New Ways to Pay for Long-Term Care

Under current law, national health spending is projected to grow at an average rate of 5.5 percent per year for 2018-27 and to reach nearly $6.0 trillion by 2027, according to the National Health Expenditure Data published by the Centers for Medicare and Medicaid Services. 

Furthermore, CMS projects health spending to grow 0.8 percentage point faster than Gross Domestic Product (GDP) per year over 2018-27 which puts the health share of GDP at 19.4 percent in 2027. In 2017, health share portion was 17.9 percent. 

Prices for health care goods and services are projected to grow somewhat faster over 2018-27 (2.5 percent compared to 1.1 percent for 2014-17.)

As a result of comparatively higher projected enrollment growth, average annual spending growth in Medicare (7.4 percent) is expected to exceed that of Medicaid (5.5 percent) and private health insurance (4.8 percent).    

Most of the growth is affected by the Medicare enrollments -- welcome to age 65, Baby Boomers, we are the key reason. Another driver is the shrinking family caregiver segment. Both lead to States' opt in to the Long-Term Care Partnership Program. 

What is the Long-Term Care Partnership Program?

It's a program designed to to incentivize more aging Americans to purchase a private LTC insurance policy.  The driving force behind the program became law when President Bush in early February 2006, signed the Deficit Reduction Act (DRA) of 2005. The Act included section 6021, which created the Qualified State Long-Term Care Partnership Program.  

The bill tightens asset transfer rules to reduce the incidence of seniors transferring a substantial amount of their money and other assets to relatives in order to be eligible for long-term care services under Medicaid. However, Medicaid spending grew 2.9% to $581.9 billion in 2017, or 17 percent of total National Health Expenditure.

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 LTC services.  Check out this website about the program, a comprehensive resource of information for state governments and consumers.

Many older adults are not aware of this program, but we should be. Section 6021 of the DRA authorized states to offer Medicaid “dollar-for-dollar asset disregard” or “spend down protection” for people who purchase and use a Partnership-qualified (PQ) long-term care insurance policy–referred to as a Partnership policy.

These Partnership policies, sold by private insurance companies, have been approved by the state and meet certain criteria:

  • Traditional LTC plans
  • Compound inflation up to age 75

Here's an example of how it works:

Through the Partnership Program, Mary buys a $100,000 LTC Plan and uses it for her care. When that's depleted, Mary applies for Medicaid. But she's earned a $100K Medicaid asset disregard that permits her to keep an additional $100,000 over the asset level she would normally have to meet in order to be eligible for Medicaid coverage. After Mary’s eventual death, the Partnership Program also protects those assets from Medicaid estate recovery.

But do research to see if the State where you live participates in the program.

Even if your State does not participate, don't be alarmed. They may have plans to design their own Long-Term Care Act like Washington and Hawaii.

Washington

In 2018, Washington State Lawmakers passed the nation’s first long-term care benefit program, which would provide residents with up to $36,500 to pay for costs like caregiving, wheelchair ramps, meal deliveries, and nursing home fees.

Long-Term Care Trust Act, taxpayers expect to save $3.9 billion in state Medicaid costs by 2052. Beginning in 2022, workers will pay a modest monthly payroll tax, 58 cents for every $100 they earn in income, which calculates to $18/month.

Those who pay into the program for three years, or for a total of 10 years including five consecutive years, will be able to access the benefit, which, maxes out at $36,500. In 30 years, as it’s indexed for inflation, the benefit will be more than $88,000.

Hawaii has designed its own LTC Trust Act.

This may be a good solution to cut Medicaid costs but could be too late for older boomers.

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