ltc partnership programs presented by: jeff sadler

LTC PARTNERSHIP LTC PARTNERSHIP PROGRAMSPROGRAMSPresented by: Jeff SadlerPresented by: Jeff Sadler

LTC PARTNERSHIP PROGRAMS


What is a Long-Term Care Partnership Program?

Why are they important?



Endorsed by stateHelp consumers see LTC Insurance as

ASSET PROTECTIONProvide relief for the Medicaid programShould 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?WHO PAYS NOW?

State governors’ concerns today focus on rising Medicaid costs

Medicaid: 47 percentOut-of-pocket: 21 percentMedicare: 17 percentPrivate LTC insurance: 10 percentOther: 5 percent

MEDICAIDMEDICAID

Let’s recap:

Medicaid:Is 1965 public program for the poorHas now become the default payer of LTC

costsApproves people either through the spend-

down process or by artificial qualification

MEDICAIDMEDICAID

Generally pays for nursing home careNursing home care is the primary driver

today of increased Medicaid expensesFactor in the Boomers, and …

MEDICAIDMEDICAID

… SOMETHING HAS TO GIVE

MEDICAID AND LTCMEDICAID AND LTC

Medicaid’s problems are not newEvidence 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 FOUNDATIONRWJ FOUNDATION

The Robert Wood Johnson Foundation commissioned a study in the 1980s

Report issued in 1987

RWJ FOUNDATIONRWJ 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.



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

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 INCENTIVECONSUMER 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

EXAMPLEEXAMPLE

Consumer buys private LTCI with a total benefit value of $250,000

Consumer needs careConsumer uses LTCI firstIf 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 MODELSPARTNERSHIP 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 STATESTHE FOUR STATES

Connecticut: dollar-for-dollar modelCalifornia: dollar-for-dollar modelNew York: total asset protectionIndiana: hybrid of the two

WHY NO MORE STATES?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 1993OBRA 1993

The Waxman AmendmentPrevented 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?

WHAT HAS BEEN THE RESULT FOR THESE 4

STATES?Average age of partnership policyholders is

between 58 and 63Majority 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?WHAT HAS BEEN THE

RESULT FOR 4 STATES?Over 180,000 policies purchasedOver 2,000 claimsLess than 5 percent ultimately applied for

Medicaid

CONNECTICUTCONNECTICUT

Latest year surveyed: 2003-0434 percent of purchasers of partnership plans

had assets between $100,000 and $350,000Average total benefit: $247,39497 percent were first-time purchasers

NEW YORKNEW YORK

Now offering 4 different partnership models2 Total Asset Protection2 Dollar-for-DollarStill have minimum specified benefits, but

now drawing broader appeal

CALIFORNIACALIFORNIA

Average age at purchase: 5756 percent were female97 percent were first-time purchasers38 percent bought policies with a minimum 5-

year benefit period

INDIANAINDIANA

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



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 RULESDRA ’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 TRANSFERSASSET TRANSFERS

Medicaid application date: August 1, 2006Look-back window: retro to August 1, 2001Transfer of $180,000 made February 1, 2002Penalty! $180,000 divided by $3,300 = 54 monthsPenalty used to be measured from date of transfer –

2/1/02 + 54 months = eligibility on 8/1/06NOW – Penalty applied as of 8/1/06 – eligibility will

be on 2/1/2011

NEW MEDICAID RULESNEW 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

NEW PARTNERSHIP ACTIVITY

Now – there will be more than FOUR statesFederal Medicaid waivers will be grantedEach 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 AMENDMENTSTATE PLAN AMENDMENT

Policies cover state residentsPolicies are tax-qualifiedPolicies adhere to NAIC provisionsPolicies contain specified inflation optionsLTC agents have appropriate trainingInsurers subject to reporting requirements

WHO’S READY TO GO?WHO’S READY TO GO?

Colorado MassachusettsFlorida Michigan Oklahoma Georgia Minnesota PennsylvaniaIdaho Missouri Rhode IslandIllinois Montana South DakotaIowa Nebraska VirginiaMaryland New Jersey Washington

GRANDFATHEREDGRANDFATHERED

ConnecticutCaliforniaNew YorkIndiana

CMS TEMPLATECMS TEMPLATE

Clarification of:Inflation protection (ages 61+)Exchanges vs. grandfatheringReciprocityAgent training for certificationUniformity

ltc partnership programs presented by: jeff sadler

Documents

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assets slide

ltc partnership programs

medicaid eligibility

private insurance slide

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ltc expenses

medicaid program