Financing Long-Term Care: The Potential Role of the Long-Term Care Partnership Program

by Portia Cornell, Harvard University

With the failure to implement the CLASS Act, Congress has created a commission whose task is to create a plan to address long-term-care challenges under a sustainable financing mechanism. Partnership programs are one of the policy options under serious consideration, suggesting it is important to assess remaining policy options for long-term care that protect older Americans from catastrophic risk with acceptable burden on public costs.  The proposed project will estimate the future costs and offsets of the Partnership Program.  I will approach this question in three steps: (1) estimate the additional cost to Medicaid of the asset disregard applied to current holders of Partnership-qualified plans, assuming no changes in the number and type of policy holders; (2) determine what take-up rate among individuals similar to current holders of long-term-care insurance would achieve cost-neutrality of a Partnership program; and (3) calculate how much a rational, risk-averse consumer’s willingness-to-pay for private long-term care increases with the availability of an asset disregard.  Thus, in the first two steps, I will establish a lower bound on how much the government would have to induce insurance purchase a Partnership programs to make fiscal sense, and in the third step establish a theoretical framework to evaluate whether this is a realistic goal.  To my knowledge, this research will represent the first comprehensive cost estimates of Partnership programs.

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