Care PlusCare PlusA Proposal for Financing A Proposal for Financing

LTCLTC

Long Term CareLong Term Care

Need for Long Term Care in HawaiiNeed for Long Term Care in Hawaii

14.8% or 30,730 of older 14.8% or 30,730 of older adults residing in community adults residing in community have self care/mobility have self care/mobility limitationslimitations

Of these,Of these, 82% earn less than 82% earn less than

$20,000 per year$20,000 per year 43% earn less than 43% earn less than

$10,000 per year or have $10,000 per year or have no income at allno income at all

Minnesota’s Aged in Minnesota’s Aged in 20302030

In 2030, over one-half of the total 65+ In 2030, over one-half of the total 65+ population will be between ages 65 and 74. population will be between ages 65 and 74. In 2050, less than half of the 65+ population In 2050, less than half of the 65+ population will be between 65 and 74. will be between 65 and 74.

The 85+ population will begin an The 85+ population will begin an exponential growth in 2030 and by 2050 will exponential growth in 2030 and by 2050 will represent 22% of Minnesota’s elderly represent 22% of Minnesota’s elderly population, up from 12% in 2030. population, up from 12% in 2030.

The dramatic growth in the frail elderly The dramatic growth in the frail elderly population (85+) is one of the factors that population (85+) is one of the factors that will increase the need for long term care./*/* will increase the need for long term care./*/*

Costs of LTC are StaggeringCosts of LTC are Staggering In Hawaii costs are projected to In Hawaii costs are projected to bebe $ 2 billion/per year in 2020 $ 2 billion/per year in 2020 -$ 544 million for Medicaid -$ 544 million for Medicaid matchmatch by 2020 by 2020 -Five fold increase in out-of- -Five fold increase in out-of-pocketpocket costs estimated to more than costs estimated to more than 1,0001,000 % of yr 2000 costs % of yr 2000 costs

Distribution of State Distribution of State Long Term Care DollarsLong Term Care Dollars

Institutional Care (Medicaid)

71%

HCB Care (Medicaid)

22%

Other Programs7%

What Will LTC Cost in 2010?What Will LTC Cost in 2010?(In Thousands)(In Thousands)

Family Cash (210,715)

23%

Family Assets (169,005)

18%

State Medicaid (207,837)

22%

Fed Medicaid (243,982)

26%

Medicare (54,505)

6%

Other Payor (45,371)

5%

Other Insurance (0)0%

Increases in LTC Costs Increases in LTC Costs VersusVersus

Family IncomeFamily Income

0

20

40

60

80

100

120

1990 1995 2000 2005 2010 2015 2020

Cos

t of

Car

e an

d In

com

e (T

hous

ands

)

Average Nursing Home Costs Mean Family Income for age 65+

Average non-institutional costs

National Polls Have ShownNational Polls Have Shown

Families are willing Families are willing to pay their fair to pay their fair share…even if it share…even if it means a tax means a tax because long term because long term care:care: Is a family Is a family

problemproblem Does not go away Does not go away

-- day or night, -- day or night, year after yearyear after year

Affects young Affects young and oldand old

Why Must Action be Taken NowWhy Must Action be Taken Now Families may face nursing home care costs of Families may face nursing home care costs of

$200,000 per year per person in the year $200,000 per year per person in the year 2020.2020.

Family cash outlays may increase more than Family cash outlays may increase more than 1100%1100%

Family asset expenditures may increase Family asset expenditures may increase almost 1000%almost 1000%

The State share of Medicaid program may The State share of Medicaid program may increase more than 1300%increase more than 1300%

Pay a little now Pay a little now or a whole lot more lateror a whole lot more later

Tomorrow’s Tomorrow’s

Potential Potential

Long Term Care CostsLong Term Care Costs

Today’s Investment in

Long Term Care

Benefits of Early Benefits of Early InterventionIntervention

••Minimum services to keep people Minimum services to keep people atat home home ••Basic consumer information andBasic consumer information and training training••Community capacity building toCommunity capacity building to empower individuals to address empower individuals to address issues issues••Reduced dependency on state Reduced dependency on state generalgeneral revenues by collaborating with revenues by collaborating with private sector and community private sector and community

State Design StrategyState Design Strategy Conduct preliminary policy analysisConduct preliminary policy analysis Select and price options through Select and price options through

actuarial analysesactuarial analyses Evaluate recommendations of Evaluate recommendations of

actuaryactuary Develop implementation Develop implementation

plan/legislationplan/legislation Identify policy options for financingIdentify policy options for financing Seek stake holder input and Seek stake holder input and

supportsupport

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 AuthorityCarePlus AuthorityA 5-memberA 5-member Temporary Board of Temporary Board of Trustees was designated to:Trustees was designated to:

■ ■ DDesign 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

DecisionsDecisions

-Who is in greatest need-Who is in greatest need-How can scarce resources -How can scarce resources bebe targeted to benefit those targeted to benefit those most inmost in need need-What criteria should -What criteria should triggertrigger eligibility for LTC eligibility for LTC

Government Strategies for Government Strategies for LTCLTC

Model ExampleModel ExampleUniversal Coverage Universal Coverage for Allfor All

Canadian National Canadian National HCHC

Social InsuranceSocial Insurance Social SecuritySocial Security

Social Assistance For Social Assistance For SubgroupsSubgroups

MedicaidMedicaid

Mandatory EmployerMandatory Employer Prepaid HC Act Prepaid HC Act HawaiiHawaii

Subsidies from Public Subsidies from Public $$

Tax Credits for Tax Credits for Private InsurancePrivate Insurance

Status QuoStatus Quo No Major ChangesNo Major Changes

CombinationCombination

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 RequirementsProgram Requirements

Includes both public and private Includes both public and private sectorssectors

Includes employer, employees, Includes employer, employees, retireesretirees

Assures a fair distribution of costs Assures a fair distribution of costs by age, ability to payby age, ability to pay

Funded by dedicated source of Funded by dedicated source of state revenuestate revenue

Protects state from predatory Protects state from predatory migration migration

Must be tailored to be Must be tailored to be revenue- generatingrevenue- generating

■ ■ Pursue and use federal dollarsPursue and use federal dollars

■ ■ Pursue fees for services fromPursue fees for services from

those of meansthose of means

■ ■ Pursue partnerships withPursue partnerships with

private agencies and fundingprivate agencies and funding

organizationsorganizations

Program RationaleProgram Rationale

Must ensure short and long term viabilityMust ensure short and long term viability Must be tailored to be revenue Must be tailored to be revenue

generatinggenerating Must be aimed at creating self sufficiencyMust be aimed at creating self sufficiency Avoid short- sighted programmingAvoid short- sighted programming Create and renew partnerships between Create and renew partnerships between

public private and non profit sectorspublic private and non profit sectors Relieve demands on state general fund Relieve demands on state general fund

for assistancefor 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 EligibilityDisability 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 therestrictions imposed by the required vesting period.

Increase in Benefits over TimeYear Amount

20082008 $72.10$72.1020092009 74.2674.2620102010 76.4976.4920112011 78.7978.7920122012 81.1581.1520132013 83.5883.58

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.

20062006 $ $ 12.0012.00

20072007 14.0014.00

20082008 16.0016.00

20092009 18.0018.00

20102010 20.0020.00

20112011 22.0022.00

20122012 23.0023.00

The initial tax shall be set at $10.00/month

with incremental increasesYear 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. 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?Who Runs the Program? An Appointed Board of Trustees is An Appointed Board of Trustees is

responsible for policy and for responsible for policy and for maintaining the trust fundmaintaining the trust fund

Third Party Administrators contracted Third Party Administrators contracted by the State are responsible for by the State are responsible for determining eligibility of beneficiaries determining eligibility of beneficiaries and for the pay out of benefits. They will and for the pay out of benefits. They will also provide for care coordination and also provide for care coordination and educationeducation

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

-Does the option provide -Does the option provide sufficient sufficient

flexibility to mitigate flexibility to mitigate bottom line new bottom line new costs for costs for residentsresidents

-Are there provisions that -Are there provisions that guard guard against unbearable cost against unbearable cost increases increases due to fraud, abuse, due to fraud, abuse, price utilization price utilization and intensityand intensity

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

The program must be realistic.The program must be realistic.

CAREPLUS…CAREPLUS…

IT’S A BEGINNING!