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Building a Roadmap for Financing Long. Term Services & Supports Melding Private Insurance, a Building a Roadmap for Financing Long. Term Services & Supports Melding Private Insurance, a Contribution Program & Medicaid into a Cohesive Proposal Long-Term Care Financing Advisory Committee November 12, 2009 For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC

Presentation n Refined Strawman Proposal q LTC Partnership q Contribution Program q Combined Approach Presentation n Refined Strawman Proposal q LTC Partnership q Contribution Program q Combined Approach q Impact on Medicaid n Future Medicaid analysis n Appendix For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 2

Section 1 Refined Strawman Proposal For Advisory Committee Policy Discussion Purposes Discussions Only University Section 1 Refined Strawman Proposal For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 3

Refinements to Strawman proposal since last month n LTC Partnership/Private LTC Insurance q q Refinements to Strawman proposal since last month n LTC Partnership/Private LTC Insurance q q n Contribution Program q q n Identified affordable benefit package models Targeted middle income people who are at risk to spend down Modeled a mandatory plan Analyzed premiums required to ensure solvency Medicaid Program q q Assessed effect of LTC Partnership and Contribution on Medicaid Status quo eligibility rules for purposes of modeling Medicaid baseline For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 4

Preview: “Take-away” points LTC Partnership: n n Private LTC insurance with good benefits can Preview: “Take-away” points LTC Partnership: n n Private LTC insurance with good benefits can be made affordable to younger middle income adults Group coverage with conversion requirement would increase take-up rate Contribution Program: n n $75 daily benefit covers a significant amount of care and needs High uncertainty on how high to set premium rates in order to guarantee solvency (because of uncertainty in disability/death rates, among other factors) Medicaid Savings: n Difficult to calculate, requires many assumptions For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 5

Comprehensive and cohesive approach begins to emerge (assumes mandatory Contribution Program) For Advisory Committee Comprehensive and cohesive approach begins to emerge (assumes mandatory Contribution Program) For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 6

Framework for Evaluation & Key Assumptions For Advisory Committee Policy Discussion Purposes Discussions Only Framework for Evaluation & Key Assumptions For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 7

Key questions for evaluating the proposal n Target Population q How many people will Key questions for evaluating the proposal n Target Population q How many people will benefit from the model? q Who will not benefit? n Benefit Coverage q What benefit does the model offer? Does it meet the need? q How much LTS coverage does it provide? n Costs (Costs and Savings Impact Analysis) q Who bears the costs? q Is it cost effective? For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 8

Assumptions and limitations of analysis n Assumptions q Affordability: Target of 2% q Modeled Assumptions and limitations of analysis n Assumptions q Affordability: Target of 2% q Modeled mandatory enrollment for Contribution Program q 5% compound inflation (e. g. Premiums, LTS costs, Medicaid) q Modeled individual policies, did not look at couples policies q No assumptions made about tax treatment of the premiums/costs n Limitations of work q Projection stops at 20 years q Population subgroups by age & income (e. g. people who are disabled) q Disability & death probabilities are critical q No Return on Investment assumptions made q Microsimulation model is highly recommended in order to develop legislation For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 9

LTC Partnership/Private Insurance For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts LTC Partnership/Private Insurance For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 10

LTC Partnership is worth considering n Comparison grid highlights key differences between MA asset LTC Partnership is worth considering n Comparison grid highlights key differences between MA asset protection provision (quasi-Partnership) and LTC Partnership n Important things to be gained from a LTC Partnership: q q n Asset protection provided when purchase LTC insurance policy (in MA: asset protection provided when individual enters nursing facility) Policies must cover community-based benefits (in MA: no requirement) Choice is between existing MA asset protection rules or full LTC Partnership q q Federal law “grandfathered” MA quasi-Partnership rules, but do not provide a way to amend these rules, except by implementing full LTC Partnership Any new Program must protect people who bought LTC insurance policies under the quasi-Partnership rules For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 11

LTC Partnership: Where did we leave off last month? n Last month, we looked LTC Partnership: Where did we leave off last month? n Last month, we looked at the Connecticut Partnership model. n We wanted to improve that model by: q q n Creating an affordable LTC insurance benefit package Targeting middle income people who are at risk to spend down In this section, we identify and model the features of two affordable LTC insurance benefit packages q q Cal. PERS Federal Long-term Care Insurance Program (FLTCIP) For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 12

Elements of the improved model n Who participates (target population)? q q q n Elements of the improved model n Who participates (target population)? q q q n What is the benefit? q n People over the age of 25 years Incomes over $25, 000 for under 65 Incomes over $30, 000 for elderly people People who can pass health screen; excludes people with disabilities Assumed 15 percent of population over 25 would take up private insurance Daily benefit of up to $100 or $150 toward comprehensive LTS for up to 2 years What is the cost? annual premiums vary by age, examples: q q q $410 at age 25 $967 at age 55 $4, 905 at age 85 For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 13

Two affordable models – benefit details For Advisory Committee Policy Discussion Purposes Discussions Only Two affordable models – benefit details For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 14

Who benefits: 69% of the population over age 25 would be eligible* to purchase Who benefits: 69% of the population over age 25 would be eligible* to purchase a LTC insurance policy (estimate that only 15% will purchase) * Assumes low-income people and people who cannot pass health screen are not eligible to purchase an LTC insurance policy For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 15

Benefits covered: Both models cover substantial home care, most assisted living, and some nursing Benefits covered: Both models cover substantial home care, most assisted living, and some nursing facility care For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 16

Slide from last month: Connecticut premiums unaffordable for middle income n n Higher income Slide from last month: Connecticut premiums unaffordable for middle income n n Higher income people buy LTC insurance in CT (green) We need to make LTC insurance affordable for middle income (yellow) For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 17

Costs to the individual: Improved model is more affordable, particularly for younger middle income Costs to the individual: Improved model is more affordable, particularly for younger middle income For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 18

Additional cost if program provides subsidies: Older middle income would need subsidy in order Additional cost if program provides subsidies: Older middle income would need subsidy in order to afford policy For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 19

Group insurance could increase take up rate n What does a Group offer? q Group insurance could increase take up rate n What does a Group offer? q q q n Other State Models: All state employees q q n State of Minnesota State of Michigan Cal. PERS: q q q n Affinity, Simplicity to a large base No agent fees, but regulated in the same way as the individual market Would need to require rollover to retirement with no changes (group conversion) 12 -14% of eligible population Self-funded (no insurance company) to all active workers, retirees, & families More risky, if program does not perform well The Federal Long-Term Care Insurance Program (FLTCIP) q q q 6 percent of eligible population John Hancock is the Insurance Carrier Rate increase = Lapse in Mortality Rates (and decline in Rate of Return, ROR) For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 20

LTC Partnership: Effect on Medicaid n Potential savings to Medicaid q If new middle LTC Partnership: Effect on Medicaid n Potential savings to Medicaid q If new middle income people buy LTC Insurance, then fewer people would spend-down to Medicaid n Potential costs to Medicaid q Helping people keep their assets could reduce Medicaid revenue: If people were already buying LTC Insurance and would have spent down and Medicaid would have recovered their assets, then Medicaid would recover fewer assets For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 21

Outstanding questions and considerations n Are we ready to recommend a LTC Partnership with Outstanding questions and considerations n Are we ready to recommend a LTC Partnership with these parameters? n Do we want to explore subsidizing older middle income people who are close to the affordability threshold? n Do we want to consider ways to increase participation? q q q n Target people at younger ages Encourage group coverage Provide financial incentives Do we want to consider other mechanisms (e. g. , LTC riders to life insurance policies) for promoting insurance for LTS? For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 22

A Contribution Program For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts A Contribution Program For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 23

Contribution Program: Where did we leave off last month? n Last month, we looked Contribution Program: Where did we leave off last month? n Last month, we looked at the CLASS model. n We wanted to improve that model by: q q n Ensuring solvency over many years Ensuring high participation levels In this section, we: q q Analyze the premiums required to ensure solvency Model a mandatory plan For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 24

Elements of the improved model n Who participates (target population)? q q q n Elements of the improved model n Who participates (target population)? q q q n What is the benefit? q q n People over the age of 25 years People of low to middle income Incomes over $25, 000 for under 65 Incomes over $30, 000 (roughly) for elderly people Nobody is excluded due to disability status 79% of population is eligible to participate, assumes 100% participate (mandatory program) $75 cash daily benefit for LTS ($50 cash daily if 2 ADLS, $100 if 4 ADLs) Lifetime What is the cost? q q q $92 monthly premium, or $1, 095 annual premium (derived from analysis) Premiums same for everyone regardless of age and income Premiums paid until person receives benefit (includes retirees) For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 25

Contribution Program – benefit details For Advisory Committee Policy Discussion Purposes Discussions Only University Contribution Program – benefit details For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 26

Who benefits: 79% of population over age 25 would be eligible to participate (modeled Who benefits: 79% of population over age 25 would be eligible to participate (modeled mandatory program - 100% take-up) For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 27

Benefits covered: A $75 daily benefit amount would cover most home care needs, but Benefits covered: A $75 daily benefit amount would cover most home care needs, but is insufficient for institutional care 2009 Dollars Cash Daily Cash Yearly Long-Term Supports & Services Home-based services 3 hours day/3 days week 5 hours day/5 days week Assisted Living Nursing Home Costs For Advisory Committee Policy Discussion Purposes Discussions Only 1 2 3 $ 50. 00 $ 75. 00 $ 150. 00 $ 18, 250. 00 $ 27, 375. 00 $ 54, 750. 00 Percen tage of Needs Met 100% 64% 35% 17% University of Massachusetts Medical School EBD Consulting Services, LLC 100% 96% 100% 53% 100% 26% 52% 28

Costs to the individual: Affordable for people at or above 500% FPL (green) People Costs to the individual: Affordable for people at or above 500% FPL (green) People 400 -500% FPL would require subsidies (yellow) People below 400% would continue to rely on Medicaid (red) An individual with income = 400% FPL would require a subsidy of $228/year to limit spending to 2% of income For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 29

Uncertainty as to how high to set premiums to ensure solvency: Premiums are very Uncertainty as to how high to set premiums to ensure solvency: Premiums are very sensitive to assumptions, particularly disability and death rates, and population projections Death & Disability Rate Higher Range (Conservative) Lower Range (Optimistic) For Advisory Committee Policy Discussion Purposes Discussions Only Higher probabilities applied to population over age 65 Same probabilities applied to all age groups University of Massachusetts Medical School EBD Consulting Services, LLC Monthly Premium $91. 21 $65. 55 30

Requires diligent oversight over revenues and expenses to ensure solvency Periodic Evaluation: Medicaid Obligations Requires diligent oversight over revenues and expenses to ensure solvency Periodic Evaluation: Medicaid Obligations & Consumer Welfare Enrollee Risk & Benefit Coverage Revenue: Premiums AND Expenditures: Payments Actuarial Accuracy For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 31

Contribution Program: Effect on Medicaid n Potential savings to Medicaid q Fewer people would Contribution Program: Effect on Medicaid n Potential savings to Medicaid q Fewer people would spend-down to Medicaid, especially if mandatory q If Contribution program pays before Mass. Health for Mass. Health-covered services, then there would be direct savings to Medicaid n Potential costs to Medicaid q If include asset protection for Contribution benefits (like Partnership), then Medicaid would recover fewer assets For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 32

Outstanding questions and considerations n Are we ready to recommend a Contribution Program with Outstanding questions and considerations n Are we ready to recommend a Contribution Program with these parameters? n Relationship to Common. Health? q n Mandatory or auto-enrollment with voluntary opt-out? q n For people with disabilities, does a Contribution Program pay first (direct savings to Medicaid) or cover services that Common. Health doesn’t cover? Consider various mechanisms for universal participation? Consider ways to increase voluntary participation? q q Incentivize with Medicaid asset protection (like Partnership)? Conduct sensitivity analysis of lower participation rates? For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 33

The Big Picture Public & Private Insurance Options How do they fit together? For The Big Picture Public & Private Insurance Options How do they fit together? For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 34

Some people may wish to purchase both: people with higher assets who can afford Some people may wish to purchase both: people with higher assets who can afford both premiums For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 35

Does the refined Strawman proposal meet our principles? n Meets All Principles ü ü Does the refined Strawman proposal meet our principles? n Meets All Principles ü ü ü Strengthens the safety net for low income (by deferring Medicaid spend-down) Provides affordable options for middle income Supports stay-at-home preferences Increases private financing Limits pressure on state programs For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 36

Changes necessary to implement Strawman proposal n Contribution Program q n State legislation with Changes necessary to implement Strawman proposal n Contribution Program q n State legislation with design specifications to support Committee’s goals Insurance reforms q q NAIC model act & regulations State LTC Partnership legislation with design specifications to meet Committee’s goals Other insurance market reforms? e. g. group conversion policies Develop FDIC-like mechanism to insure policies against risk of insurer insolvency? For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 37

Medicaid For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School Medicaid For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 38

Steps in Medicaid analysis 1. Establish Medicaid spending baseline 2. Quantify effects on Medicaid Steps in Medicaid analysis 1. Establish Medicaid spending baseline 2. Quantify effects on Medicaid baseline of proposals 3. Identify gaps in participation/coverage 4. Identify and assess Medicaid improvements or expansions to fill gaps 5. Cost out Medicaid improvements/expansions For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 39

Assessing the impact on Medicaid n Key Features q q n Status quo eligibility Assessing the impact on Medicaid n Key Features q q n Status quo eligibility rules for purposes of modeling Medicaid baseline Uses Medicaid state plan LTS spending to model potential impact on Medicaid (impact could be greater because excludes HCBS waiver spending and expenditures made on behalf of Medicaid members by other state agencies) Methodology q q Calculate Medicaid baseline ($2. 8 b) Focus on the baseline for elderly ($1. 8 b. ) Focus on the baseline for people with disabilities ($911 m. ) Calculate the impact of each program and for each population on the baseline n n n The Contribution Program The LTC Partnership And, then Together For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 40

Baseline Facts about Medicaid State plan spending used for modeling purposes n Big role Baseline Facts about Medicaid State plan spending used for modeling purposes n Big role for Medicaid: q n Elderly big spenders: q n Medicaid spending on the elderly represents 66 percent of total LTC spending on elders and people with disabilities Institutional bias: q q n Medicaid represents 37 percent of all long-term care spending on the elderly, including all source Spending on Nursing homes represents 77 percent of all spending on the elderly Spending on Nursing homes represents a SMALL percent of all $ on people who are disabled Total budget bigger than $2. 7 billion: q $3. 4 billion is spent on LTS when include community-based waiver services for people who are elderly and those who are disabled (ages 18 -64) For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 41

[Placeholder] The Big Picture: A Global Shift in Roles For Advisory Committee Policy Discussion [Placeholder] The Big Picture: A Global Shift in Roles For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 42

Conceptual example - How will the financing of LTS change under the Contribution Program Conceptual example - How will the financing of LTS change under the Contribution Program for the elderly? For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 43

Next steps re: Medicaid n Continue to quantify effects on Medicaid baseline of proposals Next steps re: Medicaid n Continue to quantify effects on Medicaid baseline of proposals n Clarify resulting gaps in participation/coverage n Identify and assess Medicaid improvements or expansions to fill gaps n Cost out Medicaid improvements/expansions For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 44

Committee Business For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical Committee Business For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 45

Committee Business n Public input process q New Dates (confirmed): n n n Next Committee Business n Public input process q New Dates (confirmed): n n n Next meeting: q q n Friday, December 11 th from 1 PM – 3: 30 PM, Needham Sheraton Thursday, December 17 th from 5: 30 PM – 7: 30 PM, Northampton COA Date: Thursday, December 10 th, 2009 from 9: 00 -11: 30 am Location: AARP - One Beacon Street, 23 rd Floor Future meeting reminder q Additional meeting scheduled for either Thursday, February 11 th or February 25 th For Advisory Committee Policy Discussion Purposes Discussions Only University of Massachusetts Medical School EBD Consulting Services, LLC 46