BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 1384 (Liu) - California Partnership for Long-Term Care  
          Program
          
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          |Version: April 26, 2016         |Policy Vote: INS. 8 - 0, HEALTH |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: May 16, 2016      |Consultant: Brendan McCarthy    |
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          This bill meets the criteria for referral to the Suspense File.

          Bill  
          Summary:  SB 1384 would shift the administration of the  
          California Partnership for Long-Term Care from the Department of  
          Health Care Services to the Department of Aging. The bill would  
          require the Department of Aging to adopt regulations allowing  
          additional types of long-term care insurance to be offered  
          through the Partnership.


          Fiscal  
          Impact:  
           Shift of $360,000 per year in staff costs to manage the  
            Partnership for Long-Term Care from the Department of Health  
            Care Services to the Department of Aging (General Fund). 

           Additional one-time costs of about $120,000 for the  
            development and adoption of regulations, review of contracts  
            with insurers, and program support by the Department of Aging  
            (General Fund).








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          Background:  The state's Medi-Cal program provides health care and  
          long-term care services to low income, elderly, and disabled  
          individuals. In order to qualify for Medi-Cal health care  
          services, individuals must meet specified income thresholds.  
          Generally, the income limit for a single adult is about $16,000  
          per year and the limit for a couple is about $22,000 per year.  
          In addition, to qualify for Medi-Cal long-term care services,  
          individuals must have assets less than $2,000 and couples must  
          have assets less than $3,000. Individuals can "spend down" their  
          assets (i.e. spend their accumulated savings) until their assets  
          are exhausted, at which time they can qualify for Medi-Cal  
          coverage.
          As required by federal law, the state also undertakes "asset  
          recovery" from deceased Medi-Cal beneficiaries. Under this  
          program, the state will seek to recover funds from the estate of  
          a deceased Medi-Cal beneficiary for services received after age  
          55 (or for the costs of institutional care provided at any age).  
          Under current law, some assets can be transferred to a surviving  
          spouse or child and the state will not seek asset recovery until  
          the receiver dies.


          Under current law, the Department of Health Care Services  
          oversees the California Partnership for Long-Term Care. Under  
          the Partnership, individuals can purchase long-term care  
          insurance that provides certain benefits with respect to the  
          state's Medi-Cal program. Insurance policies are issued by  
          participating private insurance companies, not the state.  
          Partnership policies provide two kinds of protection for policy  
          holders that subsequently require Medi-Cal coverage for  
          long-term care services. First, Partnership beneficiaries are  
          allowed to withhold assets from Medi-Cal asset tests equal to  
          the benefits paid from their policy. (For example, if a  
          Partnership policy holder has a policy that pays out $100,000 in  
          benefits and is then exhausted, that individual could qualify  
          for Medi-Cal even if he or she had up to $102,000 in assets.)  
          Second, the amount of asset recovery sought by the state upon a  
          Medi-Cal beneficiary's death is reduced by the amount of  
          benefits paid from their policy. (For example, if a beneficiary  
          incurred Medi-Cal expenses over $200,000, the beneficiary has a  
          home worth $200,000, and his or her Partnership policy paid out  
          $100,000 in benefits, the state would only seek to recover  
          $100,000 from his or her estate.)








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          In principle, Partnership long-term care insurance policies  
          provide useful financial protections for individuals who may  
          eventually need Medi-Cal long-term care services. In practice,  
          however, premium rates for Partnership policies are generally  
          too high for most people who will ever qualify for Medi-Cal to  
          afford. The number of Partnership policies issued in 2004 was  
          8,425 which declined to 611 by 2014. In part, this reflects a  
          larger trend in long-term care insurance.  Few consumers  
          purchase adequate long-term care insurance, and those who do are  
          likely to need substantial services at some point. This creates  
          a poor risk pool for insurers, which leads to high premiums,  
          which disincentives health individuals to purchase coverage. It  
          also reflects the mismatch between the high premiums for  
          long-term care insurance and the low incomes of potential  
          Medi-Cal beneficiaries.


          The intention of this bill is to increase the options for  
          coverage available under the Partnership program, to encourage  
          more individuals to purchase coverage.




          Proposed Law:  
            SB 1384 would shift the administration of the California  
          Partnership for Long-Term Care from the Department of Health  
          Care Services to the Department of Aging. 
          The bill would require the Department of Aging to adopt  
          regulations allowing additional types of long-term care  
          insurance to be offered through the Partnership, including  
          options with lower inflation protection and home-care only  
          policies.




          Staff  
          Comments:  As noted above, there are there are significant  
          shortfalls between people's future needs for long-term care  
          services and their ability to pay for them. In addition, the  
          rules surrounding the Medi-Cal program impose serious financial  








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          consequences on those who need long-term care services. Given  
          the low income thresholds for eligibility for Medi-Cal and the  
          high premium costs for long-term care insurance, it is not clear  
          whether the changes in the bill will be sufficient to make  
          long-term care insurance affordable for individuals who are  
          likely to become Medi-Cal eligible in the future.


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