Hawaii CARE PLUS 2002-2003 • In 2002-2003 the Hawaii State Legislature passed a bill authorizing creation of a LONG TERM CARE (LTC) trust fund • The fund was to be financed by an initial $10/month income tax surcharge on every Hawaii tax filer over the poverty line • The benefit package was intended to cover approximately 75% of the care needed by a typical LTC user, in home or community care, initially 365 days at $70/day • The right to benefits was to accumulate over a ten-year period, with 1/10 of the face benefit added for each year of participation. Effect of a State Social Insurance Plan on State Medicaid LTC Lawrence H. Nitz, Professor The University of Hawaii at Manoa lnitz@hawaii.edu Lisa Alecxih, Vice President Long Term Care The Lewin Group Lisa.alecxih@lewin.com 6/27/2005 Academy Health Annual Research Meeting, Boston, MA 1 6/27/2005 Academy Health Annual Research Meeting, Boston, MA Basic Assumptions Forward-Looking Elements • The staged acquisition of benefit rights, together with an initial 3 year delay of start of benefits will serve to deter “LTC Tourism” • Low income workers should not be taxed for LTC benefits that they may qualify for under various Medicaid programs • The LTC tax should be spread over the population for the entire exposure period, the whole life, rather than limited to working years • The program should be a pay-as-you-go system to restrict the size of reserves required, since the whole population would be covered • A separate legal entity, with its own qualified trustees, should be established to limit the possibilities of legislative raids on the Fund • The cost of care was anticipated to rise at about 3% per year • The compensating tax rate was planned to increase at approximately 3.2% per year 6/27/2005 6/27/2005 Academy Health Annual Research Meeting, Boston, MA 3 – This adjusts for the inflation benefit – It also adjusts for Hawaii’s higher growth rate among persons over 50 than under 50 • An increase in longevity was planned in rate setting • The target fund balance in 75 years was planned to be at least 108% of the coming year’s funding requirements, and increasing Sources Academy Health Annual Research Meeting, Boston, MA Academy Health Annual Research Meeting, Boston, MA 4 Simulation Methodology • This work was supported by funds appropriated by the Hawaii State Legislature to the Hawaii Executive Office on Aging over the period 2000-2003. • Actuarial models and calculations were developed by John Wilkin, FSA, of Actuarial Research Corporation of Annandale, VA. • Subject matter legislative sponsorship for the program was provided by Senators Suzanne Chun Oakland and Roz Baker, and by Representative Dennis Arakaki. • Legislative leadership provided by Senate President Robert Bunda, and House Speaker Calvin Say, Ways and Means Chair Brian Taniguchi and House Finance Chair 6/27/2005 2 • Applied a version of the Brookings-LewinICF Long Term Care Financing Model customized for the Hawaii Population • Built a Base Case for current conditions in which private LTC insurance is sold with marketing assistance no stronger than communication and tax credit support • Built a Social Insurance Case in which the proposed program was introduced 5 6/27/2005 Academy Health Annual Research Meeting, Boston, MA 6 1 Notes on Simulation Overview of Results • The 2003 version of the LTCFM was updated with current source data for income, pension expectations, and LTC usage • A time span of 50 years was selected to illustrate the effects for the post-baby-boom population • Presentations contrast the effects of the Social Insurance Case with those of the Base Case • • • • • 6/27/2005 6/27/2005 Academy Health Annual Research Meeting, Boston, MA 7 Prospective population served Aggregate benefits to be paid out NH patient usage of social insurance LTC Coverage of social insurance LTC Proportion of LTC costs paid by Medicaid by family income • Proportion of LTC costs paid by Medicaid by family assets • Payment of LTC costs by social insurance, compared to base case payment by private LTC insurance Academy Health Annual Research Meeting, Boston, MA 8 28000 320 24000 280 20000 240 16000 200 160 12000 120 80 8000 40 4000 0 0 Persons Served Base Case 6/27/2005 Persons Served Social Insurance Social Insurance LTC Coverage Academy Health Annual Research Meeting, Boston, MA 9 6/27/2005 Academy Health Annual Research Meeting, Boston, MA Figure 3 Effective Social Insurance Impact 10 Figure 4 LTC Social Insurance Coverage 70 120 60 100 50 e rc e n ta g e o f P o p u la t io n C o v e re d P e rc e n ta g e o f N H P o p u la t io n u s in g S o c ia l In s u ra n c e B e n e fit Base Case LTC Insurance 40 30 20 80 60 40 20 10 0 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 1 Program Ye ar NH with Social Insurance 6/27/2005 Academy Health Annual Research Meeting, Boston, MA 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 Program Year NH with Market Insurance Social Insurance 11 6/27/2005 Base Case Academy Health Annual Research Meeting, Boston, MA 12 2 Figure 6 Medicaid Effects by Family Assets Figure 5 Medicaid Effects by Family Income Medicaid, Base Case Medicaid, Base Case LTC Social Insurance LTC Social Insurance Percentage of NH Costs Paid by Medicai Percentage of NH Costs Paid by Medica 100 90 80 70 60 50 40 30 20 80 70 60 50 40 30 20 10 0 10 0 <7500 7500 - 15000 20000 30000 40000 50000+ 15000 - 20000 - 30000 - 40000 - 50000 As s et Levels Family Income 6/27/2005 Academy Health Annual Research Meeting, Boston, MA 13 6/27/2005 Figure 7: Payment by LTC Insurance in Base and Social Insurance Cases Private LTC Insurance, Base Case Conclusion • Social insurance spreads benefits to the middle class • It is possible to target a specific risk segment of the care continuum, in this case the early care portion • General financial payments for early care might in fact be used to subsidize family NH expenses Percentage of NH Costs Paid by LTC Ins 18 16 14 12 10 8 6 4 2 0 1- 30 3160 6190 91364 1-2 Y 2-3 Y 3-4 Y 4-5 Y – Increasing expenditures from family funds – Increasing use of paid care where voluntary care had been used previously 5+ Y Length of Stay Academy Health Annual Research Meeting, Boston, MA 15 6/27/2005 Reservations Academy Health Annual Research Meeting, Boston, MA Academy Health Annual Research Meeting, Boston, MA 16 References • Private insurers make systematic efforts to carve out portions of the social insurance domain, with associated underwriting exclusions – The social insurance proposal reserved the entire segment of care beyond 365 days for the private insurance sector • Lifestyle of community may affect the woodwork effect of unanticipated demand for care – German program apparently affected by concentration of city residents in 2 & 3 room apartments • Political leaders may not trust themselves or their successors to appoint appropriately fiduciary trustees for such an LTC fund • Broad expectation that everyone paying premium actually draws cash benefits, contrary to idea of insurance 6/27/2005 14 LTC Social Insurance 20 6/27/2005 Academy Health Annual Research Meeting, Boston, MA 17 • • • • • • Alecxih, L. M. B. (2003). The Estimated Impact of Alternative Long Term Care Financing Proposals. Testimony before the Hawaii State Legislature. Honolulu, HI, The Lewin Group. Alecxih, L. M. B., J. Corea, et al. (1992, 2002). Long Term Care Financing Model: Model Assumptions. Alexandria, VA, The Lewin Group. LIMRA International and the Society of Acuaries, Long Term Care Experience Committee. (2004). Long-Term Care Insurance Persistency Experience. Windsor, CT, LIMRA International, Inc. Executive Office on Aging, O. o. t. G. (1991). Financing Long Term Care: A Report to the Hawaii State Legislature. Honolulu, HI, Executive Office on Aging, Office of the Governor. The Lewin Group. (1990, 2003). The Brookings-Lewin-ICF Long Term Care Financing Model. Arlington, VA, The Lewin Group. Hottinger, M. (2003). Testimony on Administration of Proposed LTC Financing Act. Honolulu, HI, Hottinger Consulting. 6/27/2005 Academy Health Annual Research Meeting, Boston, MA 18 3 • • • • • • McCall, N. (2001). Who Will Pay for Long Term Care? Insights from the Partnership Programs. Washington, D. C., Academy for Health Services Research and Health Policy/Health Administration Press. Meiners, M. (2001). Reflections of a Partnership Insider on Long Term Care Financing. Who Will Pay for Long Term Care? Insights from the Partnership Programs. N. McCall. National Center for Health Statistics. (1984). National Nursing Home Survey. Hyattsville, MD, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, Centers for Disease Control and Prevention. Nitz, Lawrence H. Two Tails of Social Insurance for Long Term Care: Hawaii 1992 and 2002. Midwest Political Science Association, Chicago, IL, April 15, 2004. White House Task Force on Health Reform, L.-T. C. W. G. (1993). LongTerm Care, Working Group Draft. Washington, D. C., Government Printing Office. 6/27/2005 Academy Health Annual Research Meeting, Boston, MA 19 4