Fed Rules Delay Long-Term Care Policies

July 16, 2008
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LANSING — A web of bureaucracy has snared Michigan’s attempt to join the 10 states that offer a long-term care insurance product that would protect more assets when a person must turn to Medicaid to pay for nursing home care.

Currently, to be eligible for Medicaid’s nursing home coverage, the patient must liquidate assets and spend savings to no more than $2,000.

Eighteen months ago, Gov. Jennifer Granholm signed a bill to allow long-term care partnership policies. Under these types of policies, introduced on a trial basis in four states under the Clinton administration, the patient is able to retain some assets and still qualify for Medicaid. Partnership policies would shelter assets in an amount that would vary depending on the policy’s terms.

Michigan is one of about two dozen states working to implement partnership policies. A committee with members from the Michigan Department of Community Health, the Department of Human Services and the Office of Financial and Insurance Regulation has been working toward federal Centers for Medicare and Medicaid Services’ blessing, said Jane Church, program specialist for the state Office of Long Term Care Supports and Services.

CMS and the state have been trading questions and answers on specifics of the program, she said. The state’s rules must comply with regulations in the Deficit Reduction Act of 2005, the law that allowed expansion of the option beyond the original four states. But movement is stalled while the committee waits for CMS to approve the state’s Estate Recovery Act. Michigan was the last state in the nation to adopt estate recovery, which permits Medicaid to take possession of a house belonging to a Medicaid recipient after death. (See related story above.)

However, CMS has not yet approved Michigan’s estate recovery regulations, and won’t OK long-term care partnership policies for Michigan until that task is complete. Action isn’t expected until after the presidential election in November, Church said. Other states are moving forward with partnership policies, she said, but Michigan missed its July 1 goal to roll them out, and Church was pessimistic about the chance to gain approval for Jan. 1 implementation.

Those who favor the LTC insurance partnership program say it helps to spread the cost burden of long-term care between the individual and the state. Some who oppose it say it will increase the demand for Medicaid assistance from middle-class consumers who would otherwise pay for their own long-term care, but want to pass along a nest egg to the next generation instead of meeting Medicaid’s spend-down requirement.

“If I had an ideal scenario … every business would provide long-term care insurance — at least make it voluntary,” said Jerry O’Bee, of Ada, who sells long-term care insurance and is active in a caregivers’ support group. “That would be a fringe benefit that would have value. The biggest bill of our life is going to be our long-term care bill. Most people aren’t ready for it.

“The people who are most persuaded that this will be important are those who are caregivers today. They see as children what they have borne, and they don’t want to lay that on their kids.”

Andy Farmer, AARP’s associate state director for health and supportive services, said the association is closely watching as the partnership issue winds through government bureaucracy.

“What are the implications for individuals as well as the Medicaid system?” Farmer asked. “What happens is, instead of Medicaid paying the poor and indigent, it’s paying for people in the middle class who wouldn’t be eligible for Medicaid if not for the long-term care partnership program. But, if we can get more to buy insurance, less Medicaid is needed.”

But Church said experience in the states that have used long-term care partnerships for some time has failed to show an additional burden of Medicaid.

“I don’t see that evidence in any of the states, that they’re showing it potentially could expose Medicaid to something,” she said. “This way we’re getting some value out of the person’s resources before Medicaid is kicking in.”

Some people hire lawyers to help them find loopholes to shelter assets and still have Medicaid to pay their nursing home bills, she pointed out.

The conundrum is compounded by inflation, Farmer said. Because long-term care insurance is generally purchased decades before it is used, insurance that provides, for example, $100 of care per day now will buy far less in the future. 

“We really need 5 percent to be in place if the individual consumer, let alone the Medicaid program, is still going to be protected,” he contended.

“A person pays, over many years, at a certain level of premium; then by the time they need the benefit, the actual costs so eclipse that, the person is actually without coverage or has to pay exorbitant premiums,” Farmer said. “We’re already seeing astronomical premium increases on people who have done the right thing by buying long-term care insurance early, like you’re supposed to, to get a better bargain.”

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