Transcript Presentation: Long Term Care Partnership Programs

An Introduction to
Long Term Care Partnership
Programs
Produced by
The National Association of Health
Underwriters
Long Term Care Advisory Group
• What is a Long-Term Care
Partnership Program?
• Why is a Partnership Program
important?
• Endorsed by state
• Help consumers see LTC Insurance as
ASSET PROTECTION
• Provide relief for the Medicaid
program
• Should assist in making long-term care
sales
• How do partnership plans
accomplish this?
– It all comes down to who will be
responsible to pay for long-term care
expenses incurred in the future.
WHO PAYS NOW?
• State governors’ concerns today focus on
rising Medicaid costs
• Medicaid: 47 percent
• Out-of-pocket: 21 percent
• Medicare: 17 percent
• Private LTC insurance: 10 percent
• Other: 5 percent
Let’s recap:
Medicaid:
• Is 1965 public program for the poor
• Has now become the default payer of LTC
costs
• Approves people either through the spenddown process or by artificial qualification
MEDICAID
• Generally pays for nursing home care
• Nursing home care is the primary driver
today of increased Medicaid expenses
• Factor in the Boomers, and …
… SOMETHING HAS TO GIVE
MEDICAID AND LTC
• Medicaid’s problems are not new
• Evidence in early 1980s that growing LTC
expenses would over-burden this public
program for the poor
• Study was appointed in the 1980s to
investigate possible solutions to the coming
crisis
RWJ FOUNDATION
• The Robert Wood Johnson Foundation
commissioned a study in the 1980s
• Report issued in 1987
RWJ FOUNDATION
• The RWJ Foundation concluded that the
best path for Medicaid to avoid a continued
run-up in LTC expenses was to encourage
consumers in the matter of personal
responsibility by purchasing private LTC
insurance to take the pressure off the
Medicaid program.
LTC PARTNERSHIP PROGRAMS
• The result of this “encouragement” were
insurance plans called LTC Partnership
Policies
• States would give specific approval to LTC
insurance contracts meeting certain
standards
THE PARTNERSHIP PREMISE
• To reduce Medicaid expenditures by
delaying or eliminating the need for people
to rely on Medicaid
• Encourage purchase of private LTC
insurance by giving an incentive for the
consumer to buy
CONSUMER INCENTIVE
• By purchasing a LTC policy sold through
the Partnership, asset protection from
Medicaid would equal the amount of LTC
insurance coverage
• This amount of assets would not have to be
spent down to qualify for Medicaid
EXAMPLE
• Consumer buys private LTCI with a total benefit
value of $250,000
• Consumer needs care
• Consumer uses LTCI first
• If they use up the entire $250,000, their
application to Medicaid will allow them to keep
that amount in addition to their primary protected
assets like the home and car
• Based on the RWJ Study, four states
decided to formally develop partnership
programs and encourage consumers to buy
LTC insurance
• Two distinct models emerged
PARTNERSHIP MODELS
• Dollar-for-dollar: dollar value of the
protected assets equals the dollar value of
benefits paid by LTC insurance contract
• Total Assets model: Required purchase of
set minimum LTC coverage (6 years total)
in exchange for complete protection of all
assets
THE FOUR STATES
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Connecticut: dollar-for-dollar model
California: dollar-for-dollar model
New York: total asset protection
Indiana: hybrid of the two
WHY NO MORE STATES?
• Concern that a public program was
endorsing private insurance
• Believed it would increase Medicaid costs
rather than reduce them by drawing
attention to the program’s coverage
• Would mostly benefit wealthier individuals
who could afford the private insurance
OBRA 1993
• The Waxman Amendment
• Prevented states from acquiring the
Medicaid waiver necessary to activate a
partnership plan
• Iowa was stopped in mid-development
WHAT HAS BEEN THE RESULT FOR
THESE FOUR STATES?
• Average age of partnership policyholders is
between 58 and 63
• Majority of policyholders held assets
greater than $350,000 (excluding home)
• Majority of policyholders had average
monthly incomes of $5,000 or more
WHAT HAS BEEN THE RESULT FOR
FOUR STATES?
• Over 180,000 policies purchased
• Over 2,000 claims
• Less than 5 percent ultimately applied for
Medicaid
CONNECTICUT
• Latest year surveyed: 2003-04
• 34 percent of purchasers of partnership
plans had assets between $100,000 and
$350,000
• Average total benefit: $247,394
• 97 percent were first-time purchasers
NEW YORK
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Now offering 4 different partnership models
2 Total Asset Protection
2 Dollar-for-Dollar
Still have minimum specified benefits, but
now drawing broader appeal
CALIFORNIA
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Average age at purchase: 57
56 percent were female
97 percent were first-time purchasers
38 percent bought policies with a minimum
5-year benefit period
INDIANA
• Hybrid model:
– Total asset protection if purchase made for
benefit amount of $188,000 or greater
– Dollar for dollar protection for policies less
than $188,000
DEFICIT REDUCTION ACT OF 2005
• 1993 ban on LTC Partnership Programs
lifted
and
• Changes made to Medicaid eligibility
DEFICIT REDUCTION ACT OF 2005
• LTC goals were:
– Make it more difficult to qualify for Medicaid
program artificially, and
– Encourage people to look to another source for
LTC expense funding
DRA ’05: NEW MEDICAID RULES
• All transfers must occur 5 years prior to Medicaid
application date
• Penalty period now imposed from the date of
Medicaid eligibility – not the date of the actual
transfer
ASSET TRANSFERS
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Medicaid application date: August 1, 2006
Look-back window: retro to August 1, 2001
Transfer of $180,000 made February 1, 2002
Penalty! $180,000 divided by $3,300 = 54 months
Penalty used to be measured from date of transfer
– 2/1/02 + 54 months = eligibility on 8/1/06
• NOW – Penalty applied as of 8/1/06 – eligibility
will be on 2/1/2011
NEW MEDICAID RULES
• Medicaid application can now be denied for
person with home equity greater than
$500,000 ($750,000 in some states)
• Annuities are now assets. Policyowner’s
state of residence now required to be listed
as a remainder beneficiary.
NEW PARTNERSHIP ACTIVITY
• Now – there will be more than FOUR states
• Federal Medicaid waivers will be granted
• Each state that wants to offer LTC partnership
policies must file a state plan amendment with the
Department of HHS
• Unless related to this process, no additional state
legislation is necessary
STATE PLAN AMENDMENT
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Policies cover state residents
Policies are tax-qualified
Policies adhere to NAIC provisions
Policies contain specified inflation options
LTC agents have appropriate training
Insurers subject to reporting requirements
WHO’S READY TO GO?
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Colorado
Florida
Georgia
Idaho
Illinois
Iowa
Maryland
Massachusetts
Michigan
Oklahoma
Minnesota
Pennsylvania
Missouri
Rhode Island
Montana
South Dakota
Nebraska
Virginia
New Jersey
Washington
GRANDFATHERED
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Connecticut
California
New York
Indiana
CMS TEMPLATE
Clarification of:
• Inflation protection (ages 61+)
• Exchanges vs. grandfathering
• Reciprocity
• Agent training for certification
• Uniformity