MetLife

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MetLifes Long-Term Care Policy
Metropolitan Life Insurance Company New York, New
York 10010 Internal Use Only L0302D50R(exp1205)ML
IC-LD
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The Basics Of Long-Term Care
Long-Term Care
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Key Points of Discussion

• What is Long-Term Care ?
• Overview of LTC Services
• Who Pays for Long-Term Care Services
• Medicare
• Medicaid
• Is Insurance the Answer
• Taxation
• Underwriting

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People are living longer!
By the middle of this century, it is estimated
that the number of people age 100 and over may
range from 500,000 to 5 million.
Source The New England Centenarian Study,
Harvard Medical School/Beth Israel Deaconess
Medical Center, 2000
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What is long-term care ?

• The care you need when you are chronically ill
• When you need help with your activities of daily
  living

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What are the activities of daily living ?

• Bathing
• Dressing
• Eating
• Toileting
• Transferring
• Continence

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What is NOT Long-Term Care?

• Long-Term Care
• Lengthy duration
• Maintain function
• Personal assistance
• Home, assisted living facility, nursing home, or
  adult day care center

Vs

• Acute Care
• Short duration
• Get better
• Medical care
• Hospital or doctor's office

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And, as we age, our need for care increases

• In 2020, the number of people over age 85 in
  nursing homes is expected to increase to 3.87
  million
• In 2030, this number is expected to increase to
  5.22 million

Robyn I. Stone, August 2000
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How have changes to our health care system
affected long-term care ?

• Medical advances
• Management of chronic illnesses
  

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Could it happen to you ?

• At least 40 of Americans age 65 may spend some
  time in a nursing home Average nursing home stay
  is 2.6 years
• 10 will stay five years or longer

Sources HIAA, 2002 Barons, 2000
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Sociological Changes

• Families in Transition
• Working Women
• Delayed Childbirth
• Divorce

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What are the levels of care people need ?

• Skilled care
• Personal care or custodial care (ADLs)

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Where is long-term care provided ?

• At home
• In a community setting, such as adult day care or
  adult day health centers
• In various facilities licensed to assist people
  with long-term care needs for example, assisted
  living facilities, Alzheimer facilities, or other
  alternative care facilities
• In hospice home-care programs or facilities
• In nursing homes

The types of facilities vary by state.
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What is the cost of long-term care ?

• Nursing home care can cost an average of 52,195
  a year
• Home health care can cost an average of 23,400 a
  year

Source MetLife Mature Market Survey, 2002
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Comparing the Cost of Long-Term Care ?

• Home Care Nursing Care
• (4 hrs. day/7 days
  week)
• Hartford, CT 95/day 214/day 34,602/year 7
  8,110/year
• Orlando, FL 67/day 125/day
• 24,309/year 45,625/year
• San Francisco 82/day 147/day
• 29,857/year 53,655/year

Source MetLife Mature Market Survey, 2002
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Who Pays for Long-Term Care ?

• Medicare
• Medicare Supplements
• Private Health Insurance
• HMOs
• Medicaid
• Family Funds

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How do people pay for long-term care costs ?
Private Health Insurance
Other
7.4
6.3

• Total Long-Term Care
• Spending
• 117 Billion in 1998

Medicare 17.8
Medicaid 39
Out-of-Pocket 29.5
Source HCFA-DHHS, 2000
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LTC Competitors
2002 LTC Premium ( in millions)

• GE 248
• John Hancock 117
• CNA 69
• Bankers 66
• Allianz 36

• Trivent 28
• Lincoln Benefit 28
• Prudential 27
• MetLife 25
• Mass Mutual 16

AAL Lutheran Brotherhood
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MetLife Long-Term CareOur History
2002
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Met Life Group Long-Term Care Insurance List of
Corporate Customers
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MetLife Long-Term CareMarket Strategy

• Initial Focus
• National Accounts
• Firms with 20,000 employees
• Consultant/Direct Sales
• 1994
• Firms with 5000 employees
• Consultant/Brokers
• lt5,000 Market
• Driven by Group Sales Representatives
• 1997 - AARP
• 1998 - Individual
• 2002 - Federal Government Employees

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How does Medicare help?

• Government funding for people over age 65.
• Pays for acute care or hospital care
• Covered only 17.8 of long-term care costs on a
  national basis
• Pays 0 for custodial care (personal care) in a
  skilled nursing facility if that is the only kind
  of care required

Sources HCFA-DSSH, 2000, 2002 Guide to Medicare
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What is required for Medicare to pay for care in
a skilled nursing facility ?

• Must receive skilled care
• Must be a Medicare-approved facility
• Must have a 3-day prior hospital stay
• Pays 100 of cost for first 20 days
• 105 co-pay from day 21 through day 100
• 0 after day 100
• per benefit period

Source Medicare, 2003
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What does Medicare provide for home care?

• Must need doctor approved skilled care
• Medicare-certified home health agency
• Must be homebound

Source 2001 Medicare You, HCFA
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Medicare Perception Vs. Reality

• Medicare paid only 13.7 of the nations
  long-term care bill
• Yet...
• Most believe Medicare will pay for their
  long-term care needs

Sources HCFA-DHHS, 2001
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How does Medicaid work ?

• Joint state and Federal program
• Pays for health care for the poor
• Requires spending down of personal assets
• You may be temporarily ineligible for benefits if
  you transfer assets

Source National Underwriter, 2002
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How can you qualify for Medicaid ?

• 2 Factors
• Income
• Assets

Source National Underwriter, 2002
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Qualifying for Medicaid
Assets Everything you own that is countable.

• Countable (Non-exempt assets)
• Non-Countable (Exempt assets)

Source National Underwriter, 2002
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Qualifying for Medicaid
Income All the money you receive from any source.

• Social Security
• Interest and investment earnings
• Trusts
• Help from family members
• Pensions
• Annuities

Source National Underwriter, 2002
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Medicaid Rules

• Asset transfer
• 36 month look back (trust-60 months)
• Estate recovery by states

Source National Underwriter, 2002
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How can long-term care insurance help ?
It Can Help

• Avoid physical and financial dependence on family
• Protect hard-earned assets
• Maintain choice on how and where to receive care
• Assure high-quality care at an affordable price

Source ACLI, 2001
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What could get in the way ?
Excuses...

• I cant afford it.
• I can think about this later.
• It will never happen to me.
• My family will take care of me.

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Shopping for long-term care insurance

• Financial quality of the company
• How to qualify
• What benefits to buy
• Knowledgeable financial professional

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LTC Taxation

• Federal Legislation (HIPAA)
• Tax Qualification

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Federal Legislation (HIPAA)

• Health Insurance Portability and Accountability
  Act Clarifies tax treatment of long-term care
  insurance (1996)
• Sets standards for tax qualified plans
• Government endorsement of private long-term
  care insurance
• Created "qualified" and "non-qualified" plans,
  but treatment of non-qualified plans not clear

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Tax Qualified Plan

• Benefits generally not subject to Federal Income
  Tax (Per diem and other periodic payments made
  without reference to reimbursement of specific
  covered expenses in excess of 220 per day in
  2003 may be taxable
• Premiums Treated as Medical Expenses for
  itemizing medical deductions ( subject to 7.5 in
  excess of AGI)
• LTC expenses not covered by insurance can be
  treated as medical expenses for itemizing medical
  deductions (over 7.5 of AGI)
  

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Tax Qualified Plan

• Employer-paid LTC premiums for employees tax
  deductible to employer
• Employer payments are not included as income
• to employee

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Tax Qualified Long-Term Care Insurance Contracts

• Employer-paid LTCI premiums for employees may be
  deductible by the employer (without any
  limitation based on age of insured)
• Employer-paid LTCI premiums are not included as
  income to employee
• Qualified LTC expenses not covered by insurance
  can be treated as medical expenses for itemizing
  medical deductions (over 7.5 of AGI)

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Business Taxation Self-Employed

• If you are self-employed and purchase qualified
  long term care insurance on you and your spouse,
  you can deduct 100 of the premium in 2003
• The business may be able to deduct 100 of the
  premium on the non-owner employees
• The business can limit coverage under an insured
  plan to a select group of employees such as
  highly paid executives
• Benefits paid under the Tax Qualified Long-Term
  Care Insurance Contracts are generally tax-free

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Business TaxationC-Corporation

• The business can purchase Qualified LTC Insurance
  on bonafide employees and the full premium may be
  deductible.
• Employer can extend coverage under insured plan
  to select group of employees and may base
  eligibility on salary
• Employer-paid LTCI is not taxable as income to
  employees and may be deductible by employer
  (subject to possible limits)
• Benefits under the tax qualified insurance
  contract are generally received tax free

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Business Taxation S-Corporation

• Owners of 2 or more of the stock, who perform
  services for the corporation, are generally
  treated as self-employed individuals for LTC
  deduction purposes
• S-Corporation may be entitled to deduction for
  full premiums paid for non-owner employees
• Employer can extend coverage under insured plan
  to select group of employees and may base
  eligibility on salary
• Benefits under the tax qualified LTCI policy are
  generally tax free

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Business Taxation Partnership

• Long-Term Care and other AH Insurance Premiums
  paid for partners are included as income to each
  partner
• Partner may be eligible for self-employed
  deduction (100 of the eligible premium in 2003)
• Partnership may be able to deduct full premiums
  paid for partners and non-partners
• Benefits under the Tax qualified LTC insurance
  contract are generally tax-free

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Competition

• Know the Product you are selling
• Most competition is based on
• Underwriting rather than product