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    Document Summary
    - Report Published -

    Senate Document No. 17

    Document Title
    Study of Public-Private Partnerships to Encourage the Purchase of Long-Term Care Insurance

    Department of Medical Assistance Services

    Enabling Authority
    SJR 304 (Regular Session, 1993)

    Executive Summary
    Study Origin

    Two resolutions (House Joint Resolution 688 and Senate Joint Resolution 304) passed in the 1993 General Assembly Session requested the Department of Medical Assistance Services, in cooperation with the State Corporation Commission's Bureau of Insurance, to study of the advantages of public-private partnerships which other states have implemented to encourage the purchase of long-term care insurance.


    Recognizing the growing elderly population that will potentially require long-term care services and the increasing costs of these services, several states have explored methods to encourage the purchase of long-term care insurance. At present, most long-term care is paid by public funds, primarily the Medicaid program. Older persons may be unprepared for the expenses of long-term care and need to use the Medicaid program after exhausting personal resources. Some people transfer their assets and deliberately impoverish themselves in order to qualify for Medicaid and preserve their assets for inheritance.

    Long-term care insurance accounts for a very small amount of long-term care expenditures. Consumer demand remains low despite improvements in the products and greater availability. A decade ago, long-term care insurance was not even defined as a distinct product in state statutes. In 1987, legislation established long-term care insurance as a specific type of insurance and in 1992, regulations became effective that further defined the intent of the law. At present, 40 companies are authorized to sell long-term care insurance products in Virginia. Products available are superior to insurance available even five years ago in terms of useful benefits to the consumer.

    In 1988, the Robert Wood Johnson Foundation funded eight states to study public-private partnerships to encourage long-term care insurance and reduce reliance on Medicaid. Four states were funded to develop programs: Connecticut, New York, California, and Indiana. Additionally, Massachusetts has developed a program and Iowa has a program in development. The programs differ in details but all allow Medicaid funding to be used once private insurance has been exhausted without requiring impoverishment. By offering protection of assets as an incentive, the states hope to encourage more use of private insurance for long-term care.

    Legislation enacted by Congress in August 1993 made the public-private partnerships a less attractive option for states. This study concludes that this model is not a viable alternative for Virginia at this time. Therefore, other methods to encourage purchase of long-term care insurance were also examined and are presented in this report.

    Findings and Recommendations

    The public-private partnerships, though not a viable option for Virginia at this time, may develop useful models in terms of consumer education and other methods to make long-term care insurance more attractive to purchasers. Therefore, continued monitoring of the programs will be useful.

    Recommendation 1: The Department of Medical Assistance Services should continue to monitor the public-private partnerships established in six other states to encourage the purchase of long-term care insurance, and as appropriate, make recommendations concerning ideas appropriate for implementation in Virginia.

    Tax incentives can include income tax deductions and credits for related expenses like premiums, deductions and co-payments, and exclusion of benefits paid out under an insurance plan. These incentives may be viable methods to encourage the purchase of long-term care insurance, especially among working individuals. The President's proposed health reform plan includes provisions for tax incentives for purchasers of long-term care insurance.

    Recommendation 2: A survey should be conducted to determine whether state tax incentives such as tax credits, deductions or other incentives to encourage the purchase of long-term care insurance by employers, employees or individuals should be implemented in Virginia. Survey results should be provided to the Joint Commission on Health Care in 1994.

    Offering coverage through employer groups makes premiums more affordable and may make purchasing long-term care insurance easier and more attractive. In 1991, 360 employers nationwide offered long-term care insurance including four state governments. A 1993 poll indicated that 65 percent of those surveyed would buy long-term care insurance from an insurance company or through their employer if available.

    Recommendation 3: The Secretary of Administration should consider the feasibility of providing a group long-term care insurance policy option to employees of the Commonwealth. The study should include but not be limited to the costs of such a program, the design of the benefits package to be offered, the projected participation rate, and, if appropriate, the projected start date.

    The public still has many misconceptions about long-term care financing. About half believe that Medicare pays for long-term care services. Better-informed consumers can make better decisions about their needs and choices regarding long-term care, including long-term care insurance. The Virginia Department for the Aging and the State Corporation Commission's Bureau of Insurance currently provide a range of consumer education services for senior persons. Expanded education efforts could increase the knowledge level of the public and provide assistance when specific information is required.

    Recommendation 4: The Virginia Department for the Aging and the State Corporation Commission's Bureau of Insurance should identify methods to expand consumer education concerning long-term care financing and options available. Programs targeting both older Virginians and younger age groups should be considered.