s financial ability. While some individuals can count on friends and family to assist with the activities of daily living, many others must determine how to pay for extended home-health services or a potential stay in a nursing facility.
Defining Long-Term Care
It is important to define long-term care since it relates to insurance contracts and federal and state guidelines. Long-term care is not the same as hospital care although some hospitals may have long-term care sections. Long-term care specifically applies to care in a nursing home, home health care setting, or other institution providing non-hospitalization benefits. When hospitals provide such care the wing of the building is typically called a “nursing unit” rather than a “hospitalization unit.”
Various laws will define long-term care based on their interpretation or intent. Partnership states will define long-term care based upon Partnership requirements. Federal law considers “long-term” to mean care provided for 90 days or more. Additionally, most long-term care definitions relate to the inability to perform the general activities of daily living, called “activities of daily living” or ADLs. These activities include eating, toileting, transferring to and from beds and chairs, bathing, dressing, and continence. Non-tax qualified state plans may include ambulating as an ADL, which is the ability to move around independently. Many professionals felt omitting ambulation as a trigger for receiving policy benefits was unfortunate. The ability to move around independently is often a primary reason for needing some type of assistance.
Cognitive impairment is also used as a measure for collecting policy benefits. A cognitive impairment would be the inability to take care of oneself due to Alzheimer’s disease, dementia, or some other mental incapability.
A long-term care policy will cover multiple types of care: custodial or personal care, intermediate nursing care, and skilled nursing care. Medicare only covers skilled care, and only for a short time, meaning it is not “long-term.” No individual should rely on Medicare for their long-term care needs. Custodial or personal care is the least technical since it covers help with the daily activities of living. Skilled care is the highest level of technical care and can only be provided in the appropriate setting. The Medicare & You handbook, published by the Department of Health & Human Services, defines skilled nursing facility care as “Skilled nursing care and therapy services provided on a daily basis in a skilled nursing facility. Examples of skilled nursing facility care include physical therapy or intravenous injections that can only be given by a registered nurse or doctor.”
While no one can precisely predict who will need long-term care it is known that the risk is high that this type of care will be needed as individuals age. As people live longer and healthier lives, they may need a nursing home simply because they become frail, not necessarily because they are ill. At one time, family members provided this care but, for many reasons, that is increasingly not the case today. While purchasing an insurance policy is not the only solution it is perhaps the most logical and least expensive choice.
Statistically, those most likely to end up in a nursing home are female, elderly, increasingly frail, and live alone although any person of any age can end up in a nursing home. According to HealthinAging.org, almost half of all people living in a nursing home are 85 years old or more. Most are women, and most of the women no longer have a spouse or partner.
Most people who reside in a nursing home also have some type of disability that has developed over recent years. This disability typically relates to loss of the ability to perform at least one of the activities of daily living. Losing one activity may allow the person to continue living at home, but as more abilities are lost, the need for a nursing home grows. Over 80 percent of nursing home residents need help with three or more activities of daily living according to HealthinAging.org. About 90 percent of nursing home residents who are able to walk still need assistance or supervision. More than a third of nursing home residents have lost their sight and/or hearing, requiring supervision even though they may otherwise be relatively healthy.
Physical disabilities are not the only problem. As people age, many develop mental conditions leading to nursing home confinements. Dementia remains the most common problem and affects an estimated 50 to 70 percent of nursing home residents. Over 75 percent of nursing home residents have difficulty making decisions necessary to remain at home and over 66 percent have difficulty with memory or knowing where they are. In some cases, people are sometimes able to remember but at other times they have difficulty doing so.
Again, according to HealthinAging.org, at least 66 percent of nursing home residents have behaviors that require supervision. These behaviors may include being verbally or physically abusive to other people, acting inappropriately in public, resisting necessary care, and wandering. It is also common to have communication problems. About half of nursing home residents have trouble being understood and understanding others.
Depression is also an issue as people age. That is not surprising since financial difficulties and personal difficulties emerge with aging. Going to a nursing home only increases the depression since everyone would probably prefer remaining at home. Research shows that depression occurs more in nursing homes than in any other setting.
Medicaid is the major payor of long-term care services. It is because of the increasing costs of covering those who have spent all their own assets (ending up on Medicaid) that the Partnership Program began. While asset conservation is a goal of the Partnership Program, another primary goal was reduced Medicaid spending.
Unfortunately, it turned out that the Partnership program would probably not provide decreased Medicaid spending. Individuals who bought Partnership policies tended to have sufficient assets to fund their nursing home confinements without applying to Medicaid, but they recognized the advantage of buying such a policy. In two of the four initial Partnership states, more than half of Partnership policyholders over the age of 55 had a monthly income of at least $5,000 (although Partnership plans never protect income, only assets) and more than half of all buyers had assets of at least $350,000 at the time they purchased their Partnership policy. In many cases, these individuals (80 percent) would have bought traditional long-term care policies if Partnership plans had not been available, reported the Government Accountability Office (GAO) in 2007.0F[1] We are far past 2007, but that trend seems to have continued to be the case.
Not everyone agreed with the GAO and believes that Medicaid has experienced savings from Partnership plans. HHS commented that the study results should not be considered conclusive since it did not adequately account for the effect of estate planning efforts, such as asset transfers. Health & Human Services (HHS) believes consumers would have found a way to qualify for Medicaid if the Partnership Program had not become available. Whether those who would have repositioned their assets would still have purchased a traditional long-term care policy is not known, of course, but one could theorize that high-income, high asset households often tend to be more aware of their options than those with less income and assets.
History of the Partnership for Long-Term Care
In the late 1980s, the Robert Wood Johnson Foundation (RWJF) supported the development of a new LTC insurance model, with the goal of encouraging more people to purchase LTC coverage. The program, called the Partnership for Long-Term Care, brought states and private insurers together to create a new insurance product that would encourage the uninsured to purchase long-term care coverage. It was hoped that moderate-income individuals, who face the greatest risk of future reliance on Medicaid, would cover their long-term care needs through insurance policies.
The Partnership program was designed to attract consumers who might not otherwise purchase this type of insurance. States offered the guarantee that if benefits under a Partnership policy did not sufficiently cover the cost of care, the consumer could apply and qualify for Medicaid under special eligibility rules while retaining a pre-specified amount of assets (though income and functional eligibility rules would still apply). Consumers would be protected from having to become impoverished to qualify for Medicaid, and states would avoid the initial burden of long-term-care costs.1F[2] The amount of costs avoided depends upon the amount of long-term care insurance purchased.
In 1987 the Program to Promote Long-Term Care Insurance for the Elderly was authorized. The Robert Wood Johnson Foundation (RWJF) was charged with providing states with resources to plan and implement private/public partnerships for funding long-term care needs. A primary goal of the Partnership Program was estate preservation, but also to promote an awareness of long-term health care needs faced by individuals as they age. The partnership programs joined the private insurance sector already offering long-term care insurance with the goal of developing high-quality insurance options that would prevent asset depletion and dependence on Medicaid.
Partnership programs protect assets (never income) from the high costs of home care, community care, and nursing home care. Income would still need to be used for the individual’s care, but assets would be protected. No policy protects income once benefits are used up and the insured goes on Medicaid.
Between 1987 and 2000, a total of 104,000 applications were taken and more than 95,000 policies were sold in the initial four program states (California, Connecticut, Indiana, and New York).
Analysts in the health care industry first recognized the need to develop and promote long-term care policies in the early 1980s. This was about the same time that our government realized the need to seek ways to fund the care of those who were ending up on Medicaid. By the mid-1980s insurance companies were marketing private long-term care policies, although these early policies had several flaws in coverage, including restrictions on benefits for custodial care.
Many were surprised to learn that it was not just the so-called “poor” who were ending up dependent upon state and federal aid for their long-term health care needs; the middle class was finding themselves impoverished once they entered a nursing home. It took less than one year for many individuals to become poor enough to qualify for Medicaid.
The situation was not expected to improve unless the general population accepted their financial responsibility by purchasing insurance or providing some financial avenue to pay for long-term care needs. Concern about the financing of long-term care was based on set predictions: the population of chronically ill elderly would inevitably increase along with the increasing population of those 80 years old and older. This was especially true when combined with all the medical advances being experienced. According to a study published during this time by the New England Journal of Medicine, 43 percent of all Americans would enter a nursing home at some time before they died.2F[3] Of these, 55 percent would stay at least one year, and 21 percent would stay at least 5 years. The average stay would last two and a half years. In 2023 the average cost of a nursing home in a semi-private room is $260 per day or $94,900 per year. Of course, some areas of the U.S. are more expensive than others so many people will pay much more than listed here and others will pay less. Medicare pays very little of the long-term care costs since Medicare was never designed to cover care in a nursing home beyond a very short period of time.
Medicaid, the program that ends up paying the costs once a person becomes impoverished, is one of the largest items in most state budgets. The elderly and disabled population represents less than one-third of the total Medicaid caseload but consumes over two-thirds of the total program funding for care in nursing homes. Obviously, this is a situation that has the potential of totally draining state budgets as the baby-boomer set becomes elderly.
As the financial crisis became more evident, the idea of financing long-term care through some type of public-private cooperation gained favor. As a result of state government and insurance company meetings and discussions during the 1980s, a partnership for long-term care was developed. The Robert Wood Johnson Foundation was attracted by its win-win-win potential. Who wins? Consumers, Medicaid, and private insurers all had the potential to win. RWJF authorized the national program in 1987.
The Robert Wood Johnson Foundation (RWJF) had specific goals:
Partnership Policies Created
The national program office is located at the University of Maryland Center on Aging. Initially, their primary responsibilities were to provide leadership and technical assistance for grantee institutions during the planning and implementation stages. They would also offer information to other states that were interested in replicating the public-private partnership programs or even pursue alternative programs that might appropriately address the situation. Additionally, they wanted to develop and implement some type of media relations strategy that would increase policy sales. Obviously, if consumers did not buy the partnership policies, they would not solve the problem.
The planning phase of Partnership long-term care policies was authorized in 1987 with funding of $3.2 million. The national program office contacted states that had demonstrated a commitment to reforming long-term care financing. Grants were awarded to California, Connecticut, Indiana, Massachusetts, New Jersey, New York, Oregon, and Wisconsin. These eight states collected and analyzed data from nursing homes, the elderly population, state Medicaid files, and insurers to help them design and price their products and to assess products’ impact on costs.
Based on the Brookings/ICF long-term care financing model, which simulates utilization and financing of long-term care services through the year 2020, it was estimated that a national Partnership program involving all 50 states could result in a 7 percent drop in Medicaid’s share of the total long-term care bill between 2016 and 2020.3F[4] Since the Partnership program protects assets (not income), it was well-received in the states that originally utilized Partnership long-term care programs.
A quick overview of the original Partnership Program states:
|
|
California |
Connecticut |
Indiana |
New York |
Total: |
|
Year Implemented |
1994 |
1992 |
1993 |
1993 |
|
|
Partnership Model |
Dollar-for-Dollar |
Dollar-for-Dollar |
Hybrid |
Total Asset Protection |
|
|
Number of participating insurers |
5 |
8 |
13 |
8 |
17 |
|
Number of active partnership policies by 2003 |
64,915 |
30,834 |
29,189 |
47,539 |
172,477 |
GAO Analysis of Data from Robert Wood Johnson Foundation and state data of partnership plans
Some interesting initial Partnership facts:
The purchase of Partnership policies has increased significantly since the program began, although there were some down periods in sales. Two states reported that they did not feel the decline in sales had anything to do with Partnership plans since all long-term care policy sales were down.
Most Partnership policies written were comprehensive, covering both nursing home care and home and community-based care.
Medicaid Continues to be the Largest Nursing Home Payor
Medicaid is the largest payor of nursing home bills for the elderly, covering half of all costs. Medicaid is a joint federal-state program that is financed (on average) 57 percent by the federal government and 43 percent by the states. The individual states administer the program in their state according to their Medicaid state plans, which are set up within broad federal guidelines. States can make changes or innovations that go beyond current state parameters, which is the case with Long-Term Care Insurance for the Elderly initiatives in Partnership participating states. States must have the federal governments’ permission to have the federal parameters or requirements changed, even when it benefits consumers.
One approach has been to use waivers of federal requirements. A waiver of Medicaid requirements can be obtained in different ways, including the following.
Administrative waivers typically have a time limit on their duration and have special reporting requirements.
Another approach, the one used for the Partnership program, is through a state amendment to its state Medicaid plan. A state plan amendment may be used in lieu of waivers. States submit their plan amendments to the HCFA requesting permission to alter their Medicaid programs. In this case, the federal role is to approve the modifications (rather than waive compliance with the law) within the existing federal statutory authority. When such amendments are approved the changes become part of the state plan until either the state makes another amendment or until the statutory requirements are changed. Where administrative waivers have a set durational time limit, state plan amendments have no time restrictions and there may be no special reporting requirements.
The first Partnership models required waivers, but later models did not. Models were amended to minimize the need for federal waivers. The plans initiated in early 1988 required a federal waiver.
Early legislative activity for the waivers included introducing bills specifically aimed at Partnership plans, along with attempts to include waiver language in various budget reconciliation bills. Those efforts never reached the floor of Congress for a vote because a congressional conference eliminated from consideration all budget-neutral items, which included the Partnerships. This decision reflected the need to undo a logjam in the 1989 budget reconciliation process.
Subsequent efforts to revive waiver legislation met with strong opposition led by Democratic Congressmen Henry Waxman of California, Chair of the House Subcommittee on Health and the Environment, which controlled legislation involving the Medicaid program, and John Dingell of Michigan, chair of the House Energy and Environment Committee. They had specific concerns, including the belief that:
After the political opposition blocked the initial attempts in the late 1980s, the state Partnership program teams shifted to a Medicaid state plan amendment strategy to obtain the required approvals. This was not a fast process. Delays occurred for various reasons, including:
In the end, the four states that implemented their partnerships, California, Connecticut, Indiana, and New York, received HCFA approval of their Medicaid state plan amendments.
Due to the delays caused by the Medicaid state plan amendment process and HCFA’s separate process needed to approve them, the Robert Wood Johnson Foundation (RWJF) awarded implementation grants to the states one at a time, from August 1987 through December 1988. Normally the national program procedure is to authorize all project sites at once.
The states that had planned to have a Partnership program, but did not implement it, cited political opposition, fiscal constraints, and regulatory barriers as the primary obstacles to doing so.
California, Connecticut, and Indiana based their Partnership plans on a dollar-for-dollar model, although Indiana changed its model in 1998. Under the dollar-for-dollar model, for each dollar of long-term care coverage purchased by the insured from a private insurance carrier participating in the partnership program, a dollar of assets was protected from the spend-down requirements for Medicaid eligibility. Therefore, if Joe buys a policy that provides $50,000 in benefits, he is protecting the same amount ($50,000) of his personal assets from the spend-down requirement. Partnerships do not protect Joe’s income, just the assets he has acquired.
To acquire asset protection the consumer buys a Partnership-qualified long-term care policy. The total amount of protection purchased determines the amount of assets that are protected (dollar-for-dollar protection). After the insured receives the full amount of insurance benefits purchased for long-term care services, he or she may apply for Medicaid benefits without spending down the portion of assets the Partnership policy protected. Any assets above the amount protected by the Partnership policy would still need to be spent on the insured’s care prior to Medicaid application.
In any dollar-for-dollar Partnership program, the spending of assets would look like the following:
Partnership Policy Benefits Purchased: |
Policyholder Assets Upon Medicaid Application: |
Required Asset Spend-Down for Medicaid Eligibility: |
|
$100,000 |
$100,000 |
None |
|
$100,000 |
$150,000 |
$50,000 |
|
Traditional non-partnership policy purchased |
$100,000 |
$100,000 |
|
No Policy Purchased of any type. |
$100,000 |
$100,000 |
Even though traditional non-partnership policies do not protect assets, such policies still have value. The benefits provided by non-partnership policies still allow the insured to keep assets if the insured purchased adequate benefits for a substantial duration. Even so, it would seem prudent (if the choice is available) to purchase Partnership policies since special protection for assets come with them.
When the first states introduced Partnership plans, New York chose a different approach. Rather than offer dollar-for-dollar benefits, they chose a program called the total-assets protection model. Under this program, certified policies had to cover three years in a nursing home or six years of home health care. Once the benefits were exhausted, the Medicaid eligibility process did not consider any assets of the insured at all. Protections were granted for all assets, even those far above the amount of protection purchased. Income still had to be contributed to the individual’s health care, just as in the dollar-for-dollar plans. Total Asset Partnership plans are more expensive than dollar-for-dollar plans. The Deficit Reduction Act specifies that new long-term care Partnership programs offer dollar-for-dollar models only, not total asset models.
States participating in Partnership plans all conducted extensive promotional and educational campaigns designed to inform the public about the availability of these insurance policies with the goal of increasing sales (which would ultimately relieve the state of some portion of their Medicaid expenditures). RWJF contributed to some of the promotional campaigns by providing contracts with public relations firms. Participating states collected and analyzed sales and marketing data and used the information to evaluate the Partnership programs, making any changes they felt necessary.
DRA of 2005 Provides Asset Protection
In the spring of 2006, President George W. Bush signed the Deficit Reduction Act of 2005 (DRA 2005) allowing long-term care insurance Partnership models to be used in all 50 states. This Act made it harder for individuals to give away money and property by lengthening the allowable time to move assets from three to five years, while also increasing the incentives to purchase long-term care insurance. Policies in the new program had to meet specific criteria, such as federal tax qualification, specified consumer protections, and inflation protection provisions.
The Deficit Reduction Act of 2005 included a number of reforms related to long-term care services. Of interest to many states was the lifting of the moratorium on Partnership programs. Under the DRA all states could implement LTC Partnership programs through approved State Plan Amendments if specific requirements were met. The DRA required programs to include certain consumer protections, most notably, provisions of the National Association of Insurance Commissioners’ Model LTC regulations. The DRA also required that policies include inflation protection when purchased by a person under age 76.4F[5]
The Omnibus Budget Reconciliation Act of 1993 contained language with a direct impact on the expansion of Partnerships for long-term care. The Act recognized the initial four states operating Partnership programs as well as the future program in Iowa and the modified program in Massachusetts. These six states were allowed to operate their Partnership programs as planned since their state plan amendments were approved by HHS prior to May 14, 1993.
States seeking a state plan amendment after May 14, 1993, had to follow the conditions outlined in OBRA '93. There are three sections with specific language pertaining to Partnership programs. The requirements in each section are as follows:
Sec 1917(b) paragraph 1 subparagraph C
Section 1917(b) paragraph 1, subparagraph C required any state operating a Partnership program to recover funds from the estates of all persons receiving services under Medicaid. The result of this language was lost asset protection occurring as soon as the insured died. Only while he or she was living were their assets protected from Medicaid recovery. This meant assets would not pass on to the insured’s heirs. After the participant died, states must recover what Medicaid spent on their care from the estate, including protected assets under Partnership policies.
Sec 1917(b) paragraph 3
This section prevented any state from waiving the estate recovery requirement for Partnership participants even if they wanted to in order to promote Partnership plan sales.
Sec 1917(b) paragraph 4 subparagraph B
This section required a specific definition of "estate" for Partnership participants. Estates:
A. shall include all real and personal property and other assets included within the individual's estate, as defined for purposes of State probate law; and
B. . . . any other real and personal property and other assets in which the individual had any legal title or interest at the time of death (to the extent of such interest), including such assets conveyed to a survivor, heir, or assign of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust or other assignments.
The above definition may vary from the current definition used by a state for estate recovery. States implementing a Partnership program may find themselves in the position of having to use a more encompassing definition for Partnership participants alone. These post OBRA Partnership states may even have to seek legislative approval to implement the required recovery process for Partnership participants.
Insurance Producers and Consumer Education
Given the complexity of the long-term care insurance industry, and the additional benefits of Partnership programs, many people felt it was necessary to include not only consumer education but also insurance producer education in the new state Partnership programs. Long-term care policies have so many options, gatekeepers, and limitations that even experienced insurance producers may not be fully educated on these contracts.
Most states are requiring insurance producers to obtain at least eight hours of education on Partnership plans initially, followed by four hours of “refresher” education on Partnership plans every renewal period thereafter. While some states require the education to be state-approved, other states have not made this a requirement. In these states, the eight and four hours respectively are called “training” requirements. The prudent insurance producer will seek out courses that not only qualify for these training requirements but have also received state credit (this course provides state credits). However, even if the training course does not have state approval it might still meet the requirements of the producer’s state. In “training” states selecting a course that follows the NAIC requirements is generally the standard the states require, although this is not always the case. By selecting such a course, however, the insurance producer is likely to be compliant. In many states, the insurance companies that market Partnership plans are also required to monitor whether their insurance producers have met the Partnership training requirements. It is likely that most insurers will be requiring all courses completed by their insurance producers to follow the NAIC guidelines since that will then meet the federal training requirements.
Some states require Partnership training to be obtained in a classroom. In these states, internet study is only acceptable when internet training is classified as “classroom equivalent.”
As it applies to consumers, the DRA addressed some issues relating to education for both consumers and insurance producers:
1. The secretary of Health and Human Services (HHS) was required to establish a National Clearinghouse for Long-Term Care Information that educates consumers about the need for long-term care and the costs associated with these services. HHS provides objective information to help consumers plan for the future. A Website, www.longtermcare.gov, was established to aid in consumer education.
2. Partnership programs must include specific consumer protection requirements of the 2000 National Association of Insurance Commissioners (NAIC) LTC Insurance Model Act and Regulation. If the NAIC changes the specified requirements, the HHS secretary has 12 months to determine whether state Partnership programs must incorporate the changes as well.
3. State insurance departments are responsible for ensuring that individuals who sell Partnership policies (insurance producers) are adequately trained and can demonstrate understanding of how such policies relate to other public and private options for long-term-care coverage.
Education for both consumers and insurance producers are closely aligned. Insurance producers play a vital role in ensuring that consumers understand their policy options, policy terms, and benefit conditions of any given policy. Of primary importance is guaranteeing that consumers understand the criteria that will allow them to become eligible for both private LTC coverage and, if necessary, Medicaid. Simply having a Partnership policy does not guarantee that Medicaid benefits will be available after exhausting Partnership policy benefits. Each individual must still qualify for Medicaid based on their state’s income and functional eligibility criteria. Consumers should also be aware that, although a Partnership policy may cover home-based care, Medicaid coverage may (depending on the state) only entitle them to care in a nursing facility.
The DRA specifies that “any individual who sells a long-term-care insurance policy under the Partnership receives training and demonstrates evidence of understanding of such policies and how they relate to other public and private coverage of long-term care.”
Policy Benefits
The type of benefits available in a long-term care policy depends in part on what the individual chooses at the time of application. He or she determines the types and extent of the policy’s coverage. If additional benefits are chosen, then the policy will cost more too. Of course, the more benefits purchased also means more of the policyholder’s assets will be protected from Medicaid spend-down requirements.
Inflation Protection
Inflation protection has recently gained recognition for its value as nursing home costs have sharply risen. An inflation provision stipulates that benefits will increase by some designated amount over time. Inflation protection ensures that long-term care insurance products retain meaningful benefits into the future. Because policies may be purchased well before they are needed, and long-term care costs are likely to continue to increase, inflation protection can be a key selling point for consumers interested in purchasing private LTC coverage.
The DRA requires that Partnership policies sold to those under age 61 provide compound annual inflation protection. The amount of the benefit (such as 3 percent or 5 percent per year) is left to the discretion of individual states. Policies purchased by individuals who are over age 61 but not yet age 76 must include some level of inflation protection, and policies purchased by those over age 76 may, but are not required, to provide some level of inflation protection.
There are two main types of inflation protection used in long-term care insurance plans: future-purchase options (FPO) and automatic benefit increase options (ABI). Under FPO protection the consumer agrees to a premium for a set amount of coverage. At specified intervals (such as every two years, for example), the insurance issuer offers to increase existing coverage for an additional premium. If the consumer declines the increased benefits (or cannot afford to buy them) policy benefit levels remain the same, even though costs for long-term care services may be increasing. A policy purchased to pay a $100 daily benefit may not be adequate ten years later. On the other hand, it may be better to have a $100 per day benefit than none.
With ABI, the amount of coverage automatically increases annually by a contractually specified amount. The cost of those benefit increases is automatically built into the premium when the policy is first purchased, so the premium amount remains fixed. Policies that have ABI protection are generally more expensive upfront but are more effective at ensuring that policy benefits will be adequate to cover costs down the road.
Consumer advocacy organizations and some members of Congress maintained that the intent of the language in the DRA was to require automatic compound inflation protection for those under age 61, but some insurers believed that future-purchase option protections could also satisfy the requirement.
Reciprocity between Partnership States
In 2001 Indiana and Connecticut implemented a reciprocity agreement between them allowing Partnership beneficiaries who have purchased a policy in one state (but move to the other) to receive asset protection if they qualified for Medicaid in their new locale. Prior to this agreement asset protection did not transfer outside the state of policy issue, although the Partnership insurance benefits are portable (policy benefits are good in any state, but not the asset protection element of them). The asset protection specified in the agreement was limited to dollar-for-dollar plans, so Indiana residents, for example, who purchased total asset protection policies only received protection for the amount of LTC services their policy covered if they moved to Connecticut.
An individual who has not yet retired may not know where he or she will reside in future years so reciprocity is an attractive feature. The DRA required the HHS secretary (in consultation with National Association of Insurance Commissioners, policy issuers, states, and consumers) to develop standards of reciprocal recognition under which benefits would be treated the same by all Partnership states. States are held to these standards unless the state notifies the secretary in writing that it wishes to be exempt. Most states developed Partnership plans that are reciprocal, meaning the Partnership benefits and asset protection are good in any state that allows reciprocity.
State Funding
States already face huge financial stress as the baby-boom generation ages. The Center for Health Care Strategies (CHCS) launched an initiative designed to help states take advantage of new opportunities made available in the DRA. The Long-Term Care Partnership Expansion project was underwritten by the Robert Wood Johnson Foundation.
George Mason University served as the national program office for the original Partnership for Long-Term Care program and provided the latest in research knowledge on Long-Term Care Partnerships to health care policymakers.
The National Association of State Medicaid Directors (NASMD) was available to assist states with concerns or questions regarding the Partnership program implementation process.
End of Chapter 1
[1] Long-Term Care Insurance, GAO Report to Congressional Requesters, May 2007
[2] Issue Brief Long-Term Care Partnership Expansion: A New Opportunity for States
[3] Program to Promote Long-Term Care Insurance for the Elderly, Robert Wood Johnson Foundation
[4] Robert Wood Johnson Foundation’s Program to Promote Long-Term Care Insurance for the Elderly
[5] Robert Wood Johnson Foundation • May 2007 • Long-Term Care Partnership Expansion