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ON OUR OWN: Planning & Paying for Long-term Care in Minnesota

ON OUR OWN: Planning & Paying for Long-term Care in Minnesota. Tina Armstrong, Director of Health Policy MN Department of Commerce Kelli Jo Greiner, Team Lead MN Board on Aging Consumer Choices Team Age and Disabilities Odyssey June 20, 2011 1:30-2:45 Mayo B.

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ON OUR OWN: Planning & Paying for Long-term Care in Minnesota

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  1. ON OUR OWN: Planning & Paying for Long-term Care in Minnesota • Tina Armstrong, Director of Health Policy • MN Department of Commerce • Kelli Jo Greiner, Team Lead • MN Board on Aging Consumer Choices Team Age and Disabilities Odyssey June 20, 2011 1:30-2:45 Mayo B

  2. Plan Well to Age Well in Minnesota Kelli Jo Greiner MN Board on Aging

  3. What is long-term care? • Mostly non-medical care • For persons of all ages with chronic illnesses or disabilities • Typically helps people with activities of daily living like dressing, bathing, and using the bathroom • Provided in home, nursing home, assisted living facility, etc.

  4. Pressures on LTC system • Baby Boom + medical advances → Aging of population • Lower worker-to-retiree ratio → Lower tax collections, higher expenditures • Caregiver shortage → Higher cost of care • Families are smaller and spread out → Less informal care provided by children

  5. Federal Business Drivers • Messages coming out of federal government • Reduce fiscal pressure on Medicaid and Medicare • Increasing need to explain and manage health insurance options • CMS is placing a bigger emphasis on diversion and community living • CMS is starting new efforts focused on improving care transitions between hospitals, NHs and community

  6. Consumer Facts • Information for consumers is often not accessible and too high of a literacy level • People who need help, don’t self identify • There are many “sources” of information and assistance but not all are neutral • Generation Xr’s and Millenials have high demands for technology and we are not prepared as they move into the role of caregiver

  7. Information About LTC • Media presents negative views • Other information sources • Information clutter is a problem • “Experience” is the best teacher

  8. LTC Cost as an Issue • Growing awareness of LTC costs • People have more accurate sense of LTC costs • Many still think “It won’t happen to me” • People perceive LTC insurance as “too expensive” • Some feel “stuck” between high costs of care and high costs of “planning”

  9. Elderly group will increase

  10. The Motivators to Plan for LTC • Demographic changes • Pressures on LTC system • Increasing costs • Medicare does not pay • Medical Assistance is the safety net • Self-determination, self control, self directed

  11. Why plan now? • Peace of mind--reduces fear and worry • More choices and options are likely • Increases likelihood your goals and wishes will be known and followed • Reduces burden for others who will need to carry-on • Reduces potential for misunderstandings and conflict

  12. Who doesn’t pay for most LTC? • Medicare pays for VERY LITTLE of LTC services • Home Health Care • Must receive intermittent skilled care definition • Must be homebound • Does not cover 24 hour care • Must use Medicare certified provider • Physician must certify need • Coverage (if qualify) • $0 deductible • $0 coinsurance

  13. Who doesn’t pay for most LTC? • Skilled Nursing Facility (SNF) • Must have 3 day hospital stay prior to admission (some Medicare Advantage plans do not require) • Must enter SNF within 30 days of hospital discharge • Must receive daily skilled services or rehab 5X or more per week • Physicianmust certify need for skilled placement • Coverage (if qualify) per benefit period • Days 1-20 (Medicare pays 100%) • 21-100 (Medicare beneficiary must pay coinsurance of $137.50 per day) NOTE: Less than 8% of all Minnesota SNF care is covered by Medicare

  14. Who doesn’t pay for long-term care? • Private Health Insurance • Similar Requirements to Medicare • Cannot be Custodial Care • Benefit Limits

  15. Who does pay for long term care? • Income and life savings of elders and family members • Sell home and use equity • Unpaid family caregivers provide majority of long term care (3/4ths) • Working caregivers spend an average of 22 hours a week providing elder care • Caregiving responsibilities can last 8-10 years • Working caregivers lose an average of $650,000 in lost wages, lost Social Security benefits, and lost pension contributions.

  16. Who pays for long term care? • Medical Assistance is a critical safety net • A need-based state/federally funded program which does pay for home, community, and skilled nursing care • Critical to understand income and asset rules • “Healthy” spouses are protected from poverty

  17. Who pays for LTC? Source: www.longtermcare.gov, 2010

  18. Why plan for long-term care? • We are all at risk • Percent of persons 65+ who will need some LTC: 70% (www.longtermcare.gov) • Average length of care: 3 years (www.longtermcare.gov) • Average projected lifetime cost for a healthy 55 year old: $162,000 in current dollars (www.medicare.gov)

  19. Understand Financing Alternatives and Consequences • There is no one financial answer or solution • Options and choices typically decrease with age and increased risk • What was may no longer be . . .change is a given. • Consider the consequences of “doing nothing”

  20. Minnesota Average Annual Care Costs in 2011

  21. Overview of Options to Pay for Long-term Care

  22. Once you have read one long-term care policy, you’ve read one long-term care policy!

  23. Option 1 and 2 Long Term Care Insurance and LTC Partnership Policies Tina Armstrong MN Dept of Commerce

  24. Criteria for Benefits • Typically Pays Benefits when: • Unable to Perform 2 of 6 “Activities of Daily Living” Eating Bathing Toileting Dressing Transferring Continence OR • Severe cognitive impairment

  25. Features and Benefits • Covered Services • Benefit amounts • Inflation protection • Nonforfeiture provisions • Elimination period • Optional Coverage Features

  26. Covered Services • “Facility Care Only” or “Home Health Care Only” or “Comprehensive” policy • Comprehensive policy includes: Nursing home Assisted living Home care Adult day care Respite care Hospice care Supportive services

  27. Daily Benefit • Choice of daily benefit amount for facility care • Consider Average costs in your area • Choose home care benefit amount • Can be specific dollar amount or a percentage of the facility care amount (e.g., 50%, 75% or 100%) • Consumer preference and affordability are important factors in choosing

  28. Weekly or Monthly Benefit • Less Common for policies to have weekly or monthly maximums • More flexibility to cover high expenses on days when no family care is available

  29. Example (continued) Policy A Daily Benefit • Policy A pays home care expenses up to $60/day • Policy A pays Leo $300 for the week of care ($60 x 5 days) • He has an additional $100 of expenses that the policy will not cover Policy B Weekly Benefit • Policy B pays home care expenses up to weekly maximum of $420 ($60/day x 7 days/week) • Policy B reimburses all of Leo’s costs of $400 because he has not reached his weekly maximum of $420

  30. Lifetime Coverage Amounts • Buyer selects lifetime maximum they prefer • Most policies have a “pool of dollars” approach • Some older policies count “days of care” • Most policies have a single maximum for all covered services • Some older policies have separate maximums for facility care vs. home care • Some benefits may also have specific limits (e.g., home modification or caregiver training)

  31. Pool of Dollars Maximum • You decide how to use your benefits when you need care • Can use all of it for home care or all for nursing home or any combination you prefer • Pool of dollars approach lets you stretch how long benefits last

  32. Calculation of Lifetime Max • Most frequently calculated in terms of years • Nursing home daily benefit x 365 days per year x number of years selected • Examples: $100/day x 365 x 3 years = $109,500 $100/day x 365 x 5 years = $182,500

  33. How Long Will Benefits Last? • Depends on type, amount and frequency of care you receive • Benefits last longer if you do not need care every day or if care costs less than the allowable benefit amount

  34. Example • Policy pays: • $100 per day nursing home care • $100 per day assisted living facility • $50 per day home care • Lasts 3 years if you receive all your care in nursing home every day at $100/day • Lasts 3 years if you receive all your care in assisted living facility every day at $100/day • Lasts 6 years if you receive all your care at home every day at $50/day

  35. Lifetime/Unlimited Coverage • Most companies offer an “unlimited” or lifetime coverage option • Benefits last as long as you need care • No overall dollar limit, but daily limits still apply • Many people like “lifetime coverage” since they cannot “run out” of benefits if they need care for a long time • Costs more

  36. Benefit Payment Method • Reimbursement – Policy pays 100% of LTC expenses up to a pre-set amount you choose • Indemnity – Policy pays a pre-set amount each day you have LTC expenses even if your expenses are less than that • Disability – Some policies pay “cash” for each day you are disabled, even if you do not incur any LTC expenses • You decide how to spend that money

  37. Example Payment each Method Marie is in nursing home that costs $120/day • Reimbursement policy pays her actual expenses up to $150/day • Policy pays $120 for Marie’s nursing home care • Indemnity policy pays $150/day • Policy pays fixed amount, so pays Marie $150/day • Disability policy pays Marie $150 per day • Marie decides to move out of the nursing home after 3 days and live with her daughter • Marie continues to receive $150 per day from her policy even though she is not incurring any LTC expenses and is receiving care from her family

  38. Inflation Protection • Important for benefits to keep pace with rising costs • Nationally, LTC costs are rising at 4% per year • All LTC plans must offer 5% compound inflation protection • Applicant must sign a statement rejecting it if he/she does not want it

  39. Inflation Protection Additional Choices • Compound vs. Simple • Fixed (3%, 5%) vs. Variable (CPI) • Automatic vs. Future Purchase Option • Other Schedules

  40. Compound Inflation Protection • Costs the most initially, but provides best hedge against inflation • Can be more affordable in the long-run • Policies offer 5% annual coverage increase • Increases continue throughout the interval of coverage • All coverage amounts increase (daily amounts and lifetime amounts)

  41. Example: Compound Inflation Year Daily Benefit Lifetime Maximum* 1 $130 $ 142,350 5 $158 $ 173,010 10 $202 $ 221,190 15 $258 $ 282,510 20 $329 $ 360,255 Rule of Thumb: benefits almost double every 15 years *Based on a 3-year policy, assuming no benefits have been paid out

  42. Simple Inflation Protection • Similar to compound, except increase is the same each year – flat dollar amount • 5% simply means 5% of the original benefit amount • Benefits increase but premium does not change as a result

  43. Simple Inflation Protection • Continues for life of the policy (even while receiving benefits) • Costs less than compound because benefits increase more slowly • In the long-run, does not keep pace with inflation as well as compound inflation protection

  44. Example: Simple Inflation Year Daily Benefit Lifetime Maximum* 1 $130 $142,350 5 $156 $170,820 10 $188 $205,860 15 $221 $241,995 20 $253 $277,035 *Based on a 3-year policy, assuming no benefits have been paid out

  45. Comparison – Daily Benefits Compound Inflation Year 1 = $130 Year 5 = $158 Year 10 = $202 Year 15 = $258 Year 20 = $329 Simple Inflation Year 1 = $130 Year 5 = $156 Year 10 = $188 Year 15 = $221 Year 20 = $253

  46. How FPO Works • Able to buy additional coverage amounts every few years, without evidence of good health • Premium for the additional coverage is based on your age at the time you accept the added benefits • Additional amount may be based on consumer price index (CPI) or 5% annual increase from the last offer

  47. How FPO Works (continued) • Offers may continue while you receive benefits, but usually they end once you go on claim • You can usually “skip” some of the offers and still take others • Offers may also end if you decline two of them

  48. Automatic vs. Future Purchase

  49. Inflation Protection Considerations • Do not just ignore the issue • Compare how the inflation choices work and what they cost • Younger people are more likely to want compound inflation protection • Older people may consider less expensive inflation approaches • Important to be aware of the “pros” and “cons” of each option

  50. Nonforfeiture Option (NFO) • All insurers are required to offer NFO to: • the group policyholder (e.g., employer or association) • applicants of individual policies • Provides continuation of coverage, on limited basis, if you stop paying premiums and let coverage lapse • The benefit becomes effective no later than 3-years after the effective date of the rider • Most provide coverage equal to 30x the daily benefit amount or 100% of premiums paid (minus claims) at the time of lapse (whichever is greater)

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