Emerging Private LTC Financing Innovations

The Second National Medicaid Congress

June 14, 2007

Richard P. NelsonErickson & Sederstrom, P.C.

Nebraska Initiative

Agenda

Nebraska’s LTC Reform

“Own Your Future” Campaign

Answers4Families

LTC Savings Plan

LTC Insurance Partnership Program

Nebraska’s LTC Reform

Medicaid shapes Nebraska’s 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

Nebraska’s LTC Reform

65+ Population

0%

5%

10%

15%

20%

25%

2005 2010 2015 2020 2025 2030

Year

Per

cen

tag

e o

f P

op

ula

tio

n

65 to 84

Over 85

Over 65

Projected population growth

Nebraska’s LTC Reform

Awareness “Own Your Future” Campaign Answers4Families

Advantage LTC Savings Plan LTC Insurance Partnership Program

Strategy: Encourage Nebraskans to provide for their own LTC services as a part of their retirement planning

“Own Your Future” Campaign

Sponsored jointly by State and US HHS Launched at Thanksgiving 2006 Emphasis on family conversations/planning Governor’s letter to every household with a

resident 45-65 years old Offered LTC planning kits

12 month media campaign

Awareness

“Own Your Future” CampaignAwareness

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%

Phase III Campaign Activity

*Based on actual kit counts, prior to removing duplicates (to be comparable with other phases)

Phone and BRC orders as of 4-19-07 Web orders as of 4-14-07

AwarenessAnswers4Families

Awarenesswww.answers4families.org/ltcplanning

Answers4FamiliesAwareness

Answers4FamiliesAwareness

Nebraska’s LTC Savings PlanAdvantage

www.treasurer.state.ne.us/ltcsp/

Nebraska’s LTC Savings Plan

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

Advantage

Nebraska’s LTC Savings Plan

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

Advantage

Nebraska’s LTC Savings Plan

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

Advantage

Qualified Individuals

*Proposed changes to the original qualifications in LB 965 (2006) are contained in LB 304 (2007) that is awaiting final passage at this writing.

Nebraska’s LTC Savings Plan

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

Advantage

Qualified Withdrawals

Nebraska’s LTC Savings Plan

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

Advantage

Quick Comparison: IRS Medical Expense Deduction

Nebraska’s LTC Savings Plan

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

Advantage

Quick Comparison: IRS Health Savings Account

LTC Insurance Partnership Program

Advantage Shelters assets from Medicaid spend down

requirements Dollar for dollar shelter

Authorized as part of Nebraska’s LTC Savings Account law (2006)

Medicaid State Plan Amendment has been approved by CMS

On administrative hold pending CMS clarification Qualifying inflation protection Reciprocity

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