Emerging Private LTC Financing Innovations

1
Emerging Private LTC Financing Innovations
Nebraska Initiative
The Second National Medicaid Congress June 14,
2007
Richard P. Nelson Erickson Sederstrom, P.C.
2
Agenda

• Nebraskas LTC Reform
• Own Your Future Campaign
• Answers4Families
• LTC Savings Plan
• LTC Insurance Partnership Program

3
Nebraskas LTC Reform

• Medicaid shapes Nebraskas LTC services
• Funds 57 of nursing home residents
• Institutional bias
• Underdeveloped community/home LTC infrastructure
• 40 of the Medicaid budget is spent on LTC
  services
• Serves 9 of the Medicaid population
• 25 of the Medicaid budget is spent on LTC
  facilities
• Serves 4 of the Medicaid population

4
Nebraskas LTC Reform
Projected population growth
5
Nebraskas LTC Reform
Strategy Encourage Nebraskans to provide for
their own LTC services as a part of their
retirement planning

• Awareness
• Own Your Future Campaign
• Answers4Families
• Advantage
• LTC Savings Plan
• LTC Insurance Partnership Program

6
Own Your Future Campaign
Awareness

• Sponsored jointly by State and US HHS
• Launched at Thanksgiving 2006
• Emphasis on family conversations/planning
• Governors letter to every household with a
  resident 45-65 years old
• Offered LTC planning kits
• 12 month media campaign

7
Own Your Future Campaign
Awareness
Phase III Campaign Activity
Letters Mailed Campaign Phase Tool Order Kits Response Rate
237,170 Nebraska (Phase III) 14,554 6.14
6,826,893 Total Phase III (6 states) 343,440 5.03
1,589,000 Total Phase II (4 states) 101,608 6.39
2,105,555 Total Phase I (5 states) 187,485 8.90
All Other States 21,858
10,521,448 Grand Total (of 3 Phases) 632,533 6.01
Phone and BRC orders as of 4-19-07 Web orders
as of 4-14-07
Based on actual kit counts, prior to removing
duplicates (to be comparable with other phases)
8
Answers4Families
Awareness
www.answers4families.org/ltcplanning
9
Answers4Families
Awareness
10
Answers4Families
Awareness
11
Nebraskas LTC Savings Plan
Advantage
www.treasurer.state.ne.us/ltcsp/
12
Nebraskas LTC Savings Plan
Advantage

• Favorable State Income Tax Treatment
• First in the nation
• Enacted in 2006, LB 965 (Neb.Rev. Stat., Sections
  77-6101 to 77-6105)
• Implemented for the 2006 tax year barely
• Available at participating banks and other
  chartered financial institutions and their
  subsidiaries

13
Nebraskas LTC Savings Plan
Advantage

• Tax deductible contributions
• 1,000 per person, 2,000 per joint return
• Maximum lifetime contribution
• 165,000 per person, indexed to inflation
• Tax-free investment earning
• Qualified individuals make tax-free Qualified
  withdrawals for LTC expenses and insurance
• 10 penalty for improper withdrawals
• Tax-free ownership transfer to spouse or upon
  death

14
Nebraskas LTC Savings Plan
Advantage
Qualified Individuals

• Age 65 or disabled persons, incurring medically
  necessary LTC expenses
• Proposed Any person incurring LTC expenses
• Age 62, purchasing LTC insurance for themselves
  or their spouse
• Proposed Age 50, including those for whom the
• taxpayer has an insurable interest

Proposed changes to the original qualifications
in LB 965 (2006) are contained in LB 304 (2007)
that is awaiting final passage at this writing.
15
Nebraskas LTC Savings Plan
Advantage
Qualified Withdrawals

• LTC expenses
• Costs in a LTC facility
• Costs of care at home
• Person is unable to perform multiple basic life
  functions independently
• LTC insurance premiums
• Policy meets the requirements of the LTC
  Insurance Act

16
Nebraskas LTC Savings Plan
Advantage
Quick Comparison IRS Medical Expense Deduction

• Eligible medical expenses and LTC insurance
  premiums must exceed 7.5 AGI
• LTC expenses must meet two eligibility tests
• Chronically ill
• Substantial assistance for 2 or more ADLs
• Minimum 90 days in 12 month period
• Cognitive impairment
• Threat to health or safety requires substantial
  supervision
• Plan of care prescribed by licensed health care
  practitioner

17
Nebraskas LTC Savings Plan
Advantage
Quick Comparison IRS Health Savings Account

• Tax deductible contributions for eligible persons
  
• High deductible health plan
• Higher contribution limits, no aggregate limit
• Excludes persons qualified for Medicare
• Tax-free growth
• Tax-free withdrawals for eligible expenses
• LTC expenses only for chronically ill with a
  prescribed plan of care

18
LTC Insurance Partnership Program
Advantage

• Shelters assets from Medicaid spend down
  requirements
• Dollar for dollar shelter
• Authorized as part of Nebraskas LTC Savings
  Account law (2006)
• Medicaid State Plan Amendment has been approved
  by CMS
• On administrative hold pending CMS clarification
• Qualifying inflation protection
• Reciprocity

19
Conclusion

• Competition for retirement/health planning
  dollars
• LTC Savings Plan benefit
• Favorable state income tax treatment
• LTC Insurance Partnership Program will add
  another modest benefit
• Medicaid asset shelter