11

The Long-Term Care Partnership Insurance Program in MontanaRevised April 2013

2

Services & Support: Chronic illness Disabilities Other conditions that be limiting physically or mentally

What is Long-Term Care?

33

Statistics•Explore Quick Facts about Long-Term Care (LTC)

44

Question: What percent of persons 65 & older are expected to need some type of long-term care?

1. 82%2. 70%3. 63%4. 45%

55

Fact• 70% of persons

age 65 or older • Will need long-term care

66

Medicare

•Generally doesn’t cover long-term care

77

•Custodial Care•Activities of Daily Living

88

Question: What was the average length of stay in nursing home in Montana for 2013?

1. 10.9 years2. 8.5 years3. 5.4 years4. 2.4 years

99

Facts• Montana Average

Length of Stay (2013) 2.4 years 1 in 5 stay more than 5

years

1010

Question: What is the average monthly cost of nursing home care in Montana for 2013?

1.$8,589 2.$7,523 3.$5,955 4.$3,225 5.$2,987

1111

Average cost of care

• Montana (2013)(nursing home)

$5,955 monthly$71,456 annually

1212

Average Cost in Montana for 3 yrs• Individual$214,380

• Couple$428,760

1313

National AverageLong-Term Care ServicesRate Service

$19 hr Home Health Aide

$62 day Adult Day Care Center

$2,962 month Assisted Living Facility

$183 day$5,490 month

Semiprivate Room in Nursing Home

$204 day$6,120 month

Private Room in Nursing Home

14

How can I provide for the cost of long-term care (LTC)?

1515

Ways to Afford LTC

1. Financial Resources Present Income Savings Investments

1616

Ways to Afford LTC

2. Real property Sell itAcquire reverse mortgage

1717

Ways to Afford LTC

3. Depend on:• Spouse• Adult Children

1818

Ways to Afford LTC

4. Apply for Medicaid• Must meet certain

federal & state eligibility requirements

1919

Ways to Afford LTC

5. Long-Term Care Insurance• Licensed Insurance

Agent• Group LTC

2020

Age When People Applied for LTC Insurance (2008)

35 – 44 6%

45 – 54 26%

55 – 64 50%

65 – 74 15%

2121

Private Long-Term Care Insurance-2008

•Who has?•12.4% of those age 65 & older

2222

Ways to Afford LTC

6.Montana’s New Long-Term Care Partnership Insurance Program

2323

Historical Background

• How did the LTC partnership insurance program develop?

2424

Concern at State & Federal Levels

• Increasing cost of Medicaid for long-term care for the elderly

2525

Question: On average what percent of nursing home costs were paid by Medicaid in Montana?

1.92%2.86%3.73%4.60%5.54%

2626

Who Pays• Medicaid

60% of LTC costs

• Nursing home residents

29% of LTC costs

• Medicare/Other 11%

2727

Federal Deficit Reduction Act of 2005

• States were encouraged to develop programs that would help reduce the growth of Medicaid expenses

2828

Montana Legislature (July 1, 2009)

• Responded with the authorization for a LTC insurance partnership program

2929

Montana Collaboration

• Private Insurance Companies

• Commissioner of Securities & Insurance (CSI)

• Department of Public Health & Human Services (DPHHS)

Montana Medicaid Program

30

How does the Montana LTC partnership insurance program work?

3131

LTC Benefits• Assets up to the value of

the LTC partnership policy will not “count” when making eligibility determination for Medicaid

3232

• 72-year old widow• $50,000 CDs

Wants to leave CDs to grandchildren for

college

Example: Betty

3333

LTC Policy •Betty purchased a LTC partnership

insurance policy Benefit limit (pool)$100,000

3434

Benefits• LTC partnership

policy will cover the costs of Betty’s careUp to $100,000

benefit limit

3535

$100,000 Benefit Depleted

• Betty’s daughter contacted Office of Public Assistance • Medicaid

eligibility determination

3636

Daughter documents

• Betty purchased LTC partnership insurance policy

• Full benefit ($100,000) had been utilized

3737

Calculation• OPA excluded value

of Betty’s $50,000 (CDs) in Medicaid eligibility calculation

3838

Eligibility• Betty met other

eligibility requirements•Became immediately eligible for Medicaid

3939

Benefit to Betty• She was able

to keep $50,000 in CDs to leave to her grandchildren

40

Why not just “give away” assets to become qualified for Medicaid instead of paying for a LTC partnership insurance policy?

4141

Give away assets• Federal & State laws

require a period of Medicaid ineligibility

5-year look-back rule

4242

Consequence• “Uncompensated

asset transfer penalty” • Result: “Ineligibility

period” before qualifying for Medicaid

4343

Calculation• Divide value of assets

applicant gives away • By monthly average

nursing home cost • Montana $5,955

4444

Revisit Betty• What if ?????• Betty had given

$50,000 to her grandchildren in an attempt to become “eligible” for Medicaid?

4545

Calculation$50,000 CDs

÷ $5,955 = 8.4 Betty has almost 8½

months of Medicaid ineligibility

4646

• How will Betty pay for 8½ months of care?

4747

Caution: Asset Protection• Available only

after all benefits of LTC partnership insurance policy have been utilized

4848

More Information• Medicaid & Long-

Term Care CostsMontGuide• Search by

MontGuide title • www.montana.edu

4949

Protect vs. Qualify• Purchasing LTC insurance

partnership policy may help protect assets• Does not qualify a

person for Medicaid coverage

50

What companies are authorized to provide LTC partnership insurance policies in Montana?

51

14 Companies As of April 2013

• Web site Search: Long-term care partnership

• Phone 1-800-332-6148

5252

LTC Partnership Companies

• American General Life Insurance

• Bankers Life & Casualty• Bershire Life Insurance

Company of America• Genworth Life Insurance

5353

• John Hancock Life Insurance (USA)

• Massachusetts Mutual Life Insurance

• MedAmerica Insurance• Mutual of Omaha Insurance • New York Life Insurance

LTC Partnership Companies

5454

• Northwestern Long-Term Care Insurance

• Prudential Insurance Company of America

• Transamerica Life Insurance

• United of Omaha

LTC Partnership Companies

55

How can the financial stability of insurance companies be determined?

5656

Rating companies

• A. M. Best Company• Standard & Poor’s

Corporation• Moody’s Investor

Services

5757

Rate strength & viability to meet claims

• Investments• Reserve adequacy• Expense control• Underwriting

5858

American Association for Long Term Care

• Summary from•3 rating companies for several insurance companies

• See Page 4 of MontGuide

59

What is the cost of a LTC Insurance Partnership Policy?

6060

Costs of premiums depends on

• Age at purchase

• Type of coverage

6161

2011 Montana Long-Term Rate Comparison Guide

• Rates for regular long-term care policy

• Can provide basis for comparison

• Available from Montana Commission of Securities & Insurance

6262

2011 Montana Long-Term Rate Comparison Guide

Company Age 55 Age 60 Age 65 Age 70

Assurity $252 $323 $407 $553

Bankers $523 $592 $711 $921

Berkshire $265 $336 $459 $709

Genworth $238 $288 $387 $527

Massachusetts Mutual

$237 $289 $367 $514

MedAmerica $320 $385 $479 $599

6363

2011 Montana Long-Term Rate Comparison Guide, con’d.

Company Age 55

Age 60

Age 65

Age 70

Mutual of Omaha

$299 $357 $482 $727

New York $214 $259 $332 $442

Northwestern $447 $510 $626 $845

Transamerica $358 $439 $556 $725

United of Omaha

$305 $364 $492 $741

United Security Assurance

$317 $366 $506 $707

6464

Clearinghouse

• National Clearinghouse for Long-Term Care Information•Address in MontGuide• page 5

65

How much of my income “should” be spent on LTC insurance?

6666

Question: LTC premiums should consume no more than what percent of income?

1. 15%2. 10%3. 7%4. 4%

6767

National Association of Insurance Commissioners (NAIC)

• Recommends LTC insurance premiums should be no more than

•7% of income

6868

Example: Susan & Larry

• Joint income of $65,000• $65,000 X .07

$4,550 annually

6969

Example: Susan and Larry

$4,550 ÷ 12 = $380 Monthly premiums

should not be more than $380

70

What questions should be asked before purchasing a LTC partnership insurance policy?

7171

Ask• Location

of care•Home•Assisted living facility •Adult day care•Nursing home

7272

Benefits paid

• Each day?• Monthly?• Elimination period?• Inflation adjustment?

7373

6 Resources are listed in MontGuide• Website is linked

within the MontGuide• Addresses to write• Phone numbers

74

Are premiums paid for a LTC partnership insurance policy tax deductible?

7575

Federal Income TaxMaximum Tax Deductible Premiums

Attained Age of Individual Before Close of Taxable Year

Maximum Tax-Deductible Premiums (2012)

40 or below $350

41 – 50 $660

51 – 60 $1,310

61 – 70 $3,500

71 & above $4,370Note: These amounts are subject to change each year

7676

Example• Dan & Marlene

Paid $8,537 for LTC policies

Limit: $3,500 eachTotal: $7,000

($3,500 his + $3,500 hers = $7,000)

7777

Deduction• Exceed 7.5% AGI

$65,000 x 7.5% = $4,875

• Amount allowed for LTC $7,000 - $4,875=

• Federal Tax Deduction = $2,125 on Schedule A

• $2,125 x .15 = $319 TAXES SAVED

7878

Montana• Does not duplicate

federal rules!• Allows for a tax deduction of total amount premiums paid for LTC insurance•If you itemize

7979

Montana• Total amount

premiums paid for LTC insurance

Taxpayer Taxpayer’s parents Taxpayers grandparents

8080

Montana: Schedule IIIItemized Deductions Dollar for $ Not limited to amount above 7.5%

5. Medical insurance premiums not deducted on your return.

$ 0

6. Long-term care insurance premiums not deducted elsewhere on your return.

$8,537

Dan & Marlene $8,537

8181

Dan & Marlene Total Deduction Amount

FederalTax Bracket 15%

$2,125

Montana Tax Bracket 6.9%

$8,537

8282

Dan & Marlene Tax Savings

Federal $319

Montana $589

Total $908

83

Are benefits from a LTC partnership policy taxable?

8484

Generally, NO• Limit is reimbursement

received from the larger of• Cost of qualified LTC• $310 per day ($113,150)• See form 1099-LTC

85

Is a LTC policy purchased before program began considered a partnership policy?

8686

Purchased before July 1, 2009

• Policy could be eligible for designation as a LTC partnership policy

8787

Insurance Company

• Ask if company would agree that the policy could be:• Reissued• Exchanged

8888

Company submits Policy for Certification

• Montana Commissioner of Securities & Insurance

8989

After Certification

• Company should provide to insuredPartnership Status

Disclosure Notice

90

Is a LTC insurance partnership policy purchased in another state certified in Montana?

9191

Another state?

• Policy can be designated as “certified” if person later moves to Montana

9292

Policy purchased in another state

• Montana Commissioner of Securities & Insurance (CSI) reviews policy Must meet all of following conditions:

9393

Condition in another state• Was insured person

a resident of partnership state when coverage first became effective?

9494

Definition• Does policy meet

IRS definition of a“qualified” LTC partnership insurance policy?

9595

Policy Date

• Was partnership policy date issued, re-issued, or exchanged after July 1, 2009?

9696

NAIC Rules• Does partnership

policy meet specific rules of the National Association of Insurance Commissioners?

9797

Does policy have an inflation rate clause?

• Age…Under 61 yrs •compound annual protection

• Age…61-76 •some level of inflation protection

• Age…Over 76 •inflation protection is optional

98

What if I want to make changes to my LTC partnership insurance policy after it is purchased?

9999

Changes may

• Affect whether your policy continues to be certified under Montana law

100100

Consult Insurance Agent

• To determine the effect of proposed changes • Response in writing

101101

Summary:LTC Partnership Insurance Program• Helps Montanans

protect their assets against the cost of LTC!

102102

Summary:LTC Partnership Insurance Program• Eventually will save

state & federal government Medicaid expenses!

103103

MSU Extension

MontGuide Further information

•Long-Term Care Partnership Insurance in Montana

104

Marsha GoettingExtension Family Economics Specialist

P.O. Box 172800Bozeman, MT 59717-2800phone: (406) 994-5695fax: (406) 994-4838

E-mail: goetting@montana.edu

MontGuide Co-authors

105

MontGuide Co-authors Nancy Clark

Shannon MykinsBarbara Flamand Public Assistance Bureau

Montana Department of Public Health & Human Services

Christina Goe Montana Commissioner of Securities and

Insurance

106

MontGuide Co-author Joel Schumacher

Montana State UniversityExtension Economics Associate Specialist

PowerPoint/Webinar Presentation

Keri D. Hayes MSU Publications Assistant

107

Reviewers Reviewers of PowerPoint and

script: Jane Wolery-Teton County Extension Agent

Jesse Fulbright-Liberty County Extension Agent