Legislation will help state, seniors pay for long term care

By J. Emmett Reed, FHCA Executive Director

As lawmakers begin tackling how to handle implementation of the Affordable Care Act, it’s clear that Medicaid is once again at the center of the debate. How lawmakers will address the potential swelling of the Medicaid rolls and more importantly, cover those costs, have the providers impacted by those decisions watching with great interest.

Medicaid is an important safety net for more than two-thirds of the 71,000 Floridians who depend on nursing homes for their daily care needs. Unfortunately, Medicaid rates for nursing home care have been reduced by close to $700 million over the past four years, with facilities losing $550,000 each year.

This chronic underfunding for our state's most frail elders comes at a time when Florida is on the verge of a boom in the elderly population. While facilities remain committed to delivering residents the highest quality of care, they continue to struggle with a lack of adequate funding that affects their ability to operate effectively. But what can be done?

Millions of seniors hold a potential solution in their hands if they own a life insurance policy. Legislation being considered this session will allow seniors to use the value of that policy to pay for needed long term care services, thus helping to reduce the pressure on Florida’s Medicaid budget when it comes to funding nursing home care.

Life insurance is recognized as the owner’s personal property, with guaranteed rights to the policy as a “living benefit” and not just a death benefit. The problem is that far too many life insurance policies owned by seniors will never pay a death benefit because they are allowed to either expire, lapse or are surrendered for cash value.

For seniors in need of Medicaid long term care services, life insurance is an “unqualified asset” for eligibility. As a result, they must either abandon or cash surrender their policy to qualify for coverage. But, converting a life insurance policy into a long term care benefit plan would extend their ability to remain private pay while the present day value of the life insurance asset is spent down in a Medicaid compliant fashion. All of this is done while preserving a portion of the death benefit for family members if their loved one passes.

According to a recent study by Florida State University*, each year between 2,600 and 2,800 seniors who require long term care services have the potential to convert their life insurance policies into long-term health care benefit plans. Doing so would save the state and taxpayers between $79 and $93 million annually in Medicaid expenses.

Seems like a simple solution, and one that will have a measureable, positive impact on Florida’s long term care funding challenges. We’re pleased that Representative Jimmy Patronis and Senator Jeff Brandes agree, as both have filed legislation in their respective chambers (HB 535/SB 794) which would give seniors this option.

Stable funding is critically important to long term care in Florida, which is growing in both projected numbers and importance. Close to 10,000 people will turn 65 each day over the next 18 years. Over the next 10 years, health care jobs will be among the country’s top occupational groups. To meet those demands, nursing homes will need resources to recruit qualified nurses, Certified Nursing Assistants and other staff who are key to maintaining resident high quality care.

We understand the Legislature is trying to strike a balance between funding critical programs such as health care and education while creating jobs that will strengthen our state’s economy. This legislation is a solution and a win-win for all those involved.

Families have a means to pay for long term care, which is particularly helpful to the vast majority of those who have not planned for it with savings. The state gains an alternative funding source, reducing pressure on the growing Medicaid budget. And Florida’s long term care sector remains strong, giving nursing homes the ability to maintain a stable workforce and deliver high-quality care to those who need it most.

*Source: Florida State University Center for Economic Forecasting and Analysis, Conversion of Life-Insurance Policies to Long-Term Care Benefit Plans in Florida (Jan. 2013)