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Long-Term Care Insurance Focus of Senate Committee Hearing

On June 22, the Senate Special Aging Committee held a hearing on the Long-Term Care Partnership Program Act (S. 2077). All witnesses at the hearing testified in support of the legislation.

Sponsored by Chair Larry Craig (R-ID), S. 2077 would allow states to enter into partnerships with private long-term care insurance providers. Under the bill, an individual could purchase a long-term care insurance policy approved by the state, and in return, the state would guarantee that should the policy benefits be exhausted, the government would cover the costs of continuing care through Medicaid without requiring the senior to “spend down” his or her retirement savings. The measure is modeled after existing partnership programs in California, Connecticut, Indiana, and New York.

Sen. Craig explained that Medicaid currently pays for more than 60 percent of long-term care costs, and as the baby boom generation ages those costs are expected to double by 2025 and quadruple by 2050. He argued that long-term care partnership programs “truly represent a ‘win-win’ for all concerned something rarely encountered in health care policy: For the individual, such ‘partnership policies’ allow the person [to] feel secure that the money they saved for their golden years won’t be quickly wiped out on their way to poverty. For states, such policies offer a way to relieve pressure on skyrocketing Medicaid expenditures.”

Department of Health and Human Services Assistant Secretary for Planning and Evaluation Michael O’Grady highlighted the need for long-term care insurance: “My office estimates that total spending for long-term care for the elderly will increase from $102 billion in 2000 to $260 billion by 2025. Medicaid’s share of long-term care costs in 2025 is projected to be roughly $83 billion. There is little question that the increase in demand for publicly supported long-term care far exceeds our current financing system’s capacity.” He said that partnership policies would expand the long-term care insurance market to low-income individuals, would allow seniors to obtain long-term care without spending down their savings, and would allow seniors to control how and where they obtain their long-term care services. Citing statistics from states that operate partnership programs, Mr. O’Grady stated, “The average age of Partnership policy purchasers, at the time they buy the policy, is roughly 60. Most of these buyers will not be using long-term care services for at least twenty years. After that they must first exhaust their insurance benefits, then spend down any assets in excess of their Partnership protected assets, and finally, qualify for Medicaid. In the twelve years since the inception of the four state Partnership programs approximately 180,000 policies have been sold, just over 2,000 policyholders have received insurance payments, yet only 86 people have gone on Medicaid.”

Explaining that 85 percent of Americans over age 45 have no long-term care insurance, Mark Meiners of the Partnership for Long-Term Care stated, “It is especially important for middle income families to have affordable insurance since they represent the largest segment of the population and are most at risk of ending up impoverished and on Medicaid if they need LTC [long-term care] and have not prepared financially for that risk.” He added, “The special strength of the Partnership LTC insurance is that it makes purchases of insurance covering the equivalent of 1 to 3 years of benefits (e.g., anywhere from about $50,000 to $300,000 depending on the location) more meaningful by those in the middle to modest income group. Without the special asset protection, shorter, more affordable, coverage (when it exists at all) can still leave the purchaser at risk of impoverishment from catastrophic expenses. Faced with this possibility, people too often go without long-term care insurance, even though they need and could afford some protection.”

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