Care Plus A Proposal for Financing LTC

Long Term Care

Need for Long Term Care in Hawaii 14.8% or 30,730 of older adults residing in community have self care/mobility limitations 14.8% or 30,730 of older adults residing in community have self care/mobility limitations Of these, Of these, 82% earn less than $20,000 per year 82% earn less than $20,000 per year 43% earn less than $10,000 per year or have no income at all 43% earn less than $10,000 per year or have no income at all

Minnesota’s Aged in 2030 In 2030, over one-half of the total 65+ population will be between ages 65 and 74. In 2050, less than half of the 65+ population will be between 65 and 74. In 2030, over one-half of the total 65+ population will be between ages 65 and 74. In 2050, less than half of the 65+ population will be between 65 and 74. The 85+ population will begin an exponential growth in 2030 and by 2050 will represent 22% of Minnesota’s elderly population, up from 12% in The 85+ population will begin an exponential growth in 2030 and by 2050 will represent 22% of Minnesota’s elderly population, up from 12% in The dramatic growth in the frail elderly population (85+) is one of the factors that will increase the need for long term care./*/* The dramatic growth in the frail elderly population (85+) is one of the factors that will increase the need for long term care./*/*

Costs of LTC are Staggering In Hawaii costs are projected to be $ 2 billion/per year in $ 544 million for Medicaid match by Five fold increase in out-of-pocket costs estimated to more than 1,000 % of yr 2000 costs

Distribution of State Long Term Care Dollars

What Will LTC Cost in 2010? (In Thousands)

Increases in LTC Costs Versus Family Income

National Polls Have Shown Families are willing to pay their fair share…even if it means a tax because long term care: Families are willing to pay their fair share…even if it means a tax because long term care: Is a family problem Is a family problem Does not go away -- day or night, year after year Does not go away -- day or night, year after year Affects young and old Affects young and old

Why Must Action be Taken Now Families may face nursing home care costs of $200,000 per year per person in the year Families may face nursing home care costs of $200,000 per year per person in the year Family cash outlays may increase more than 1100% Family cash outlays may increase more than 1100% Family asset expenditures may increase almost 1000% Family asset expenditures may increase almost 1000% The State share of Medicaid program may increase more than 1300% The State share of Medicaid program may increase more than 1300%

Pay a little now or a whole lot more later Tomorrow’s Potential Long Term Care Costs Today’s Investment in Long Term Care

Benefits of Early Intervention Minimum services to keep people at homeBasic consumer information and trainingCommunity capacity building to empower individuals to address issuesReduced dependency on state general revenues by collaborating with private sector and community Benefits of Early Intervention Minimum services to keep people at homeBasic consumer information and trainingCommunity capacity building to empower individuals to address issuesReduced dependency on state general revenues by collaborating with private sector and community

State Design Strategy Conduct preliminary policy analysis Conduct preliminary policy analysis Select and price options through actuarial analyses Select and price options through actuarial analyses Evaluate recommendations of actuary Evaluate recommendations of actuary  Develop implementation plan/legislation  Identify policy options for financing Seek stake holder input and support Seek stake holder input and support

Enabling Legislation ACT 245 Twenty-First Legislature, 2002 The purpose of the Act is to provide   A universal and affordable system for long-term care that is equitable for the people of Hawaii.   Up front financial assistance to support frail persons who wish to remain in their own homes.   Individual choice and discretion in selecting and paying for long term care services.   Beneficiaries are to have wide latitude in how they use the funds.

CarePlus Authority A 5-member Temporary Board of Trustees was designated to: ■ D CarePlus Authority A 5-member Temporary Board of Trustees was designated to: ■ Design the program ■ Determine amount and means of collection of a tax, the nature and amount benefits ■ Assure the scheme is not preempted by or in violation of the Health Insurance Portability and Accountability Act or the Employee Retirement Income and Security Act

Decisions -Who is in greatest need -How can scarce resources be targeted to benefit those most in need -What criteria should trigger eligibility for LTC Decisions -Who is in greatest need -How can scarce resources be targeted to benefit those most in need -What criteria should trigger eligibility for LTC

Government Strategies for LTC Model Example Universal Coverage for All Canadian National HC Social Insurance Social Security Social Assistance For Subgroups Medicaid Mandatory Employer Prepaid HC Act Hawaii Subsidies from Public $ Tax Credits for Private Insurance Status Quo No Major Changes Combination

Long Term Care Insurance - Has not sold well, has not reached segments of the population comparable to those reached by life insurance or homeowner’s insurance - Citizens do not prepay their needs or even share their risks of the costs of long term care

Social Insurance - Spreads the risk of relatively infrequent but very costly events over the entire population subject to the event -Assures a floor of income protection upon retirement to meet a societal need to see that elders do not live and die in deepest poverty

Social Insurance - Assures that people purchase a level of protection against the risks of leaving destitute children, serious disabilities, or poverty in old age -Assures that participants pay for at least a modest level of coverage while they are healthy and young

-Benefits the majority of the adult population -Bridges the gap between the very poor and those who are able to cover the cost of their own long-term care -Provides long-term care benefits for younger adults who may require, but may not qualify for, private long-term care insurance -Helps families in the sandwich generation who bear the long-term cost of their parents and grandparents

Social Insurance ■ Provides some assured, even if modest, level of care, for the greatest number of citizens. ■ Avoids or delays the citizen’s appeal to government to pay for long term care costs, especially middle class who become poor in old age ■ Relieves the pressure of entitlement programs for the poor, ■ Brings each citizen to participate in a prudent plan for covering some of the risk of long term care costs

Program Requirements Includes both public and private sectors Includes both public and private sectors Includes employer, employees, retirees Includes employer, employees, retirees Assures a fair distribution of costs by age, ability to pay Assures a fair distribution of costs by age, ability to pay Funded by dedicated source of state revenue Funded by dedicated source of state revenue Protects state from predatory migration Protects state from predatory migration

Must be tailored to be revenue- generating Must be tailored to be revenue- generating ■ Pursue and use federal dollars ■ Pursue and use federal dollars ■ Pursue fees for services from ■ Pursue fees for services from those of means those of means ■ Pursue partnerships with ■ Pursue partnerships with private agencies and funding private agencies and funding organizations organizations

Program Rationale  Must ensure short and long term viability Must be tailored to be revenue generating Must be tailored to be revenue generating Must be aimed at creating self sufficiency Must be aimed at creating self sufficiency Avoid short- sighted programming Avoid short- sighted programming Create and renew partnerships between public private and non profit sectors Create and renew partnerships between public private and non profit sectors Relieve demands on state general fund for assistance Relieve demands on state general fund for assistance

- Two deficiencies in Activities of Daily Living (ADLs), or - Cognitive disabilities such as Alzheimer or other dementia - Family doctor will make the initial recommendation for eligibility - Independent medical evaluation will assure that the individual meets CarePlus eligibility criteria - Care coordinator will monitor ongoing needs Disability Eligibility

Participant Eligibility - Full benefits after contributing for 10 years. (vested) - Individuals not fully vested will receive benefits at a projected qualification schedule of 1/10 per year. EXAMPLE: A person who has contributed for 4 years would be eligible for 40% of the total benefit.

The Nature and Amount of Benefits - A defined dollar per day pay out for a specified period of 365 days (need not be continuous nor is this a post service reimbursable plan) - The use of a care advocate to provide initial assistance to the beneficiary and his or her family

Flexible Benefits Benefits can be used at participant’s discretion when he or she meets the eligibility standard Benefits can also be used to pay family members or friends who are providing care Q. Why $10 per month? The $10/month balances maximum benefits with affordability

Benefit Level $70 for 365 days, subject to the restrictions imposed by the required vesting period.

Increase in Benefits over Time Year Amount 2008 $72.10 $

Target Group Taxpayers with income above the minimum filing level established for the Hawaii Resident Tax Return Q. Is the tax be based on age? No. The Tax forms do not ask the age of the taxpayer, and age is not a criterion for paying the tax, income is.

2006 $ $ The initial tax shall be set at $10.00/month with incremental increases Year Amount

Means of Collection Means of Collection The tax be collected through payroll deduction. The employer will use the Withholding Table to determine the amount as they do currently. Sole proprietors will use the Estimated Income Table to estimate their quarterly withholding.

Q. Will federal employees be enrolled in or exempted from this plan? Yes, if they file a Hawaii Resident Tax Return. Q. How will part-time residents be dealt with? If the individual files a Hawaii Resident Tax Return, he or she will be enrolled.

Q. What about non-residents paying Hawaii state tax ? A person who files a Hawaii Resident Tax Return with income over the level will be covered by the program; should this person move out of state and continue to file and pay Hawaii state income taxes, he or she will continue in the program.

Q. Q.How will the tax be collected from retirees who don’t file a Hawaii Resident Tax Return? They must file a Hawaii Resident Tax Return to be enrolled. If a person declares Hawaii as his or her tax home, he or she must file a tax return and pay taxes.

Q. Will we require pensioners who do not file Hawaii state taxes to file a return and pay into the plan? Yes, because there is no other mechanism by which we can enroll this population.

Who Runs the Program? An Appointed Board of Trustees is responsible for policy and for maintaining the trust fund An Appointed Board of Trustees is responsible for policy and for maintaining the trust fund Third Party Administrators contracted by the State are responsible for determining eligibility of beneficiaries and for the pay out of benefits. They will also provide for care coordination and education Third Party Administrators contracted by the State are responsible for determining eligibility of beneficiaries and for the pay out of benefits. They will also provide for care coordination and education The State Dept of Taxation is responsible for collecting the tax The State Dept of Taxation is responsible for collecting the tax

CarePlus Operation A Board of Trustees comprised of business members, community leaders and beneficiaries will govern care plus. The fund will have, as advisors to the board, an actuary and investment advisor.

What is CarePlus? - A consumer- funded and directed long-term care insurance plan - An investment that each adult in the State of Hawaii will make for his/her own long-term care coverage - Is not a government-funded aid program - Relies on ongoing contributions to create a self-sufficient, self-perpetuating insurance program - Generates benefits for Hawaii residents in the years to come

Features 365 days of coverage (may be non-consecutive). $70 maximum daily benefit. Affordable $10 a month contribution. Inflation protection for annual benefits. 30 day waiting period. (Participant will pay for the first 30 days of care, after which CarePlus benefits will become available). 1-year exemption from premiums in event of financial hardship.

What will CarePlus do? It will put money in the hands of those who need the care, thus Providing the frail elderly and their families with some degree of control and choice in caring for their loved one. It will allow people to stay at home longer than might otherwise be possible.

It will provide some efficiency in that lower cost care will be delivered in the lowest cost setting. It will protect precious public dollars for truly needy people. It will slow growth of the Medicaid program It will alter the public’s expectation of, and reduce reliance on, Medicaid.

It will encourage people to plan and pay for their own long term care needs. It will stimulate providers to meet consumer demand for new products and services. It will motivate the private long term care insurance industry to develop affordable plans to link to the state’s basic plan.

It will promote strong private sector oversight by requiring that local community and business leaders govern the Plan and manage the Trust Fund. It will educate the public about the plight of our elderly and their families.

- It will cover high end or front end costs of LTC leaving the back end for private insurance coverage - It will create a built in market for sale of back- end coverage when benefits run out after on year - It will allow for lower cost policies from private market

Q. What kinds of services qualify? CarePlus is designed to allow the individual to choose services and providers who best meet their needs. Q. Do I have to use any particular long-term care provider? No. You can designate your own long-term care provider or even pay a family member or friend.

What won’t the program do? It won’t solve all the problems of a seriously under-funded and under-serviced system. And, it won’t eliminate completely our reliance on Medicaid to pay for the care of our sickest elderly.

A final decision regarding LTC policy should include comparisons of proposed options to see if they make a meaningful positive difference. -Can the state afford to implement the option -Does the option provide a fair distribution of costs by age and ability to pay

-Does the option provide sufficient flexibility to mitigate bottom line new costs for residents -Are there provisions that guard against unbearable cost increases due to fraud, abuse, price utilization and intensity

The major policy decision facing a State government with respect to financing of long-term care is deciding what role, if any, the state will play. The major policy decision facing a State government with respect to financing of long-term care is deciding what role, if any, the state will play. The program must be realistic. The program must be realistic.

CAREPLUS… CAREPLUS… IT’S A BEGINNING!