Insurance program raises policy issues

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A four-state partnership helps illustrate why private LTC insurance remains on the periphery.

The growth of private long-term care insurance would seem to benefit providers, states and consumers.

At a time of increasingly uncertain public reimbursement, the product offers providers the promise of steady, continued funding.
States could be relieved of massive funding burdens. That's no small payoff, considering Medicaid payments to nursing homes surpassed $51 billion in 2003.
In addition, policyholders would get the peace of mind that insurance coverage offers. A recent study by MetLife found that nursing home care costs now exceed $70,000 a year, on average.
But despite its promise, the product is often seen as less of a solution than a work in progress.
A just-released report completed at George Washington University offers some clues as to why. There, investigators looked into a four-state partnership program designed to make long-term care insurance attractive to states and policyholders.
The program was implemented in the early 1990s in four states -- California, Connecticut, Indiana and New York. Two general models have been employed so far. California and Connecticut use the dollar-for-dollar approach, which allows people buy policies that protect a specific asset amount. Conversely, New York's total assets model requires a participant's insurance to cover three years of nursing home care, six years of home care or a combination of the two in order to qualify as a partnership policy. Indiana has developed a hybrid model that combines elements from both models.
But so far, the partnership has not delivered as its architects had believe it would.
"Most baby boomers remain unprotected against their risk of needing long-term care," said Alexis Ahlstrom, the study's lead author.
The study reaches several conclusions that could undermine partnership expansion.
First, the report asserts that no clear savings to Medicaid have been established. In addition, the report questions whether the target audience is being reached. The partnership was intended to attract people who would not otherwise buy LTC insurance to purchase policies, and thereby produce savings to Medicaid. So far, however, the partnership has attracted upper-middle class individuals rather than people with modest incomes, according to the report's authors.
But the strongest implication in the report is that demand for the product continues to be weak.
Some insurance advocates have noted that one reason the partnerships have struggled is that they are based on a false premise: that people will buy more long-term care insurance if you forgive them their Medicaid spend-down liability.
In fact, more than a score of studies have concluded that Medicaid nursing home spend-down is much less significant than originally assumed.
Steven Moses, president of the Center for Long-Term Care Financing, notes that this is the Achilles heel facing the partnership concept.
Moses added that the partnership program needs to sever its Medicaid ties if it is to become more viable.
Still not sold
But some consumer groups question whether private insurance to cover long-term care services makes sense at all. When Consumers Union reviewed 47 policies, it concluded that private long-term care insurance remains too expensive and risky for most.
"We found that long-term care insurance is so complicated it can stymie the most conscientious consumer," said Joan Eve Quinn, a spokesperson for Consumers Union, which also publishes Consumer Reports.
But given the increasing demographic demands on Medicaid and Medicare, especially as the baby boomer population enters retirement age, the capability of Americans to pay for long-term care is becoming a critical issue. Long-term care insurance remains one way to provide for this area of need.
Last year, Sens. Larry Craig (R-ID) and Evan Bayh (D-IN), introduced legislation that would make it easier for people to purchase state-approved long-term care insurance policies.
"A thoughtful discussion regarding Medicaid's chronic solvency problems -- and the extent to