Finalizing the Roadmap Strategies

Long-Term Care Financing Advisory Committee

April 29, 2010

Medicaid expansion cost estimates were developed specifically for this presentation, and should not be used for other purposes.

Overview of presentation

1. High-level comments on draft of Sections I and II

2. Detailed discussion of Roadmap strategies (Section III)

3. Discussion on next steps for launching the Roadmap

4. Committee business

Reference materials

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High-level view of roadmap strategies:Vehicles for achieving universal LTS coverage in MA

Phase One Phase Two Phase Three

1. Implement multi-phase education and awareness campaign

1. Promote enrollment in CLASS if program features encourage significant participation by MA employers and employees

1. Design / implement state contribution program that maximizes LTS coverage for all MA residents

2. Expand support for informal caregivers (counseling, training, support groups, etc.)

2. Create a new Medicaid buy-in program (CommonHealth-like program for elders / buy-in to SCO benefit)

2. Improve private LTC insurance and MassHealth “wraps” to a state contribution program

3. Implement NAIC model act and regulations

3. Implement additional MassHealth service expansions

3. Provide additional supports to informal caregivers• Financial incentives

4. Improve/expand utilization of private insurance for LTS• Promote life insurance options• Promote group coverage / portability of LTC insurance• Develop LTC Partnership (w/ grand-fathering)

4. Implement additional improvements to private insurance for LTS • Require portability • Explore financial incentives to purchase coverage

5. Promote the use of other private vehicles • Improve consumer protections for reverse mortgages and annuities • Create LTS savings accounts (HSA-like accounts)

6. Implement targeted MassHealth service & eligibility expansions

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LTC Partnership Options:

1. Continue providing existing MA exemptions (as amended by pending S. 309 – see below)

2. Pursue development of Partnership program

Option 1: Continue providing existing MA exemptions

If amended by S. 309 to require MassHealth to look at the minimum coverage requirements that exist at the time the LTC insurance policy was purchased rather than when the person entered the nursing facility, then protection provided is more similar to the Partnership model

Pros include: If amended, improved protection for consumers (more people exempt from

estate recovery for LTC costs) Specifically allows individuals to protect all assets in a home at eligibility

determination (which may or may not be more generous than dollar-for-dollar model)

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LTC Partnership (2)

Option 2: Pursue development of Partnership program

Pros include: Policies must cover community-based LTS (in MA: no requirement to do

so) Dollar-for-dollar protection may incentivize purchase of more extensive

LTC insurance coverage State could be forced (now or later) to move toward Partnership model

To protect people with qualifying LTC insurance under current provision:

MA could seek approval from CMS to grand-father current beneficiaries (while changing to Partnership model prospectively).

MA could provide asset protection above the dollar-for-dollar amount up to value of home at full state cost.

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Promote enrollment in CLASS if program features encourage significant participation

Many features of CLASS are not yet defined (e.g., employee premiums, cash benefit level, mechanism for self-employed and employees of non-participating employers)

Significant flexibility in design is left to federal HHS Secretary to implement through government regulation

Preliminary estimates of participation range from 3-6% of eligible people. Higher numbers could enroll if design features and pricing encourage participation by employers and employees.

Young, healthy workers likely will place less value on LTS coverage than older, sicker workers. However, sustaining CLASS’ financial solvency requires ongoing contributions from young healthy workers, particularly as older, sicker workers leave the workplace and begin accessing services.

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Promote enrollment in CLASS if program features encourage significant participation (2)

HHS is required to establish a CLASS eligibility assessment system by 1/1/2012, and to select a benefit plan for public comment by 10/1/2012. HHS likely will begin enrolling individuals into CLASS in 2013, and then CLASS would begin paying benefits in 2018.

CLASS’ final structure and pricing – and, therefore, participation rate – will influence the Commonwealth’s strategy for achieving the goal of universal LTS coverage in MA

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Create a voluntary Medicaid buy-in program (CommonHealth-like) for elders Enables all individuals age 65+ to buy into MassHealth LTS structure (e.g., SCO

benefit)

Sliding scale subsidies for those below 300% FPL and $50,000 in assets; those at higher income or assets pay full cost

Options

1. Could serve as bridge to state contribution program that covers elders (then analysis could be done to determine whether it should remain a choice)

2. People could use CLASS, state contribution program or LTC insurance cash benefit to buy into this integrated care program

Various ways to design, structure sliding scale premiums /deductibles/ copayments and to encourage participation

Must ensure equity between buy-in program for elders and CommonHealth for non-elderly people with disabilities (e.g., need to address CH issues around marriage penalty and one-time deductible for non-working adults with disabilities)

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Design and implement a state contribution program

Design state contribution program in way that:

Maximizes LTS coverage for MA residents

Aligns incentives with the federal CLASS program

Potential options for state contribution program:

1. Require MA residents to have LTS coverage with various options for satisfying the requirement (including CLASS, private and state-level options)

2. Negotiate with federal government to establish a MA-specific CLASS program with mandatory enrollment

3. Require MA residents to participate in a state contribution program, to which CLASS program wraps. Program would require federal authorization. HHS could authorize lower CLASS premiums in MA.

Program could be funded through payroll deductions (% of income or flat dollar amount) or through surcharge on health insurance premiums. Premiums should increase with age.

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Improve private and public “wraps” to a state contribution program

A universal state contribution program would provide a basic LTS benefit that would comprehensively cover the needs of most MA residents

Some MA residents would require more than the $50/day or $100/day of care provided by CLASS or a MA contribution program

Low-income residents would have access to wrap coverage through MassHealth

Higher income residents could purchase wrap coverage through CLASS (contingent on federal approval) or private insurance

Wrap coverage would be substantially more affordable than the current marketplace (to Medicaid and in the private market) due to the state-sponsored plan paying for the first dollars of care

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Next steps for launching the roadmap

Designate a public or quasi-public entity with ongoing responsibility for implementing the roadmap in partnership with public and private stakeholders

Entity should contract for continued research, actuarial and economic analysis and modeling work to align incentives and intersect programs in a way that ensures universal LTS coverage

State should immediately begin active negotiations with federal HHS regarding interaction between CLASS and state contribution program

Committee business

Next steps and process

April 29 – May 31, 2010: Revise and finalize draft report Continue to process comments/edits electronically One final call to process edits on second half of report?

June 2010: Finalize report Process final report with key stakeholders (Governor’s Office, EHS Secretary,

Legislative leaders) Finalize separate 10-15 page summary document Release report at special event

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Reference materials(from February presentation)

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Reminder: principles for reforming the LTS system

1. Ensure a strong public safety net for the poor and most vulnerable.

2. Assure quality of care and cost efficiency.

3. Limit financial pressure on the state financing system to preserve state funds for those most in need.

4. Encourage personal planning for financing LTS.

5. Enable middle-income people to access LTS without becoming impoverished.

6. Support informal caregivers.

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Low HighFINANCIAL RESOURCES

High

LTSNEED

Low

Medicaid

Personal Resources(includes Informal Caregivers)

Medicaid Spend-down

Visual of current LTS financing system

Insurance for LTS

State Programs

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Current MA LTS cost estimate: $18 billion; more than half is informal care

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

LTS Spending LTS Cost

- Informal care and unmet need

- Other State of MA

- Medicare

- Private insurance

- Out-of-pocket

- Medicaid

- Other State of MA

- Out-of-pocket

- Medicare

- Private insurance

- Medicaid

Projected MA LTS Spending/Cost in 2010(based on national averages; costs in millions)

Currently, approximately $9.5B of LTS is informally provided

$906 (11%)

$1,435 (16%)

$1,618 (19%)

$793 (9%)

$3,878 (45%)

$9,486 (53%)

$906 (5%)

$1,435 (8%)

$1,618 (9%)

$793 (4%)

$3,878 (21%)

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Medicaid expansion cost estimates were developed specifically for this presentation, and should not be used for other purposes.

Baseline assumptions for 2010 LTS cost projection

2010 Medicaid costs are based on 2007 costs ($3.6B) trended forward by 2.8% annually (Source: MA Office of Medicaid and CBO projections for Medicaid cost increases for LTS expenditures)

2010 informal caregiver costs are based on 2004 costs ($8.9B), untrended (Source: estimates for MA reported by National Family Caregivers Association & Family Caregiver Alliance (2006)

2010 unmet need is based on: 2007 ACS data on MA residents with self-care and

everyday task needs trended annually at 2.5% Unmet need study conducted by DPH in July

2008 stated that 4.2% of people with LTS needs receive no care and 22.0% need additional care (see study for detailed breakout of hours of need for each)

Cost of LTS at an average of $18 per hour of need Based on available data, we know the State

contributes an additional $700M to LTS

Spending components of LTS

 Percentage of National LTS

Spending

 Estimated percentage of MA

LTS Spending1

Medicaid 49.0% 45.0%

Medicare 20.4% 18.7%

Out-of-pocket expenditures

18.0% 16.6%

Private insurance 7.3% 6.7%

Other Private (membership programs)2

2.7% 2.5%

Other Public (state programs)3

2.6% 10.5%

MA spending shares for LTS assumed to be consistent with national averages:

1. National estimates adjusted slightly with MA-specific data2. Other Private is included with Private insurance in other

slides3. MA estimate includes an additional $700M in state spending

Source: Long-term Care in Massachusetts: Facts at a Glance

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Medicaid expansion cost estimates were developed specifically for this presentation, and should not be used for other purposes.

In the absence of intervention, total LTS costs in MA will increase by at least 50% in the next 20 years; Medicaid costs will more than double

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

2010 2015 2020 2030

Unpaid informal caregivers/unmet need

Out-of-Pocket

Private Insurance

Other State of MA

Medicaid

Medicare

Projected total LTS cost in MA(assumes no changes to current MA financing of LTS; costs in millions )

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Medicaid expansion cost estimates were developed specifically for this presentation, and should not be used for other purposes.

Low High

FINANCIAL RESOURCES

High

LTSNEED

Low

Medicaid(Improved)

Medicaid Spend-down

Visual of future LTS system after Phase I

Personal ResourcesConsumer ProtectionsInformal Caregiver Support

Insurance for LTSLTC Partnership

State Programs

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Medicaid(Improved)

Medicaid Spend-down

Visual of future LTS system after Phase II

New Medicaid Buy-in

Insurance for LTSLTC Partnership

Personal ResourcesConsumer ProtectionsInformal Caregiver Support

State Programs High

LTSNEED

LowLow High

FINANCIAL RESOURCES

CLASS

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Medicaid (Improved)

Visual of future LTS system after Phase III

State Contribution/CLASS Program

Personal Resources(includes Informal Caregivers)

State Programs

Insurance for LTS

Medicaid Spend-down

High

LTSNEED

LowLow High

FINANCIAL RESOURCES21

Future system creates Medicaid cost avoidance, provides most support for informal caregivers, and infuses significant private dollars into the LTS financing system

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

Status quo Phase I Phase II Phase III

CLASS

State Contribution Program

Unpaid informal caregivers/unmet need

Out-of-Pocket

Private Insurance

Other State of MA

Medicaid

Medicare

Projected future costs of LTS in MA (status quo versus Phases I-III)

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Medicaid expansion cost estimates were developed specifically for this presentation, and should not be used for other purposes.

Implementation timeline (DRAFT – need to finalize)

2010 2020 2030

•NAIC consumer protections•Informal caregiver support•Detailed planning for future interventions

LTC PartnershipExplore incentives for insurance for LTS

2015 2025

Targeted Medicaid Expansion Medicaid/SCO Buy-In

State contribution program, begin funding and begin state subsidy for low-income

State Contribution Program, pay-out for benefits begins

Education/Awareness: promote participation in CLASS and purchase of supplemental insurance for LTS

•Broad Medicaid Eligibility Expansion •Full Equity in Access to LTS thru Contribution or Medicaid

Pursue federal match for contribution subsidies

CLASS pay-out for benefits begins

CLASS premiums (pay in) begins

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