Effect of a State Social Insurance Plan on State Medicaid LTC

1. 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 Academy Health Annual Research Meeting, Boston, MA

2. 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. Academy Health Annual Research Meeting, Boston, MA

3. Basic Assumptions • 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 Academy Health Annual Research Meeting, Boston, MA

4. Simulation Methodology • Applied a version of the Brookings-Lewin-ICF 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 Academy Health Annual Research Meeting, Boston, MA

5. Overview of Results • 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 Academy Health Annual Research Meeting, Boston, MA

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13. 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 • Increasing expenditures from family funds • Increasing use of paid care where voluntary care had been used previously Academy Health Annual Research Meeting, Boston, MA

14. Reservations • 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 Academy Health Annual Research Meeting, Boston, MA

15. References • 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. Academy Health Annual Research Meeting, Boston, MA

16. 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). Long-Term Care, Working Group Draft. Washington, D. C., Government Printing Office. Academy Health Annual Research Meeting, Boston, MA