NCPA - National Center for Policy Analysis


August 1, 2005

According to the Michigan Medicaid Long-Term Care Task Force, asset divestiture by seniors costs the state $500 million to $700 million annually -- about a third of Michigan's $1.7 billion Medicaid tab for long-term care. The real solution would involve reversing Medicaid's perverse incentives so that people are prompted to plan for their own future long-term care needs, says S.D. Melzer, an adjunct scholar with the Mackinac Center for Public Policy.

The report recommends tax credits and deductions to encourage the purchase of long-term care insurance policies. In addition, it suggests that Michigan apply for federal permission to launch a long-term care insurance "partnership program."

Under this program, which Congress banned after four states launched it in the early 1990s:

  • Seniors who buy private long-term care insurance (LTC) for, say, $100,000 could keep assets of that amount and still qualify for Medicaid assistance should they need additional care after their policy runs out.
  • In other words, they wouldn't have to spend down their assets to $2,000, but only to $102,000, for Medicaid coverage.

In the four states with this program:

  • Around 180,000 of the insurance policies have been sold -- a purchase rate for LTC insurance far higher than in other states.
  • Of these policyholders, only 86 have had to resort to Medicaid.
  • Moreover, long-term care insurance policies typically cover a range of options, from home help to hospice care, providing more choices for seniors without further state involvement.

Unfortunately, the report's "model legislation" doesn't include these recommendations, says Melzer.

Source: S.D. Melzer, "Granholm's Task Force Report: Wrong Prescription, Critical Disease," Mackinac Center for Public Policy, July 5, 2005; based upon: "Modernizing Michigan Medicaid Long-Term Care: Toward an Integrated System of Services and Supports," Michigan Medicaid Long-Term Care Task Force, May 2005.

For Melzer text:


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