Transcript Presentation: Ltc Partnerships Programs

LTC PARTNERSHIP PROGRAMS
Presented by: Jeff Sadler
LTC PARTNERSHIP PROGRAMS
What is a Long-Term Care Partnership
Program?
Why are they important?
LTC PARTNERSHIP PROGRAMS
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
LTC PARTNERSHIP PROGRAMS
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
MEDICAID
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 …
MEDICAID
… 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
LTC PARTNERSHIP PROGRAMS
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
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 4 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 4
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
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
Average
age at purchase: 57
56 percent were female
97 percent were first-time purchasers
38 percent bought policies with a minimum 5year 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
 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 Health & Human Services
Unless related to this process, no additional
state legislation is necessary
STATE PLAN AMENDMENT
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?
Colorado
Florida
Georgia
Idaho
Illinois
Iowa
Maryland
Massachusetts
Michigan
Oklahoma
Minnesota Pennsylvania
Missouri
Rhode Island
Montana
South Dakota
Nebraska
Virginia
New Jersey Washington
GRANDFATHERED
Connecticut
California
New York
Indiana
CMS TEMPLATE
Clarification of:
 Inflation protection (ages 61+)
 Exchanges vs. grandfathering
 Reciprocity
 Agent training for certification
 Uniformity