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Welcome. Medicaid & Partnership Programs Cindy Eisenhower, CLTC National Training Director John Hancock Financial Services. Why are we here today?. Deficit Reduction Act of 2005 Tightened loopholes for Medicaid Allowed for expansion of Partnership programs

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Welcome

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  1. Welcome Medicaid & Partnership Programs Cindy Eisenhower, CLTC National Training Director John Hancock Financial Services

  2. Why are we here today? • Deficit Reduction Act of 2005 • Tightened loopholes for Medicaid • Allowed for expansion of Partnership programs • Required training prior to selling Partnership policies

  3. NAIC Producer Model Training • NAIC amended LTC Model Policy Act in 2006 with the NAIC Producer Training Model • The NAIC requires training for ALL producers, not just those selling Partnership policies • The same materials must be covered as per the DRA • 8 hours of initial training with a 4 hour refresher course every two years (varies in some states) • It is up to each state to adopt the NAIC Producer Training Model • Training does not need to be CE, but a state can require that it is (exception is VA, AZ and IA)

  4. Training Reciprocity • NAIC intended for the training to be reciprocals with training in other states • Partial Reciprocity • Some states have required state specific training • Granting only “partial reciprocity” • Supplemental training for these states is available through carriers and course providers • Original 4 Partnership States • Training is NOT reciprocal

  5. LTC Insurance Legislative Timeline 1988- MCCA Medicaid Eligibility Look Back- 30 months MMMNA (Minimum Monthly Maintenance Needs Allowance) CSRA (Community Spouse Resource Allowance) 1993 OBRA Look back 36 months for transfers, 60 months for irrevocable trusts Estate recovery Partnership expansion ends 1997-HIPAA Medicaid planning a crime Tax qualified long-term care insurance 2000- Rate Stability

  6. LTC Insurance Legislative Timeline 2005- DRA Changes to Medicaid Look back, home equity, annuities, life estates, income first rule, CCRC’s Penalties Expansion of Partnership programs 2015- Baby Boomers turn 65 78-80 million 2040 2 workers for every 8 retirees 1 sixteen year old for every 6 sixty-five year olds

  7. Source of Nursing Home Payments Center for Medicare and Medicaid Services (CMS) National Commission for Quality LTC, January 2007

  8. An excerpt on Medicare from the Shopper's guide states: “Most long-term care is furnished in nursing homes to people with chronic, long-term illnesses or disabilities. The care they receive is personal care, often called custodial care. Medicare does not pay for custodial care. Medicare pays less than 10% of all nursing home costs. To qualify for the Medicare nursing home benefit, you must spend three full days in an acute care hospital within 30 days of your admission to a nursing home. You must also need skilled nursing care for seven days a week, and or rehabilitation services at least five days a week. Medicare will not pay for your stay if you need skilled nursing or rehabilitation therapy only once a week."

  9. Medicaid 9 What is it? Deficit reduction act Medicaid services Eligibility Transfer of assets Look back and Penalty period Estate recovery 9/14/2014

  10. What is Medicaid? 10 • Jointly funded and administered by federal government through Centers for Medicare and Medicaid Services (CMS) and the states • Unlike Medicare, Medicaid provides extensive benefits for long-term care • Medicaid is primary public financing source for long-term care • Medicaid does not require that all care be skilled • Medicaid is designed to pay for long-term care, while Medicare pays for short term care 9/14/2014

  11. Medicaid 11 9/14/2014

  12. Deficit Reduction Act Changes 12 • Significant changes in Medicaid rules • DRA cuts nearly $40 billion over five years from Medicare, Medicaid, and other programs • Significant changes: • Look-back period • Transfer for penalty start date • Undue hardship exception • Treatment of annuities • Community spouse income rules • Home equity limits • Treatment of investments for CCRCS • Promissory notes and life estates • State long-term care partnership programs 9/14/2014

  13. Medicaid Services 13 • Required • Hospitalization • Physician Services • Laboratory and X-Ray • Nursing home care • Optional • Home Care • Personal Care • Homemaker Services • Assisted Living Facilities • Rehabilitation • Physical, Speech, and Occupational Therapy • Respite Care • Adult Day Care • Hospice Care 9/14/2014

  14. Uniform level 14 • States must provide a uniform level of services throughout the state • States cannot vary amount, duration, or scope of covered services based on the individual's residence • States must provide uniform treatment for all beneficiaries • States cannot vary amount, duration, or scope of a covered service “solely on the basis of an individual's diagnosis, type of illness, or condition” 9/14/2014

  15. Home and Community Based Medicaid Waivers 15 • States can request Medicaid waivers so they can provide homecare services to keep elderly individuals at risk of going to a nursing home in their homes • Under the DRA, states can request additional grant money to fund alternative services for those on Medicaid 9/14/2014

  16. Medicaid Eligibility GuidelinesLong-Term Care 16 • Each state follows federal guidelines to determine eligibility as to what services they will pay • A person eligible in one state may not be eligible in another. • If they are eligible in another state, they may not get the same benefits • Three types of eligibility requirements that must be met: • 1) General Eligibility • 2) Functional Eligibility • 3) Financial Eligibility 9/14/2014

  17. Primary Residence 17 • Prior to the enactment of the Deficit Reduction Act of 2005 (DRA) on February 8, 2006, a single or married individual applying for Medicaid nursing home coverage could exclude a house of unlimited value • The DRA eliminates the ability of states to exempt more than $500,000 of a home’s equity. If an individual’s equity interest in the home exceeds $500,000 Medicaid cannot pay for long-term care services • The DRA permitted the states to increase that $500,000 limit to as much as $750,000, if they passed a state law that did so • See Addendum B for these states • For an individual there is still no limitation on value of home • The rule capping home equity may be waived if the individual is able to prove hardship as defined by each individual state 9/14/2014

  18. Transfer of Assets 18 • Congress implemented penalty periods to prevent Medicaid applicants for giving assets away and then qualifying for Medicaid right away • The restrictions have been made harsher by the DRA • In evaluating an asset transfer, states consider whose assets were transferred, to whom they were transferred, when the asset was transferred, and the purpose of the transfer 9/14/2014

  19. Non-Permissable Transfer of Assets 19 • Assets given away without receiving something of essentially equal value in return • If an applicant took action to avoid receipt of an asset to which they are entitled • Elimination of joint ownership share • Trusts • Annuities • Promissory Notes • Life Estates 9/14/2014

  20. Look Back and Penalty Period 20 • The DRA gave states the authority to “look back” at an applicant’s finances for 5 years from the date they apply for Medicaid • Prior to this it was 3 years • Any transfers that were made during that period for less than fair market value create a penalty period • The penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid 9/14/2014

  21. Penalty Period Calculation 21 • The penalty period is determined by dividing the amount transferred by the average Medicaid monthly nursing home rate • The penalty period is the period of time in which the applicant would have been able to pay for their own long-term care had they not transferred their assets 9/14/2014

  22. Penalty Period Start Date 22 • For transfers taking place on or after February 8, 2006, the penalty period begins on the date the applicant becomes eligible for Medicaid, and is receiving institutional care that Medicaid would pay for were it not for the imposition of the penalty • For transfers taking place prior to the February 8th, 2006, the penalty period begins on the first day of the month in which the applicant transferred assets for less than fair market value • Prior to the DRA, it was possible that the penalty period could expire by the time Medicaid benefits were applied for 9/14/2014

  23. Penalty Period ExamplePrior Law 23 • Nelle applies for Medicaid coverage on February 1, 2006 • Nelle discloses a $22,000 gift made to a grandchild on July 1, 2003 • The average monthly cost of nursing home care is $4,000 • Since the transfer was uncompensated and occurred during her 36-month look-back period. Thus, a penalty period calculation must be employed.  • $22,000/$4,000 = 5.5 month Penalty Period • Nelle’s penalty period begins July 1, 2003 (the date of the transfer) and runs for 5.5 months to mid-November. • Nelle’s penalty period had already expired by the time she applied for Medicaid on February 1, 2006. 9/14/2014

  24. Penalty Period ExampleNew Law- Different Result! 24 • Nelle applies for Medicaid coverage on March 1, 2009, • Nelle discloses a $22,000 gift made to a grandchild on July 1, 2006 • The calculation of the penalty period remains the same: 5.5 months • The penalty period does not begin until March 1, 2009 (the date she applied for Medicaid) • Under the old law the penalty period would have started on the date she transferred the money on July 1, 2006 • Nelle will be denied Medicaid coverage for 5.5 months until mid August of 2009 9/14/2014

  25. Transfer Penalty Exceptions 25 • A spouse • A blind or disabled child • A trust for the sole benefit of a disabled individual under age 65, even if the trust is for the benefit of the Medicaid applicant, under certain circumstances 9/14/2014

  26. Transfer of the Home 26 • Special exceptions apply to the transfer of a home • The Medicaid applicant may freely transfer his or her home to the following individuals without incurring a transfer penalty • The applicant’s spouse • A child who is under age 21 or who is blind or disabled • Into a trust for the sole benefit of the disabled individual under age 65, even if the trust is for the benefit of the Medicaid applicant, under certain circumstances • A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home • A “caretaker child” who is defined as a child of the applicant who lived in the house for at least two years prior to the applicants institutionalization and during that period provided care that allowed the applicant to avoid a nursing home stay 9/14/2014

  27. Annuities 27 • Changes the DRA made regarding annuities • Annuities are treated as prohibited asset transfers subject to the penalty period unless: • Applicants disclose interest they or community spouse have in an annuity, regardless if its irrevocable or is treated as an asset • The state must be named as the remainder beneficiary • States can require the issuer to notify them when changes are made to the withdrawal amounts • Even if annuity is not subject to penalty under provisions of DRA, this does not mean that it is excluded as income or resources 9/14/2014

  28. Undue Hardship Exception 28 • Prior to the DRA, federal law allowed for an exemption from the transfer penalty if it would cause “undue hardship”, but left it up to the states to establish procedures • The DRA requires compliance with a hardship waiver process that complies with federal law • “Undue hardship” exists when enforcing the penalty period for asset transfers would deprive the Medicaid applicant of • Medical care necessary to maintain the applicant’s health or life • Food, clothing , shelter, or necessities of life 9/14/2014

  29. Estate Recovery and Liens 29 • States must attempt to recover from a Medicaid beneficiary’s estate whatever benefits it paid for the recipient's care. • No recovery can take place until the death of the recipient’s spouse, or as long as there is a child of the deceased who is under 21, blind or disabled • States can recover from probate estate or property that passes outside of probate (jointly held assets, living trust, or life estates) 9/14/2014

  30. Estate Recovery and Liens 30 • Given the rules of Medicaid eligibility, the only probate property of substantial value that a Medicaid recipient is likely to own at death is his or her home • States that have not opted to broaden their estate recovery to include non-probate assets may not make a claim against the Medicaid recipient’s home if it is not in his or her probate estate • In addition to the right to recover from the estate of the Medicaid beneficiary, state Medicaid agencies must place a lien on real estate owned by a Medicaid beneficiary during their life unless certain dependent relatives are living in the property. • If property is sold while the beneficiary is living they will cease to be eligible for Medicaid and would have to pay back the lien 9/14/2014

  31. Partnership Expansion Partnership Policies Available in All States

  32. Original 4 Partnership States • In 1988 The Robert Wood Johnson Foundation sponsored and provided financial grants to demonstrate projects in four states: California, Connecticut, Indiana, and New York • The U.S. Department of Health and Human Services (HHS) gave these states permission to modify their Medicaid eligibility rules to provide additional asset protection • These are called Partnership Programs

  33. Original 4 Partnership States • All four states require the following of Partnership Policies • Must provide comprehensive benefits (facility and home care) • Policies must include 5% compound or simple inflation protection (depending on age) • Policies must be federally tax qualified policies • Daily benefit of policy must be a minimum amount (varies by state)

  34. Original 4 Partnership States • All four states offer dollar-for-dollar approach to asset protection • To be covered in detail shortly • New York and Indiana also offer an alternative called “total asset” protection • Policyholders are only allowed asset protection in the state they bought their policy • Exception is Connecticut and Indiana because of reciprocity agreement

  35. Halt of Future Partnerships • Federal Omnibus Budget Act of 1993 (OBRA 93) halted the growth of new Partnership programs • New programs were required to apply estate recovery to protected assets • An individual with a Partnership policy could protect assets as long as they were living, but the state would have to recover from the estate • The original 4 programs were exempted from this rule

  36. DRA - Partnership Expansion • The DRA paved the way for other states to participate in Partnership programs • The DRA lifted the estate recovery requirement put in place by OBRA ‘93 • Policyholders with the DRA Partnership policies can protect their assets after death, just like the original 4 Partnership states

  37. DRA- Partnership Expansion • Partnership program helps fund long-term care needs through a collaborative effort between the public sector (state government) and the private sector (insurance carriers). • The goal of the program is to increase the number of people that purchase long-term care insurance, to help reduce the number of people that eventually apply for Medicaid • To establish a Partnership program the state files a “state plan amendment” which changes their Medicaid eligibility rules

  38. State Partnership Implementation • The DRA allows each state to implement a Partnership program • The DRA imposes certain requirements, but leaves some rules up to the state • The state must file a State Plan Amendment (SPA) with the Centers for Medicare and Medicaid Services (CMS) which is part of the Department of Health and Human Services (HHS) • An SPA gives the state the ability to request federal approval to make changes to their Medicaid program. It also includes the state’s effective date.

  39. What is the LTC Partnership Program? • A resident of a Partnership state purchases a tax-qualified long-term care insurance policy • The policy must meet all state specific requirements • When the policyholder goes on claim the policy pays benefits • When they can no longer afford any co-payments they may have, or exhaust their benefits they apply for Medicaid

  40. What is the LTC Partnership Program? • Since the state has amended their Medicaid eligibility rules, they are allowed to protect assets that would have otherwise been spent on their care • These assets will remain exempt (protected) even upon death

  41. Dollar for Dollar Asset Protection • Under the DRA, states are allowed to develop LTC partnerships using the “dollar-for-dollar” model. • Dollar-for-dollar policies protect a specific amount of personal assets. For every dollar that an LTC Partnership insurance policy pays out in benefits, a dollar of assets can be protected during the Medicaid eligibility determination. • The amount protected is calculated based on the amount of benefits paid by the LTC insurance company on the policyholder’s behalf (it is not equal to the amount of the premiums paid and not necessarily equal to the maximum benefit). • Protected assets are exempt from Medicaid estate recovery

  42. Exhaustion of Benefits • The original 4 Partnership states require that all benefits must be exhausted before a policyholder can apply for Medicaid • The DRA allows policyholders to apply for benefits prior to exhausting benefits • States can choose to mandate exhaustion of benefits • The amount of assets that can be protected is equivalent to the benefits paid at the time of application for Medicaid • If the policyholder has NOT exhausted benefits and applies for Medicaid, no further long-term care benefits will qualify for asset protection • If the policyholder has exhausted benefits, they would receive asset protection for the total amount of benefits paid under the

  43. Applying for Medicaid Prior to Exhaustion of Benefits • The policyholder’s LTCi policy may have already paid out the equivalent to the amount of assets they need to protect • The policyholder may have a co pay that is depleting their assets. If they are eligible for Medicaid they could stop paying the co-pay out of their own pocket and instead access Medicaid benefits

  44. Partnership ProgramMedicaid Spend Down *The cash allowance the individual or couple is allowed to keep would be deducted from this amount

  45. State Uniformity • The DRA intended to establish nationwide uniformity among • From state to state • Between Partnership and non-Partnership policies • Makes it easier for consumers and producers to decide which is the best policy for their needs • DRA requires that all policies are based on the NAIC LTCI Model Act and Model Regulation • DRA prohibits states from imposing any additional requirements on Partnership policies that are not imposed on non-Partnership policies • The main difference between these policies will be inflation protection

  46. Carrier Reporting • DRA requires that carriers report certain data to the states on Partnership policies sold by agents • Medicaid offices need to know benefits paid to a policyholder so they can calculate what assets are protected • Data will also help Federal and State government evaluate the success of the Partnership programs

  47. Partnership Policy Requirements • Must meet requirements of the NAIC LTC Model Act and Regulations • Must be tax-qualified (TQ) as defined in Section 7702B(b) of the Internal Revenue Code • Policy must be issued after the date on which the state Partnership program goes into effect (specifically, the effective date of the approved State Plan Amendment • Insured must be a resident of the state sponsoring the Partnership program when coverage first becomes effective

  48. Inflation Protection Requirements • Main difference between a Partnership policy and a non-Partnership policy is inflation protection • Requirements are based on age the policyholder is when their LTCi becomes effective • Inflation protection is important so that policyholders have adequate coverage when needed. If they don’t they may end up on Medicaid anyways which would defeat the purpose of the Partnership program.

  49. Inflation Protection Inflation protection will be required as follows: • For ages 60 or younger- compound inflation is required • Any Percentage, or CPI Inflation • For ages 61-75- some form of inflation is required • Simple inflation, or CPI inflation • For ages 76 and older- no inflation is required • Dropping the inflation in the future can cause the policy to lose its Partnership status

  50. Changes in Coverage • DRA allows policyholders to make changes after it is in force as long as it still meets the state’s Partnership requirements • If a policyholder decreases or cancels the inflation protection in their policy, they may lose their Partnership status • States have the option to regulate this and can determine if they will allow a policyholder to decrease their inflation as they age

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