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
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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
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– 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
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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
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• 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
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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
•
•
•
•
•
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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
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28000
320
24000
280
20000
240
16000
200
160
12000
120
80
8000
40
4000
0
0
Persons Served
Base Case
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Persons Served
Social Insurance
Social Insurance
LTC Coverage
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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
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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
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Base Case
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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
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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
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Reservations
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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
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LTC Social Insurance
20
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•
•
•
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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.
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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.
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