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Private Long-Term Care Insurance: A Viable Option for Low and Middle-Income Seniors?

In the Deficit Reduction Act of 2005, the federal government made it harder for individuals to qualify for Medicaid nursing home benefits by increasing penalties on individuals who have transferred assets for less than fair market value during the past five years and by making individuals with home equity above $500,000 ineligible for nursing home benefits. The legislation also lifts the moratorium on the number of states that may operate Long-Term Care (LTC) Partnership Programs, which allow individuals who purchase long-term care insurance to protect more of their assets if they later need nursing home care under Medicaid.

Some have suggested that purchasing private long-term care insurance to cover nursing home care would alleviate reliance on Medicaid. This snapshot examines the experience with private long-term care insurance and the LTC Partnership Programs. Findings include:

• Private long-term care insurance comprises a small share of nursing home spending,

• The price of a long-term care policy is not affordable for most elderly people,

• Private long-term care insurance is not available to people who already have long-term care needs, and

• LTC Partnerships have been operating in 4 states since the early 1990s, but enrollment remains limited. The programs appear to attract upper middle-class individuals, similar to the private long-term care insurance market.

Issue Brief (.pdf)