Medicaid's Long-Term Care Insurance Partnership Program

Publication Date: January 2005

Publisher: Library of Congress. Congressional Research Service

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Under Medicaid's long-term care (LTC) insurance partnership program, persons who have exhausted (or used at least some of) the benefits of a private long-term care insurance policy may access Medicaid without having to meet the same means-testing requirements as other groups of Medicaid eligibles. Currently, Medicaid law allows four states (California, Connecticut, Indiana, and New York) to operate partnership programs. These states disregard some or all the assets of applicants who apply to Medicaid after exhausting their private benefits and exempt these assets from estate recovery after the beneficiary has died. Only persons who purchase pre-approved LTC insurance policies meeting state-defined requirements may participate. The partnership program is intended to encourage persons to purchase LTC insurance who would not otherwise do so, reduce incentives for person to transfer assets to qualify for Medicaid sooner than they otherwise would, and contain Medicaid spending on long-term care services.

According to data provided to CRS by the partnership states, about 181,600 partnership policies (private LTC insurance policies approved by the state to qualify for asset protection should an individual require Medicaid) have been sold. Of all purchasers, 88 persons, or 0.5%, have received Medicaid coverage for their LTC needs. A total of $2.8 million in assets have been protected for persons in California, Connecticut, and Indiana who have qualified for Medicaid. It is unknown how many persons with policies still in-force will eventually qualify for Medicaid.

The majority of partnership policies purchased offer comprehensive benefits that include coverage of nursing home stays and home care. All of the partnership states require that policies be protected against inflation for at least some of its purchasers. Surveys conducted in California and Connecticut show that almost half of partnership purchasers have assets of greater than $350,000 and a survey conducted in Indiana shows that 60% of purchasers have assets of greater than that level (excluding the home). In contrast, an average of 20% of purchasers in California and Connecticut have assets of less than $100,000 (excluding the home). In New York, 8% of purchasers have assets of less than $50,000.

In response to state interest, Congressional proposals were introduced in the 108th Congress that would have allowed states the option of expanding the LTC insurance partnership program from a four-state model to a nationwide program. The Presidents' fiscal year (2004 and 2005) budgets also included similar proposals. Debate about the partnership program is likely to be continued in the 109th Congress.

This report provides a summary of the experiences of the four states in implementing the partnership program, including data and analysis of participation, policies purchased, and the market for LTC insurance. It also attempts to evaluate the extent to which the asset protection promised under the partnership program is sufficient and necessary to encourage more persons to purchase LTC insurance, and discusses other key issues raised by policymakers and stakeholders concerning the expansion of the partnership program to the national level. Legislative proposals are also described.