The Deficit Reduction Act of 2005 (DRA) makes it much harder for individuals to qualify for Medicaid nursing home benefits. Supporters of the legislation contended that it would prompt many more seniors to purchase long-term care insurance, thus alleviating reliance on Medicaid.
But two new studies by the Kaiser Family Foundation cast doubt on this assumption. One report, "Private Long-Term Care Insurance: A Viable Option for Low and Middle-Income Seniors?" finds that the price of a long-term care policy is not affordable for most elderly people, and that even when they can afford it, such insurance is not available to people who already have long-term care needs. The annual cost of a typical long-term care policy in 2002 was $2,862 for those age 65 and $8,991 at age 79. Estimates indicate that nearly one-third of people age 65 to 69 would not pass an underwriting test.
To increase purchases of long-term care insurance, the DRA also lifts the moratorium on the number of states that may operate Long-Term Care (LTC) Partnership Programs. Under these programs, insurance buyers may protect a certain level of assets and still qualify for Medicaid when the long-term care policy runs out.
The report notes that although LTC Partnership Programs have been operating in four states since the early 1990s, enrollment in them has been limited. The programs appear to attract upper middle-class individuals, similar to the private long-term care insurance market, Kaiser found. The majority of purchasers in California, Connecticut and Indiana have assets greater than $350,000 (excluding the home), and half have annual incomes of $60,000 or more. Thirty percent of purchasers say they would not have purchased long-term care insurance in the absence of these programs.
A second report, "Frontline Perspectives on Long-Term Care Financing Decisions and Medicaid Assets Transfer Practices," echoes these findings and warns that efforts to tighten Medicaid transfer rules may impede access to needed long-term care services for low- and middle-income Americans. Based on a series of interviews with long-term care benefits counselors in six states, the report found that private long-term care insurance remains largely unaffordable to the majority of low- to middle-income individuals. Counselors also reported that they rarely recommend reverse mortgages. The report determined that the "vast majority" of people do not transfer their assets in order to qualify for Medicaid.
"The findings of this study," the report concludes, "suggest that the role of Medicaid as the primary payer of long-term care services will continue to grow, despite recent federal and state efforts to limit asset transfers."
According to a study that will appear in the next issue of the health care journal Inquiry, while the vast majority of seniors will incur little or no long-term care expenses, about one in ten will amass costs between $100,000 and $250,000 and an additional 5 percent will confront expenses of more than $250,000.
To read "Private Long-Term Care Insurance: A Viable Option for Low and Middle-Income Seniors?" go to: http://www.kff.org/uninsured/7459.cfm
To read "Frontline Perspectives on Long-Term Care Financing Decisions and Medicaid Assets Transfer Practices," go to: http://www.kff.org/medicaid/7458.cfm
For more on long-term care insurance, including a discussion of the Partnership Programs, click here.