Conclusions

It is inevitable that federal action will be taken to restructure Medicaid to better control the growth of expenditures for this program. Given that long term care constitutes about 42 percent of North Carolina's Medicaid expenditures, there is little doubt that long term care will be included in any discussion about ways to better control program costs. This reality, combined with our rapidly growing older population and the aging of the baby boom generation, necessitates that attention be given to preparing both today's and tomorrow's older adults to be better positioned to pay for long term care, if needed.

While private long term care insurance is not an appropriate option for everyone, private long term care insurance may be an appropriate option for many middle/upper income individuals who do not/will not have sufficient resources to be "self-insured" against this potential risk but do have sufficient income and/or assets to comfortably afford premium costs for this coverage over time. Typically, the younger an individual is when private long term care insurance is purchased, the less costly the annual premium. Thus, any efforts North Carolina undertakes to promote purchase of private long term care insurance should include incentives that benefit adults regardless of their age. The ability to leave at least some of the assets that have been accumulated over a lifetime to heirs is extremely important to many older adults and future older adults. As such, it is important that any incentives implemented to promote purchase of long term care insurance take this fact into consideration. Consideration should also be given to providing incentives for individuals who bear the financial cost of private long term care insurance coverage for another family member as this is likely to be an important issue to many baby boomers who are/will care for aging parents. Incentives also need to build upon other appropriate health care reform efforts already being considered in North Carolina such as the recommendation by the Health Care Reform Commission that legislation be introduced to establish Medical Savings Accounts as a health care coverage option for North Carolinians. Education will be critical to the success of any incentives enacted.

Recommendations

1. Consideration should be given for legislation to establish a Long Term Care Insurance Partnership Program. The purpose of a Long Term Care Insurance Partnership Program is to increase personal responsibility for long term care costs through the sale of quality, affordable long term care insurance policies. Partnership policyholders would also be assured that personal assets equal to the amount of long term care insurance benefits paid by the insurer would be protected from consideration for Medicaid eligibility, thereby avoiding the need to all but exhaust their personal resources before receiving Medicaid assistance and/or pursue Medicaid estate planning.
2. To position North Carolina to implement a Long Term Care Insurance Partnership Program that will be viable over time, North Carolina should join the efforts of other states seeking repeal of the federal OBRA requirements of 1993 pertaining to Long Term Care Insurance Partnership programs. These requirements preclude states from protecting the assets of Long Term Care Insurance Partnership policyholders from Medicaid estate recovery provisions after their death. The ability to only protect assets until the death of the Partnership policyholder reduces the intended incentive to purchase long term care insurance in exchange for some level of assets protection for Medicaid eligibility purposes. Specifically, it is recommended that Governor Hunt and the General Assembly consider addressing this issue with North Carolina's Congressional Delegation as well as the National Governors' Association.
3. In addition to existing educational efforts of the Seniors' Health Insurance Information Program (SHIIP), SHIIP and the Division of Aging should convene a panel (including consumer advocates) to develop a Long Term Care Insurance "Consumer Bill of Rights" that includes information regarding suitability of individuals for purchase of long term care insurance and other key disclosure requirements for distribution to potential purchasers of long term care insurance products by long term care insurance sales agents.
4. Determine the fiscal impact of providing a state income tax credit or a tax deduction for individuals who purchase private long term care coverage for themselves and/or a family member. (Family members might include: parents, parent(s)-in-law, siblings, children and all step-relations associated with the above relationships.) If such a tax incentive is pursued, consideration should be given to including some criteria that policies must meet in order for the credit/deduction to apply (e.g. dollar amount of coverage equal to two years of nursing home coverage). Such conditions would help to reduce potential risk of future payment by Medicaid for long term care insurance policyholders and simultaneously support Long Term Care Partnership policies (if implemented).
5. Consider, if necessary, the possibility of minimally increasing the premium tax paid by "domestic" North Carolina insurance companies on long term care policies sold as a way to offset any projected lost tax revenues from individual taxpayers as a result of instituting a tax credit or tax deduction for purchase of long term care insurance policies.
6. Require that all long term care policies offered in North Carolina have an "alternate" care provision or some other mechanism such as an option for coverage upgrades without requiring new underwriting for the policyholder. Such a provision would provide the flexibility needed to take into consideration new service definitions/delivery options and thereby avoid having policies purchased that are obsolete when they need to be used.
7. North Carolina's rules/statutes governing Medical Savings Accounts should include the purchase of long term care insurance premiums and unreimbursed long term care costs as a qualified medical expense in the event that federal Medical Savings Account provisions do not include these costs as qualified medical expenses.
8. North Carolina should consider offering a group rate long term care insurance product to active and retired state employees as an optional health care benefit. Employees would be responsible for the entire premium cost and could also have the option to purchase coverage through the group policy for their spouse, parents, and in-laws. If a Long Term Care Partnership program is implemented, any group rate plan made available to state employees should meet criteria as a Partnership policy. If this option were made available, consideration should be given to extending the option to other groups such as municipal/county employees and/or businesses participating in the small business purchasing alliance (CAROLIANCE). Extending the option to other groups could potentially reduce the premium rate while providing another incentive for purchase of long term care coverage to other government and private sector employees.

This report was prepared by Susan Harmuth and Dennis Streets of the Division of Aging, NC Department of Health and Human Resources, 693 Palmer Drive, Caller Box No. 29531, Raleigh, NC 27626-0531. Please contact them regarding this summary or for copies of the full report.

The online version was prepared by Margaret Morse, Center for Aging Research and Educational Services, School of Social Work, University of North Carolina, Chapel Hill.