Finance Committee Research

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Finance Committee Research

• May 4, 2009

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CMS description of waivers

• 1115 Research and Demonstration Projects
• This section provides the Secretary of Health and
  Human Services broad authority to approve
  projects that test policy innovations likely to
  further the objectives of the Medicaid program.
• 1915 (b) Managed Care/Freedom of Choice Waivers
• Waivers that allow states to implement managed
  care delivery systems, or otherwise limit
  individuals choice of provider under Medicaid
• 1915 (c) HCBS Waivers
• Waives Medicaid provisions in order to allow LTC
  services to be delivered in community settings.

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Waivers

• An 1115 waiver may signal an innovative stance
  within the State, and suggests that the State has
  seized an opportunity to try a new approach.
• Some States have opted to use a separate waiver
  for assisted living, whereas others include
  services to consumers in assisted living settings
  within their Aging and Disability waivers.
• Generally speaking, the more waivers a State
  administers, the more likely that administration
  is diffused across agencies.

Research on state management practices for the
rebalancing of state LTC systems Final Report.
(2006).
4
Preview of Literature Review

• Public and Private LTC Financing Options for
  Minnesota
• Financing LTC for Minnesotas Baby Boomers A
  report to the MN Legislature
• Describes a variety of public and private
  financing options and offers recommendations for
  actions to prepare for LTC challenges

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Long-term care insurance (LTCI)

• Private insurance that is purchased before LTC is
  needed
• If care is needed, the insurance policy pays
  benefits as stipulated in the policy purchased
• Policies can be individual or group based
• Group LTCI is available through employers or
  associations

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LTCI

• Pros
• Most recognized and utilized option
• Pools the risk of LTC
• Targeted specifically at LTC
• Cons
• Only one of many risks that younger people must
  address, and seen as lower priority
• Must be purchased before needed

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Partnership for Long-Term Care Program

• The Partnership program couples the purchase of
  LTC insurance with eligibility for Medicaid
  coverage of LTC services.
• With the purchase of a partnership policy, a
  consumer who uses up the insurance benefit can
  become eligible for Medicaid coverage without
  having to exhaust his or her assets to qualify
  for such coverage.
• MN estimates that the partnership program will
  save the state 120 million to 150 million by
  2030.
• Original four states (New York, Connecticut,
  Indiana, and California)

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Partnership for Long-Term Care

• Pros
• Clarifies and sets level of individual
  expenditure for LTC and once met, offers
  back-end coverage of remaining LTC costs
  through Medicaid
• Increases consumer protections by setting
  standards for LTCI policies
• Cons
• Requires Congressional action to allow more
  states to establish program
• Medicaid savings unclear

9
Nursing facility benefit in Medigap policies

• Medigap policies are insurance plans that seniors
  on Medicare purchase to cover the co-pays and
  deductibles within the Medicare program.
• These plans are standardized and there are 10 to
  choose from
• It appears that innovative combinations of health
  insurance and LTC coverage should be encouraged,
  but not mandated

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Nursing home care into Medicare-related coverage

• Pros
• Ideally, this would expand number of seniors with
  some coverage for nursing home care
• Cons
• Would damage the Medigap market by making
  premiums unaffordable for most current
  policyholders

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Combining health care and LTC coverage

• Private approaches that combine health care and
  long-term care coverage
• Social HMOs are one example of a completely
  integrated medical and LTC model that does offer
  standard Medicare benefits, plus LTC and drug
  benefits.
• Similar to Medicare Advantage health plans.
  Social HMOs receive a monthly capitation payment
  from Medicare and accept full financial risk for
  the cost of all medical benefits to which their
  enrollees are entitled.

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Combining health care and LTC coverage

• Public approaches that combine health care and
  LTC coverage
• In contrast to the limited private plans, several
  public health insurance options include medical
  and LTC services for the elderly on Medicaid.
• Minnesota Senior Health Options (MSHO)
• Began under federal waivers as the first-ever
  capitated Medicare and Medicaid program for the
  dual-eligible elderly managed by the state.
• Wisconsin and Massachusetts have followed with
  similar programs.
• All of these programs use Medicare and Medicaid
  funding to provide the full array of Medicare,
  Medicaid (including community waivers), and
  substantial benefits that are similar to Medigap
  plans.
• These programs use creative incentives to improve
  care delivery and chronic care management.
• Program for All-inclusive Care of the Elderly
  (PACE)

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Health insurance options that include LTC coverage

• Pros
• Not only pay for LTC, but also have the potential
  to improve the coordination and management of
  medical care and LTC, to slow the progression of
  disability and possibly reduce the need for LTC
• The plans have strong incentives to use
  noninstitutional settings, which consumers
  prefer, and access to care is frequently
  improved.
• Providers and health plans experience equal or
  better financial results, and most states
  experience small decreases in expenditures or
  expenditures equal to those in their
  fee-for-service programs.
• Cons
• Complexity in development
• Not available to most elderly on Medicare, but
  are more available to elderly on Medicaid
• Potential providers of these models need to be
  able to obtain adequate reimbursement through
  Medicare and Medicaid in order to provide both
  medical and LTC benefits

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Health Savings Accounts (HSAs)

• Couples a high deductible medical insurance
  policy with a tax-deductible annual health care
  savings account.
• More of the upfront health care spending
  decisions are turned over to employees, who use
  the funds saved tax-free in the HSA (and often
  supplemented by the employer) to pay for routine
  health care expenses.
• If not used for health care in a given year, the
  remaining funds can be rolled over into the next
  year, rather than being lost (as is the case in
  flexible spending accounts).

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HSAs

• Pros
• HSAs increase the consumers prudent use of money
  for health care expenses, and heighten their
  sensitivity to the price of health care services
  because they are using their own money to pay the
  bills.
• The ability to rollover any unspent funds into
  future years for later use.
• The funds are flexible, so they can be used for a
  wide variety of health care costs as well as LTC
  expenses, such as LTCI premiums.
• Cons
• Medicare beneficiaries are not eligible to
  contribute to HSAs, so the benefits of HSAs are
  limited to individuals before they become
  eligible for Medicare, or to the use of any
  excess money in their account to pay for health
  and LTC expenses after they are on Medicare.
• HSA funds cannot be used to pay the premiums of
  Medigap policies.
• Further analysis suggests that large numbers of
  indiciudals would typically have nothing to
  rollover into their retirement years to use for
  health and LTC spending at that time
• Research has found that large numbers of
  individuals and families expend more each year
  for health care than what they have in their
  health spending accounts.

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Life insurance options that include LTC coverage

• Two types of life insurancepermanent and term
  insuranceand they can both be used for LTC
• Provisions that can cover LTC costs include
  accelerated death benefits, life settlements,
  single premium life/LTC policies, and viatical
  settlements.
• These provisions use (and thus reduce) the cash
  value of the policy in order to provide cash for
  LTC costs.
• Experts familiar with both the life insurance and
  the LTCI market predict that linked benefit
  policies (life insurance and LTCI) will become
  more popular and offer a more cost-effective
  option for clients

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Life insurance options that include LTC coverage

• Pros
• Permanent insurance option provides multiple uses
  through one vehiclelife insurance, LTC coverage,
  possible loan/savings
• The client receives cash that they can use in any
  way they want to pay for LTC related expenses
• The premium is guaranteed or locked in and will
  not rise, in contrast with LTCI premiums that
  have experience significant premium increase in
  recent years.
• In a life insurance policy, the client gets a
  death benefit, a LTC benefit and can also access
  the cash value of the policy as a loan if needed.
  If the LTC benefit is never used, clients still
  get the death benefit.
• Cons
• LTC coverage more limited than what is available
  through LTCI or health insurance
• The amount of money available may not be adequate
  to cover needed LTC costs, either because of the
  low face value of the life insurance policy or
  lack of features like inflation protection.
• The client must continue to pay premiums even
  when receiving LTC coverage.

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Reverse Mortgages

• Older homeowners can tap the equity of their
  homes to pay for needed home care services
  without having to sell the house and move. The
  amount borrowed through the reverse mortgage need
  not be repaid until the house is sold or the
  owner dies.

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Reverse Mortgages

• Pros
• Available to large numbers of older persons
• Provide cash that can be used for any purpose
• Money is available to people regardless of their
  insurability and can be obtained relatively
  quickly
• The money received is considered a loan, not
  income, so it is tax free
• Fairly significant consumer protections in place
  for reverse mortgage buyers
• HUD requires that all applicants receive
  intensive counseling prior to their closing
• Cons
• Can be relatively expensive ways to borrow
  smaller amounts of money, since most of the fees
  paid are the same regardless of the amount of the
  reverse mortgage.
• Needs to be in a market where home values are
  high enough to yield sufficient cash back to make
  it worth the effort and cost to the older
  homeowner
• Many debt-free homes owned by seniors may be in
  need of extensive repairs or renovation when
  appraised for purposes of these mortgages.
• There also has to be a lender in the community
  qualified to process reverse mortgages, and that
  may not be the case in all parts of the state.

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Family loan or line of credit

• Provides a personal, nonsecured loan or line of
  credit to families who want to help an older
  relative pay for LTC costs.
• This type of loan is most often used by families
  of potential residents of assisted living or
  nursing facilities as a way to make immediate
  move-ins possible.
• The senior pays what she/he can out-of-pocket
  each month, the loan administrator pays the rest
  to the assisted living provider, while the
  children/family make monthly payments over time
  to repay the amount borrowed
• The interest rate on the loan is similar to that
  for other unsecured loans, four percent to seven
  percent over the prime rate.
• The funds can be used for any type of LTC expense
• The Family Payment Plan is now available in
  four states

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Family loan or line of credit

• Pros
• Most immediate source of money to pay for LTC
• Only used if and when needed
• Cons
• Increase debt of adult children especially if
  proceeds from estate are not available to help
  repay loan

22
Universal public savings plan

• In 2003, Hawaii became the first state to enact a
  LTC financing program that was intended to ensure
  universal coverage
• This plan (Care Plus Program) was not
  implemented vetoed by the Governor of Hawaii

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Care Plus Program

• A universal insurance and savings plan. As such
  it is the least expensive per person (120/year)
  of all the options because the risk of needing
  LTC is spread across the whole population.
• Designed to supplement an individuals own LTC
  funding
• The program was to be funded through a 10 per
  month payment that every adult age 25 and older
  filling a state income tax return would pay
• To be eligible for a claim, the beneficiary would
  need to have two deficiencies in ADLs or a
  cognitive disability
• The program would then make payments of 70 per
  day for up to 365 days (not necessarily
  consecutive) after a 30-day deductible
• This option is not available in any state at the
  moment

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Universal public savings plan

• Pros
• Creates a large risk pool and provides benefits
  to everyone in the pool who needs them
• Spreads the risk of paying for LTC across the
  states adult population resulting in a small
  cost
• Everyone in the program receives the same benefit
  payment, so it is equitable across income levels
• Provides flexible money
• Protects the public dollars in Medicaid for the
  truly needy
• It was hoped that it would motivate the private
  LTCI industry to develop affordable plans to wrap
  around the public benefits
• Cons
• All participants are charged the same premium
  regardless of level of risk or income, so the
  payments made into the system are somewhat
  regressive
• If LTC needs last more than one year, some
  participants may not have adequate provision for
  additional services and may still need Medicaid

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Long-term care annuity

• An example of a combined savings and insurance
  product where an individual purchases an annuity
  and along with that, also purchases LTC coverage
• When the LTC benefit is triggered, the monthly
  cash amount is increased over and above the basic
  annuity, for use in paying LTC costs

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Long-term care annuity

• Pros
• The combination of annuity with a LTC policy that
  covers individuals against both the risk of
  outliving their money and the risk of needing LTC
• For individuals who have long life expectancies
  or lots of chronic illness in their families,
  this type of product offers protection on both
  fronts
• Provides another alternative for certain
  individuals who may have needs and also have some
  liquidity in cash or other investments to set up
  such an annuity.
• Unused portions of the annuities can be inherited
  
• Cons
• Current products require substantial investment
• Individuals using this option need to have enough
  assets to fund this annuity and not require that
  money for other purposes
• Few people are aware of this option

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Final Report for Rebalancing Research Project

• In 2003, Congress directed the Centers for
  Medicare Medicaid Services (CMS) to commission
  a study in up to 8 States to explore the various
  management techniques and programmatic features
  that States have put in place to rebalance their
  Medicaid long-term supportive services (LTSS)
  systems and their investments in long-term
  support services towards community care.
• Arkansas, Florida, Minnesota, New Mexico,
  Pennsylvania, Texas, Vermont, and Washington
  participated in the resulting 3-year
  collaborative study

Centers for Medicare and Medicaid Services. New
Freedom Initiative Rebalancing Long-term Care.
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Final Report for Rebalancing Research Project

• The study took place between October 2004 and
  June 2008
• Among the many products generated are
• 8 baseline case studies for each of the 8 states
  covering a period up to July 2005
• An 8-state update report, covering the period
  from August 2005 to July 2006
• 8 final cases studies for each of the 8 states,
  covering the period until December 2007
• 6 cross-cutting Topic Papers dealing with themes
  in Rebalancing
• 6 Quantitative Chartbooks

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State LTC systems Organizing for rebalancing

• Integration The extent to which functions,
  programs, and populations for LTC in a State are
  combined or articulated within State
  organizations
• Centralization The extent to which LTC
  decisions are made at the state or local levels
• Markers of centralization include uniform
  assessment protocol and procedure use of State
  personnel in local areas for assessment and
  care-planning functions, State ability to
  re-budget resources across localities, and local
  understanding of and sharing of State
  programmatic goals.

Kane, R. Kane, R. Kitchener, M. Priester, R.
Harrington, C. (2006). State Long-Term Care
Systems Organizing for Rebalancing Topics in
Rebalancing State Long-Term Care Systems.
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Conclusions

• The trend seems to be toward
• Bringing LTC functions together in the same
  agency
• Developing greater articulation among Medicaid
  LTC programs (including waiver and State Plan
  services, and institutional and community care
  services) and between Medicaid LTC programs and
  other state-operated or state-funded LTC
  programs.
• Integrating programs across multiple groups of
  consumers
• Creating more centralization of long-term care
  functions across a State

Research on state management practices for the
rebalancing of state LTC systems Final Report.
31
Long-term care rebalancing in other States
Office of Legislative Research

• Successful strategies identified
• Global budgeting
• Consolidated LTC agencies
• Single point of entry
• Consumer-directed care
• Reducing institutional capacity
• Nursing home transition and diversion programs
• Standardized assessment tool

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Global Budgeting

• The pooling together of state and federal funds
  for both institutional and home and
  community-based services into one budget with an
  overall spending cap.
• Promotes flexibility between different programs
  to promote cost efficiency
• Makes it easier to provide care in the
  appropriate setting for the individual

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States incorporating global budgeting

• Washington
• Vermont
• Wisconsin
• Ohio
• New Jersey
• Texas

34
Managed Care States to examine

• Minnesota
• Wisconsin

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Managed Care Advantages

• The payment is fixed and hence predictable (and
  thus budgetable)
• It is presumed to save money (the price is
  advertised as a discount over what it would
  otherwise cost, but the actual price may vary
  dependent on just who enrolls)
• It may allow states to accomplish something they
  could not do directly (e.g. ration services, push
  for a cheaper mode of care, and avoid
  bureaucratic conflicts)
• The state may already be invested in Medicaid
  managed care for acute care or behavioral health
  and perceive clinical advantages for seniors and
  people with disabilities if acute care and LTSS
  could be integrated in a single capitated
  delivery system.

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Policy approaches to LTC financing

• Restrict growth in LTC spending by Medicaid and
  Medicare
• Placing limits on eligibility for Medicaid
  coverage
• Place new limits on income and assets

Financing LTC for the Elderly Policy Approaches
to LTC Financing, (2004) Congressional Budget
Office Paper.
37
Eliminate mechanisms for spending down assets and
income

• Eliminating the medically needy option for
  spending down income and assets
• Requiring all states to adopt the special income
  rule, whereby people must have income below a
  specified ceiling to qualify for Medicaid
  coverage
• Eliminating Miller Trusts as a method for
  reducing countable income below the ceiling

38
Improve the functioning of the market for private
LTCI

• Could be made more attractive to consumers by
  standardizing insurance policies to allow
  competing policies to be more easily compared
• Allow consumers to supplement Medicaid coverage
  with private policies
• Taking steps to remove or lessen Medicaid
  crowd-outthe dampening effect that the
  availability of Medicaids LTC benefits has on
  sales of private LTC insurance policies

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Reducing Medicaid Crowd-out

• One method, allow consumers to purchase a policy
  that supplemented Medicaid coverage and thus
  obtain the advantages of both private and public
  financing (Partnership for Long-Term Care).
• Partnership for LTC consumers may purchase
  private insurance policies to cover the first one
  to three years of LTC benefits. When their
  coverage expires, they apply for Medicaid
  coveragejust as they would have if they had had
  no coveragebut they do not have to spend down
  their assets except to the extent that the assets
  exceed the value of their LTC insurance benefits.

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Additional areas worth exploring

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Nebraska LTC Savings Plan Act

• Taxpayers are eligible to claim state income tax
  deductions related to LTC.
• State residents can create LTC health savings
  accounts (HAS).
• Withdrawals used to pay for the LTC expenses of
  anyone age 65 or older or a disabled person who
  has a medical necessity are not taxed.
• Withdrawals to pay premiums on LTC insurance are
  also not taxed.
• Individuals must make contributions under a
  participation agreement approved by the state
  treasure.

A guide to LTC for State policy makers
Building private LTC financing options. National
Conference of State Legislatures.
42
Own your own future campaign

• Collaboration between AoA and CMS
• Purpose is to increase consumer awareness about
  LTC and to stimulate consumer planning for future
  LTC needs
• In each participating Own Your Own Future state,
  a letter from the governor is sent to households
  with members between the ages of 45 and 70,
  explaining the campaign and encouraging consumers
  to request a long-term care planning kit. Also,
  provide state-specific information and
  resources.

U.S. Department of Health and Human Services.
National Clearinghouse for Long-Term Care
Information.
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Real Choice Systems Change Grants

• Person-Centered Planning Implementation Grants
• State Profile Tool Grants
• Executive Summary for the Annual Report of
  System and Impact Research and Technical
  Assistance for CMS FY2005, FY2006, and FY2007
  RCSC Grants

Centers for Medicare and Medicaid Services.
Real Choice Systems Change Grants.
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Medicare/Medicaid Integration Program

• The purpose of the Medicare/Medicaid Integration
  Program is to encourage states to integrate
  Medicaid's long-term care services with
  Medicare's acute care services through managed
  care
• The program has funded 14 states that are in
  various stages of planning, development, and
  implementation.

George Mason University Center for Health Policy
Research and Ethics. Medicaid/Medicare
Integration Program
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Miller Trusts

• Can be used to help lower the amount of income
  going to the nursing home patient so that he/she
  can qualify for Medicaid and at the same time
  provide money for the community spouse at home
• Also known as Qualified Income Trust, Income Cap
  Trust, and Income Assignment Trust

Arizona Long-term Care System.
www.tucsonelderlaw.com/miller-trusts.htm
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Money Follows the Person

• Money Follows the Person
• A system of flexible financing for long-term
  services and supports that enables available
  funds to move with the individual to the most
  appropriate and preferred setting as the
  indiviuduals needs and preferences change.
  (CMS)
• Systems Change for Community Living Grants
  Program

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Thank you!

• Questions or comments?