Utah lawmakers are considering following the rest of the country in adopting a long-term care insurance public-private partnership that encourages people to buy private long-term care insurance and offset the use of Medicaid.
Mississippi and Utah are the only states that haven't adopted the public-private partnership policy, which was pioneered by California, Connecticut, Indiana and New York in the 1990s and then expanded nationally through Medicaid with the Deficit Reduction Act of 2005.
Utah State Senator Todd Weiler, an attorney with the consultancy Logistics Specialities, promoted the idea at a recent committee hearing, and is expected to draft a bill creating a public-private long-term care (LTC) insurance program in the coming months.
LTC insurance purchased under the program lets individuals get at least some of their future long-term care covered privately and preserve some of their assets if they do end up seeking coverage under Medicaid, which in 2009 paid for 43 percent of the nation's $240 billion in assisted living, nursing care and home care services. (Private insurance accounted for seven percent and individual out-of-pocket spending accounted for 19 percent, while Medicare post-acute coverage accounted for 26 percent.)
The LTC insurance partnership program, Wieler said, "creates an opportunity for consumers to enjoy both the benefit of long-term care insurance and asset protection in the event that Medicaid benefits are required."
Weiler said he started thinking about the issue after talking with insurance broker Craig Oberle, who also commented before the state health and human services committee.
"We all know the baby boom generation and what's happening: it's an absolute tsunami that's coming," said Oberle, a broker with the Salt Lake City-based Stone Hill National.
"The average cost of long-term care nationally is about $75,000 (per year); in Utah it's around $67,000. The real issue is when you get down the road 10 or 15 years from now, the cost of long-term care is projected to be in the neighborhood of $100,000 to $150,000 a year, depending on what state you live in."
In order to qualify for Medicaid coverage of long-term care, seniors must show financial need and for many middle-income seniors that basically means exhausting most of their assets (although there is an exclusion for home equity that in some states is more than $500,000).
But Medicaid LTC often doesn't offer many choices for beneficiaries, even in what nursing or assisted living facility they end up in, Oberle said.
Oberle said private LTC insurance, at least up to the amount specified in a policy, "gives people control over their care; it provides harmony for the family and it preserves a lot of their assets.
The state partnerships let individuals purchase long-term care insurance policies that "provide a dollar for dollar disregard to determining Medicaid eligibility."
Basically, Oberle explained to one Utah lawmaker, that means that "if I buy a policy and it pays out $300,000 in benefits, I can at that time, if I've spent down the rest of my assets, qualify for Medicaid, and I can preserve that $300,000 in my estate. It allows me to have assets in my estate and still qualify for Medicaid."
Nationally, the issue of LTC costs and demand is increasing as well, after the federal government abandoned implementation of the Community Living Assistance Services and Supports (CLASS) Act, which was intended to be a government-run program allowing individuals to voluntarily purchase long-term care insurance.
Created after the repeal of the CLASS Act, the Congressional Long-Term Care Commission is set to make recommendations on possible federal policies this fall.
Those policy challenges and the baby boom tsunami are coming at the same time that many retirees and pre-retirees generally don't understand the healthcare costs they'll face as seniors.
"The natural human tendency is to put it off and not think about it," Utah broker Oberle said. "The greatest risk a person faces is that at some point in their life they have about a 70 percent chance that they're going to incur a long-term care event."
See also: Why voluntary long-term care insurance is unlikely to Medicaid reliance