Summary: 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.
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. About half or more of the policyholders in each of these three states also reported average monthly household incomes of greater than $5,000. 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. 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. Average premiums for partnership policies differ across states and are based on age and benefits purchased. 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.
