LTC partnership programs as the missing piece in state budgets

By Vanessa De La Rosa

At this year’s annual Million Dollar Round Table meeting in Philadelphia, I had the chance to conduct interviews, experience inspirational Top-of-the-Table speeches and sit in on many focus sessions. Among the most interesting was Phyllis Shelton’s focus session, “What you need to know NOW to stay in the LTC insurance market,” in which she explained why opportunities for advisors in the LTCI market are better than ever, despite rate increases, carriers exiting the market, and stricter underwriting and re-pricing processes.

Shelton, who serves as President of LTC Consultants, a Nashville-based company that specializes in long-term care insurance sales training, consumer education and marketing materials, has a fiery Southern charisma that conveys a strong passion and deep investment in the industry. Here are some highlights from her 90-minute presentation, detailing the latest news in LTCI in relation to health reform and how LTCI can be used as a solution to state budget issues.

Health reform wreaks havoc on state budgets.

Come 2014, The Patient Protection and Affordable Care Act will require states to use Medicaid to insure everyone with an income up to 138 percent of the federal poverty level. Providing free health insurance means withdrawing funds from hospitals that accept indigent patients. PPACA will use Medicaid for home and community care. In an environment where Americans are aging, we have the largest shortage of home caregivers. The elderly and disabled constitute almost one-fourth of Medicaid’s enrollment, and the spending on these patients is six times greater than the spending on adults and children. States must pick up the tab in funding this large share of people, and their budgets will become tighter when attempting to fund other critical services.

LTCI is the missing piece in state budgets.

Medicaid expenses devour nearly one-fourth of most state budgets and are expected to grow by an additional one-third in the next 20 years. Long-term care takes up one-third of Medicaid’s budget and is expected to reach 50 percent by 2030. States are depleting other areas, like jobs, education, transportation and human services, to pay for Medicaid.

Shelton says Americans don’t realize that choosing whether or not to purchase long-term care insurance is not just a personal choice. It doesn’t affect only them. It affects their state budgets: “Every dollar spent on LTCI is a dollar that didn’t decrease the state budget and cause higher tuition costs, less public safety, etc. When people don’t plan for long-term care, they are essentially taking money from the state budget.”

She notes that the best thing for the state and federal economy is private LTCI, which in turn will cut the costs of other programs and serve as a funding vehicle for long-term care services and supports. She urges producers to educate consumers, care providers and major influencers on this idea.
A partnership between LTCI and Medicaid will help state budgets.

To cover the gap that neither private nor public funding can bridge alone, Shelton stresses the importance of the long-term care partnership, a public-private program in which state-approved insurance policies pay first, lightening the load for the respective state. Medicaid would then step in if the initial funding isn’t enough (if the consumer meets the state’s functional or cognitive eligibility).

The long-term care partnership rewards the purchase of LTCI by protecting assets equal to the long-term care benefits paid when Medicaid is accessed. Without a partnership like this, Medicaid must pay benefits after most assets are already spent down. Simply put, Medicaid acts at the safety net after private insurance has already paid.

Shelton notes that the partnership fulfills the number one concern cited in the 2005 and 2010 Long-Term Care Insurance Buyer/Non-Buyer survey: 29 percent of non-buyers said they would consider LTCI “if government paid for care when benefits cease.”

Currently, 40 states have instituted the partnership. Forty-five percent of the general population under the age of 50 say they would be likely to purchase a private LTCI policy if their state participated in a partnership program, but less than 25 percent knows whether their state has a partnership or not.

Providing LTCI to employees is providing productivity insurance to employers

It’s important to educate as many people as possible, Shelton says, and the fastest way to do so is for employers to offer long-term care insurance to their employees and their family members (age 18 and up) so that all can qualify and find it affordable. If there is suitable education, family members would be more likely to purchase LTCI while they’re still insurable. And some employers extend a one-time opportunity to working spouses to qualify for LTCI with limited health questions. If spouses are insured, that means less caregiving responsibilities fall on the employee.

Shelton explains that offering LTCI and education is securing productivity insurance. Why? Because employed people aged 55 or older are in their prime caregiving years. Forty-nine percent expect to provide care to a family member or friend in the next five years. Seven out of 10 caregivers either leave the workforce, decrease their hours or find a less demanding job, which are all outcomes that cause the employer to see a drop in productivity.


Shelton used various examples to outline in detail how broadening LTCI options in the workplace can boost employee productivity and what advisors should cover in their LTCI sales presentations — all reinforcing her enthusiastic request to consider just how important the LTC partnership program is in repairing the damage health reform has done to state economies.