States That Have Long-Term Care Partnership Agreements

Long-term care partnership agreements consist of public-private partnerships formed between state government Medicaid programs and long-term care insurance industries. Partnership agreements started out as a pilot program made up of four states. The success of the pilot program brought about new federal legislation that allows all 50 states to develop long-term care partnership agreements.

Partnership Agreements

• The high cost of healthcare can quickly outstrip a long-term health care policy's benefits in cases when extensive care is needed. When this happens, policyholders can apply for Medicaid assistance to help pick up where long-term care insurance leaves off. Any existing assets or resources must be relinquished or spent in order to qualify for Medicaid assistance. When many people have to resort to Medicaid assistance for long-term care needs, state and federal budgets are left to cover the costs. Partnership agreements were created to extend Medicaid assistance to people who don't qualify for Medicaid once their long-term care plan benefits run out.

Pilot States

• Connecticut, New York, California and Indiana were the four states to take part in the partnership agreement pilot program started in the early 1990's. Sponsored by the Robert Wood Johnson Foundation, each state's Medicaid program formed a partnership with the state's long-term care insurance industry to offer long-term care partnership policies to state residents. These policies were based on a "dollar for dollar" asset protection model that allowed policyholders to qualify for Medicaid assistance while keeping a portion of their assets and resources. The amount of assets allowed was equal to the amount of long-term care benefits paid out on their policies.

Effects

• A 2005 report from the U.S. Government Accountability Office examines the effects of the pilot program on overall Medicaid costs within the pilot states and the number of new Medicaid enrollments from the program. Out of a sample 251 policyholders who exhausted their long-term care insurance benefits, only 119 sought Medicaid assistance for their remaining long-term care expenses. These numbers may point to a potential trend for reducing the total number of new Medicaid enrolees. In terms of Medicaid cost reductions, directors from Indiana's Long-Term Care Insurance program -- Guttchen and Michael Staresnick -- reported a $2.5 million cost savings resulting from the Medicaid long-term care partnership pilot program. In effect, insurance benefits paid a larger portion of long-term care costs, since policyholders had to first exhaust their available benefits before becoming eligible for Medicaid assistance. The overall success of the pilot program prompted Congress to include provisions that allow all 50 states to implement partnership agreements on a voluntary basis within the Deficit Reduction Act of 2005. (See Reference 1 and Reference 3-middle of page, subtitle: "Lessons from the Demonstration States")

Public-Private Partnerships

• Medicaid exists as a federally sponsored health insurance program administered through state governments. Each state decides its own criteria for Medicaid eligibility and guidelines for program coverages. States also set the guidelines and criteria for how partnership agreements are run within their regions. In effect, state governments and insurance companies form public-private partnerships as a way to reduce overall Medicaid costs within their regions. The Deficit Reduction Act of 2005 also made provisions for states to enact reciprocity agreements that allow policyholders to use their plan benefits in other partnership states.