Bishop says the best part of this "partnership plan" is that he doesn't have to sell his house or wipe out his pension and personal savings if he outlives his private benefits. The state will step in and pick up his bills under Medicaid, the health care plan that the federal and state governments run for poor and disabled people, without requiring Bishop to spend down his assets to the poverty level.
"The idea is great. It's beneficial to the individual and to states trying to contain Medicaid costs," he said. "The partnership plan is indeed a blessing."
Bishop's home state of Indiana is one of four permitted under federal law to offer such plans. (California, Connecticut and New York are the others). States aim to prod Congress in 2005 to expand use of the plans. Seventeen more states are poised to launch their own partnerships if they get the green light from Washington.
"We need the federal government to allow all states to do that," Raymond Scheppach, executive director of the National Governors Association, said recently.
Long-term care is a big issue for states because it's a huge budget item -- and one that will only get bigger with the graying of America. States are taking steps on several fronts to try to reduce an impending bulge of nursing home bills and other long-term care costs that states currently must cover once patients run out of money.
Besides pushing Congress to allow special partnerships such as Indiana's that combine private long-term care insurance with Medicaid, some states will try other enticements to get more of seniors' long-term care costs picked up by private insurers. In the works are proposals for more states to offer tax breaks for purchases of private long-term care insurance. Several states are gearing up public relations campaigns to encourage folks to buy insurance now to pay for nursing homes or other assistance late in life.
States spend an average of 38 percent of their Medicaid money on long-term care and more than half of that on nursing homes, which cost about $57,000 a patient per year. The more that states can encourage baby boomers and seniors to sock away their own money for long-term needs, the less money that state Medicaid programs may have to pick up.
With the aging of the baby boom generation, long-term care costs are expected to more than double by the year 2025. Many people are shocked to discover that nursing home care is not covered under Medicare. As a result, many seniors find themselves spending down their savings until they reach the poverty level and qualify for Medicaid.
NGA Chairman Gov. Mark Warner (D) of Virginia kicked off apublic education campaign
in his state on Jan. 10 that uses TV ads, mail and free "tool kits" to champion long-term care planning. He noted that Arkansas, Idaho, Nevada and New Jersey will follow with similar campaigns.
Outgoing NGA Chairman Gov. Dirk Kempthorne (R) of Idaho made long-term care a top priority during his tenure, spotlighting the financial headache and heartache awaiting states and the elderly if nothing is done. Kempthorne estimated that one in three Americans could go broke paying for long-term care in their golden years.
Idaho is one of 17 states that already passed legislation but needs Congress to act before creating a partnership that combines private long-term care insurance with Medicaid. Essentially, the way the partnerships work is that a person buys a long-term care insurance approved by the state for a certain period and, in return, the state covers the costs of continued care through Medicaid once the senior's insurance benefits have run out.
Generally, under partnership projects, if an individual has income over the Medicaid eligibility level, that person still has to spend that each month and then Medicaid picks up the difference between income and the nursing home cost.
Other states that have passed legislation to create partnerships are: Colorado, Hawaii, Iowa, Illinois, Massachusetts, Maryland, Michigan, Missouri, Montana, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, Virginia and Washington.
The federal government put the brakes on such partnerships in the 1990s because of concern that wealthy people would game the system, using the special partnership plans to protect their bulging bank accounts and tap into Medicaid funds reserved for the poor. States and the Bush administration say the plans' track records in the four states show that argument doesn't hold water and that Congress should lift the restriction.
Last year, Congress held hearings on bills (S 2077/HR 1406) that would have allowed states to create long-term care partnerships, but Congress ran out of time before voting on the proposals. The sponsors of last year's measure -- U.S. Sen. Larry Craig (R-Idaho) and U.S. Rep. John Peterson (R-Pa.) -- have pledged to get the measure moving in 2005.
Even without action from Capitol Hill, a few states in 2005 plan to move on another front and explore tax breaks as a way to encourage seniors and baby boomers to buy private long-term care insurance. While Medicaid covers care for the poor and disabled, long-term care insurance policies help middle- and higher-income citizens cover their own future long-term care needs. Since long-term care insurance premiums are cheaper for younger and healthier people, states are encouraging baby boomers in particular to think ahead.
Nearly half the states already offer either a deduction or tax credit for those who buy long-term care insurance. Maine and Maryland give tax breaks for employers who offer group long-term-care policies. Twenty-nine states offer long-term care insurance policies for state employees.
In 2005, Arizona, Michigan and Pennsylvania are expected to be among states that try to jump on the tax-break bandwagon to encourage purchases of long-term care insurance.
Kempthorne has used his State of the State addresses for the past two years to unveil long-term care initiatives for Idahoans. On Jan. 10, he showcased a new public education campaign and a new long-term care group plan available to state workers. Last year, at the governor's urging, state lawmakers increased the tax deduction for long-term care insurance to 100 percent of the premium costs, up from 50 percent.