Statistics Explore Quick Facts about Long-Term Care (LTC) 4

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1 The Long-Term Care Partnership Program in Montana Revised April 2013 What is Long-Term Care? Services & Support: Chronic illness Disabilities Other conditions that be limiting physically or mentally 1 2 Statistics Explore Quick Facts about Long-Term Care (LTC) 4 3 Question: What percent of persons 65 & older are expected to need some type of long-term care? 1. 82% 2. 70% 3. 63% 4. 45% Fact Medicare 70% of persons age 65 or older Will need longterm care 5 Generally doesn t cover long-term care 6 1

2 Custodial Care Activities of Daily Living Question: What was the average length of stay in nursing home in Montana for 2013? years years years years 7 8 Facts Montana Average Length of Stay (2013) 2.4 years 1 in 5 stay more than 5 years 9 Question: What is the average monthly cost of nursing home care in Montana for 2013? 1. $8, $7, $5, $3, $2, Average cost of care Montana (2013) (nursing home) $5,955 monthly $71,456 annually 11 Average Cost in Montana for 3 yrs Individual $214,380 Couple $428,

3 National Average Long-Term Care Services Rate Service $19 hr Home Health Aide $62 day Adult Day Care Center $2,962 month Assisted Living Facility $183 day $5,490 month $204 day $6,120 month Semiprivate Room in Nursing Home Private Room in Nursing How can I provide for the cost of longterm care (LTC)? Home Ways to Afford LTC 1. Financial Resources Present Income Savings Ways to Afford LTC 2. Real property Sell it Acquire reverse mortgage Investments Ways to Afford LTC 3. Depend on: Spouse Adult Children 17 Ways to Afford LTC 4. Apply for Medicaid Must meet certain federal & state eligibility requirements 18 3

4 Ways to Afford LTC 5. Long-Term Care Licensed Agent Age When People Applied for LTC (2008) % % % % Group LTC Private Long-Term Care Who has? 12.4% of those age 65 & older 21 Ways to Afford LTC 6.Montana s New Long-Term Care Partnership Program 22 Historical Background How did the LTC insurance program develop? 23 Concern at State & Federal Levels Increasing cost of Medicaid for long-term care for the elderly 24 4

5 Question: On average what percent of nursing home costs were paid by Medicaid in Montana? 1. 92% 2. 86% 3. 73% 4. 60% 5. 54% 25 Who Pays Medicaid 60% of LTC costs Nursing home residents 29% of LTC costs Medicare/Other 11% 26 Federal Deficit Reduction Act of 2005 States were encouraged to develop programs that would help reduce the growth of Medicaid expenses 27 Montana Legislature (July 1, 2009) Responded with the authorization for a LTC insurance program 28 Montana Collaboration Private Companies Commissioner of Securities & (CSI) Department of Public Health & Human Services (DPHHS) Montana Medicaid Program 29 How does the Montana LTC insurance program work? 30 5

6 LTC Benefits Assets up to the value of the LTC policy will not count when making eligibility determination for Medicaid 31 Example: Betty 72-year old widow $50,000 CDs Wants to leave CDs to grandchildren for college 32 LTC Policy Betty purchased a LTC insurance policy Benefit limit (pool) $100, Benefits LTC policy will cover the costs of Betty s care Up to $100,000 benefit limit 34 $100,000 Benefit Depleted Betty s daughter contacted Office of Public Assistance Medicaid eligibility Daughter documents Betty purchased LTC insurance policy Full benefit ($100,000) had been utilized determination

7 Calculation Eligibility OPA excluded value of Betty s $50,000 (CDs) in Medicaid eligibility calculation 37 Betty met other eligibility requirements Became immediately eligible for Medicaid 38 Benefit to Betty She was able to keep $50,000 in CDs to leave to her grandchildren Why not just give away assets to become qualified for Medicaid instead of paying for a LTC insurance policy? Give away assets Federal & State laws require a period of Medicaid ineligibility 5-year look-back rule 41 Consequence Uncompensated asset transfer penalty Result: Ineligibility period before qualifying for Medicaid 42 7

8 Calculation Divide value of assets applicant gives away By monthly average nursing home cost Revisit Betty What if????? Betty had given $50,000 to her grandchildren in an attempt to become eligible for Medicaid? Montana $5, Calculation $50,000 CDs $5,955 = 8.4 Betty has almost 8½ months of Medicaid ineligibility 45 How will Betty pay for 8½ months of care? 46 Caution: Asset Protection Available only after all benefits of LTC insurance policy have been utilized 47 More Information Medicaid & Long- Term Care Costs MontGuide Search by MontGuide title

9 Protect vs. Qualify Purchasing LTC insurance policy may help protect assets Does not qualify a person for Medicaid coverage 49 What companies are authorized to provide LTC insurance policies in Montana? Companies As of April 2013 Web site Search: Long-term care Phone LTC Partnership Companies American General Life Bankers Life & Casualty Bershire Life Company of America Genworth Life LTC Partnership Companies LTC Partnership Companies John Hancock Life (USA) Massachusetts Mutual Life MedAmerica Mutual of Omaha New York Life 53 Northwestern Long-Term Care Prudential Company of America Transamerica Life United of Omaha 54 9

10 How can the financial stability of insurance companies be determined? 55 Rating companies A. M. Best Company Standard & Poor s Corporation Moody s Investor Services 56 Rate strength & viability to meet claims Investments Reserve adequacy Expense control Underwriting American Association for Long Term Care Summary from 3 rating companies for several insurance companies See Page 4 of MontGuide What is the cost of a LTC Partnership Policy? 59 Costs of premiums depends on Age at purchase Type of coverage 60 10

11 2011 Montana Long-Term Rate Comparison Guide Rates for regular long-term care policy Can provide basis for comparison Available from Montana Commission of Securities & 2011 Montana Long-Term Rate Comparison Guide Company Age 55 Age 60 Age 65 Age 70 Assurity $252 $323 $407 $553 Bankers $523 $592 $711 $921 Berkshire $265 $336 $459 $709 Genworth $238 $288 $387 $527 Massachusetts Mutual $237 $289 $367 $514 MedAmerica $320 $385 $479 $ Company Mutual of Omaha 2011 Montana Long-Term Rate Comparison Guide, con d. Age 55 Age 60 Age 65 Age 70 $299 $357 $482 $727 New York $214 $259 $332 $442 Northwestern $447 $510 $626 $845 Transamerica $358 $439 $556 $725 United of Omaha United Security Assurance $305 $364 $492 $741 $317 $366 $506 $ Clearinghouse National Clearinghouse for Long-Term Care Information Address in MontGuide page 5 64 How much of my income should be spent on LTC insurance? 65 Question: LTC premiums should consume no more than what percent of income? 1. 15% 2. 10% 3. 7% 4. 4% 66 11

12 National Association of Commissioners (NAIC) Recommends LTC insurance premiums should be no more than 7% of income 67 Example: Susan & Larry Joint income of $65,000 $65,000 X.07 $4,550 annually 68 Example: Susan and Larry $4, = $380 Monthly premiums should not be more than $380 What questions should be asked before purchasing a LTC insurance policy? Ask Location of care Home Assisted living facility Adult day care Benefits paid Each day? Monthly? Elimination period? Inflation adjustment? Nursing home

13 6 Resources are listed in MontGuide Website is linked within the MontGuide Addresses to write Phone numbers 73 Are premiums paid for a LTC insurance policy tax deductible? 74 Federal Income Tax Maximum Tax Deductible Premiums Attained Age of Individual Before Close of Taxable Year Maximum Tax- Deductible Premiums (2012) 40 or below $ $ $1, $3, & above $4,370 Example Dan & Marlene Paid $8,537 for LTC policies Limit: $3,500 each Total: $7,000 ($3,500 his + $3,500 hers = $7,000) Note: These amounts are subject to change each year Deduction Exceed 7.5% AGI $65,000 x 7.5% = $4,875 Amount allowed for LTC $7,000 - $4,875= Federal Tax Deduction = $2,125 on Schedule A $2,125 x.15 = $319 TAXES SAVED 77 Montana Does not duplicate federal rules! Allows for a tax deduction of total amount premiums paid for LTC insurance If you itemize 78 13

14 Montana Total amount premiums paid for LTC insurance Taxpayer Taxpayer s parents Taxpayers Montana: Schedule III Itemized Deductions Dollar for $ Not limited to amount above 7.5% 5. Medical insurance premiums not deducted on your return. 6. Long-term care insurance premiums not deducted elsewhere on your return. $ 0 $8,537 Dan & Marlene $8,537 grandparents Dan & Marlene Total Deduction Amount Dan & Marlene Tax Savings Federal Tax Bracket 15% Montana Tax Bracket 6.9% $2,125 $8, Federal $319 Montana $589 Total $ Are benefits from a LTC policy taxable? Generally, NO Limit is reimbursement received from the larger of Cost of qualified LTC $310 per day ($113,150) See form 1099-LTC 84 14

15 Is a LTC policy purchased before program began considered a policy? Purchased before July 1, 2009 Policy could be eligible for designation as a LTC policy 86 Company Ask if company would agree that the policy could be: Reissued Company submits Policy for Certification Montana Commissioner of Securities & Exchanged After Certification Company should provide to insured Partnership Status Is a LTC insurance policy purchased in another state certified in Montana? Disclosure Notice

16 Another state? Policy can be designated as certified if person later moves to Policy purchased in another state Montana Commissioner of Securities & (CSI) reviews policy Must meet all of following conditions: Montana Condition in another state Was insured person a resident of state when coverage first Definition Does policy meet IRS definition of a qualified LTC insurance policy? became effective? Policy Date Was policy date issued, re-issued, or exchanged after NAIC Rules Does policy meet specific rules of the National Association of Commissioners? July 1, 2009?

17 Does policy have an inflation rate clause? Age Under 61 yrs compound annual protection Age some level of inflation protection Age Over 76 inflation protection is optional 97 What if I want to make changes to my LTC insurance policy after it is purchased? 98 Changes may Affect whether your policy continues to be certified under Consult Agent To determine the effect of proposed changes Response in writing Montana law Summary: LTC Partnership Program Helps Montanans protect their assets against the cost of Summary: LTC Partnership Program Eventually will save state & federal government Medicaid LTC! expenses!

18 MSU Extension MontGuide Further information Long-Term Care Partnership in Montana MontGuide Co-authors Marsha Goetting Extension Family Economics Specialist P.O. Box Bozeman, MT phone: (406) fax: (406) MontGuide Co-authors Nancy Clark Shannon Mykins Barbara Flamand Public Assistance Bureau Montana Department of Public Health & Human Services Christina Goe Montana Commissioner of Securities and 105 MontGuide Co-author Joel Schumacher Montana State University Extension Economics Associate Specialist PowerPoint/Webinar Presentation Keri D. Hayes MSU Publications Assistant 106 Reviewers Reviewers of PowerPoint and script: Jane Wolery-Teton County Extension Agent Jesse Fulbright-Liberty County Extension Agent