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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