In an effort to cut the national deficit, Congress passed the Deficit Reduction Act of 2005 (DRA) to slow the growth of programs such as Medicaid and Medicare. In addition to creating mandatory standards, such as the five-year look back window for Medicaid eligibility, which states had to adopt, the DRA also gave states flexibility in how to implement Medicaid programs. Legislators hoped that by giving states this flexibility, they would arrive upon the most cost-efficient way to administer state Medicaid programs.
Despite Congress’s efforts to slow Medicaid’s growth, Arizona Medicaid, ALTCS, continues to be the main provider of long-term healthcare coverage in the state of Arizona. This is largely attributable to the lack of options available to people who need long-term healthcare. People can pay out-of-pocket for long-term healthcare, obtain long-term healthcare insurance, or qualify for ALTCS/Medicaid benefit. Because long-term healthcare insurance has historically been expensive and difficult to obtain, only a small fraction of Arizonans purchase it.
The DRA contains a provision that allows states to make long-term healthcare insurance more appealing to potential insurance consumers. Under the DRA, states are allowed to create Long-Term Care Partnership programs that ultimately incentivize long-term healthcare insurance. Under these partnership programs, Medicaid applicants who have purchased long-term healthcare insurance, but need additional assistance, can exclude a portion of their assets equal to the insurance benefit they have received up to the month before they applied for Medicaid.
Arizona is one of the states that adopted the long-term partnership program outlined in the DRA. In 2008, the governor signed Senate Bill 1223, which allows ALTCS/Medicaid applicants who own long-term healthcare insurance to exclude a portion of their assets when applying for the ALTCS benefit. Additionally, the bill created new requirements for sellers of long-term healthcare insurance and restricted preexisting condition limitations.
Senate Bill 1223 has flown under the radar, but it can potentially be quite helpful to Arizona seniors in need of long-term healthcare. The following example illustrates how people can use the program:
Mr. Brown purchased long-term healthcare insurance, which paid $50,000 towards his stay in a skilled nursing facility before he applied for ALTCS/Medicaid. When considering Mr. Brown’s application, ALTCS excludes $50,000 from his resources, as this is the amount of benefit payments he received through the end of the month preceding his application. Mr. Brown can take this exclusion from any type of resource, be it cash or real property. When Mr. Brown dies, $50,000 will also be exempt from the Estate Recovery program, so this amount will pass to his heirs before AHCCCS recovers from his estate.
Because ALTCS does not count applicants’ resources up to the amount of benefit payments they have received, applicants with long-term healthcare insurance can apply and become approved for the ALTCS benefit without spending all of their resources first. The general rule is that ALTCS applicants can have no more than $2,000 of countable resources to be eligible for the benefit. Under the partnership program, however, applicants can apply for the ALTCS benefit once their long-term care coverage expires, even if they have more than $2,000 worth of resources. Unlike applicants without long-term healthcare insurance, applicants who take advantage of the Long-Term Care Partnership program can apply for the ALTCS benefit with substantial resources.