Long Term Care Financing Reform What Role For States

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Long Term Care Financing Reform What Role For
States?

• Hunter McKay
• US Department of Health and Human Services
• Office of Assistant Secretary for Planning And
  Evaluation
• Contact Information 202-205-8999
• hunter.mckay_at_hhs.gov

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Long Term Care Financing

• The Status Quo The current financing system
  allows retirees and pre-retirees to remain
  blissfully ignorant of how long term care is
  financed until it is too late for anything but
  draconian measures.
• impoverishment welfare loss of control
• The Problem Ahead The size and characteristics
  of the soon to be retiring baby boom generation
  makes this approach unworkable unaffordable
  perhaps even unnecessary.

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Sources and Types of Funding

• Three public sources of financing
• Medicaid
• Medicare pay as you go no
  pre-funding
• Veterans
• Multiple Private Sources
• Out-of-Pocket pay as you go some pre-funding
• Insurance
• Annuity
  pre-funding
• Home equity conversion

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An Alternative Perspective

• Long term care financing reform is not just a
  Medicaid problem.
• Future Medicaid long term care users are not
  strangers.
• States have a vested interest in helping
  residents to 1) understand their risk, and 2)
  meet the financing challenge.
• No silver bullet a multi-faceted approach has
  the best chance for success.
• Increasing pre-funding must happen now.
• States Are Key

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Why Worry About Pre-Funding Now?

• Oldest baby boomer is aged 58 and the youngest is
  39.
• Opportunities for pre-funding diminish as boomers
  retire.
• Among those boomers are an indeterminate number
  of tweeners those for whom planning for long
  term care would make difference between using and
  not using Medicaid.

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What Can States Do?

• Change The Culture/Expectations
• No longer should pre-retirees and early retirees
  remain unaware of their risk and their options.
• Expand Financing Options
• Consumers should have a number of different ways
  to finance their own long-term care using a
  variety of different financial instruments.
• Focus on Medicaid
• States must know who is on Medicaid for long term
  care and how they got there.

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Change The Culture/Expectations

• Goal Increase awareness of long term care risk
  and options for planning ahead.
• Mechanisms
• Public awareness campaign, (PSAs, mailings, press
  events)
• Aging agencies offer to assist boomers in
  planning
• SHIP program offers assistance in buying
  insurance
• Recruit corporate partners to carry message
• Publish state guide to LTC insurance plans sold
  in state.
• Bottom Line State conveys a consistent message
  on personal responsibility for financing long
  term care.

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Expand Financing Options

• Goal Increase options for consumers to pre-fund
  long term care.
• Mechanisms
• Tax incentives consumers
• Tax incentives for businesses
• LTC insurance for state employees
• Partnership For Long-Term Care
• Housing agency offers reverse mortgage
• Single purpose loans - family loan programs.
• Bottom Line Consumers need more options to meet
  this challenge.

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Medicaid

• Goal Clarify expectations for the role that
  Medicaid plays in financing care.
• Mechanisms
• Review up front eligibility screens make
  excessive transfer of assets difficult
• Review estate recovery programs to ensure
  follow-through and fairness
• Research Who is spending down, Medicaid
  qualifying trusts, Medicaid friendly annuities
• Bottom Line Consistent and fair determination
  of Medicaid eligibility that provides incentives
  for planning.

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A Systems Approach

• Significant state innovation already exists in
  isolated program areas.
• What works for some states will not work for
  others.
• Long term care financing likely to remain a
  shared public-private responsibility.
• A systems approach uses multiple components to
  align consumer incentives, coordinate with public
  benefits and present a consistent message.
• Innovation within the context of fully developed
  strategy.

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State Examples

• Minnesota
• Statewide educational campaign
• State tax credit
• LTC insurance for state employees
• Transfer of assets waiver
• Milbank/EBRI project
• Expanded planning process
• Family loan program
• Partnership for long term care

• Connecticut
• LTC insurance for state employees
• Statewide educational campaign
• Partnership for long term care
• Home equity conversion program
• Transfer of assets waiver

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Summary

• States play a key role in changing the way
  retirees and pre-retirees plan for long term
  care.
• State leadership is critical is the following
  areas
• Awareness among pre-retirees and society in
  general
• New financing options designed to maximize
  flexibility and consumer control
• A clear sense of how public and private funding
  will be coordinated to align incentives and
  preserve Medicaid.
• The best chance for success is through a
  complementary set of strategies tailored for
  state characteristics, and oriented toward the
  long term.