BILL ANALYSIS Ó
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).
SB 1384 (Liu) Page 1 of
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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
SB 1384 (Liu) Page 3 of
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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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