LTC Bullet:  NAHU on LTC Financing

Friday, September 18, 2015


LTC Comment:  The National Association of Health Underwriters (NAHU) has published its analysis and recommendations regarding long-term care financing.  Some background, the executive summary and a link to the full report follow the ***news.***

*** SOA CALL FOR PAPERS:  The Society of Actuaries seeks essays on “three major sub-topics -- Defined Contribution Plan Risk Management Strategies; Decumulation in Retirement; and Long-Term Care Financing.  [Emphasis added.]  Individuals may submit essays on any or all of the topics and topics can be combined or treated separately.”  Check out SOA’s call for papers here.  November 1 is the deadline for submission of essays.  Prize money of $10,000 will be distributed for the best essays. ***

*** OUR LTC CLIPPINGS service ensures you’ll see critical news, articles, reports and data before your clients or competitors do.  If you’re a member of the Center already, add the “Clippings” by becoming a “Premium Member” at only 27 cents a day more ($100 per year.)  Contact Damon at 206-283-7036 or to subscribe to “LTC Clippings.”  Here’s a sample from this week.

9/17/2015, “Health Policy Brief:  Rebalancing Medicaid Long-Term Services and Supports," Health Affairs, September 17, 2015.

Quote:  “Twenty-five years after the passage of the Americans with Disabilities Act (ADA), the Medicaid program is also marking an important milestone in system transformation in 2015. The national profile of Medicaid long-term services and supports (LTSS) expenditures has shifted away from primary dependence on institutional care. In 2013 the majority of Medicaid LTSS spending was for the first time focused on home and community-based settings instead of institutional care, and the Centers for Medicare and Medicaid Services (CMS) projects that community-based spending will reach 63 percent of all Medicaid LTSS spending by 2020. However, the fundamental structure of the Medicaid statute continues to promote an ‘institutional bias’ that strongly limits the potential for true balance for beneficiaries.”

LTC Comment:  This history of Medicaid’s rebalancing from principally institutional to mostly home and community-based care is worth reading, but take it with a grain of salt.  There is no reliable evidence that rebalancing saves Medicaid money and one thing is for sure, the more Medicaid pays for home care that people want instead of nursing home care they’d rather avoid, the more people will seek Medicaid and the more its cost for LTC will increase.  Be sure to note that while HCBS now consumes over half of Medicaid LTC expenditures overall, that’s not the case for elderly recipients for whom 71 percent of LTC expenditures still pay for institutional services. ***


LTC Comment:  Last week, the NAHU LTCi Advisory Group released its “Long-Term Care White Paper” with a publication date of June 2015.  Read its “Executive Summary,” dated September 2015, below and here.  Find the full report here.  Center Premium Member Sally Leimbach served on the LTCi Advisory Group.  She explains the white paper’s background as follows:

This paper has been over five years in the creation with fits and starts.  The content has changed over that time and certainly the degree of support that NAHU is now giving LTCi.  Claude Thau stuck with the project through thick and thin over the entire time.  John Parker was invaluable during the last year of rewrites.  Joe Lesson, Linda Thalheimer, Honey Leveen and I rounded out the subcommittee that contributed and persevered through the rewrites.  All but Joe will continue on the First Revision Committee that will begin our work next week.  Dan Samson, NAHU, gave us the “shell” to work with last September and has had the daunting task of listening to us hash out changes and then record them accurately regarding a subject that he is now much more knowledgeable about than when he started.

Anyone who has tried to create a coherent policy paper as part of a group effort knows how difficult a task that is.  “A camel is a horse made by a committee” goes the proverb.  So the NAHU LTCi Advisory Group deserves congratulations and a vote of thanks for their hard work and perseverance.

The Center for Long-Term Care Reform was asked for our critical analysis of the NAHU white paper.  We provided comments privately.  We will look forward to seeing the final, revised version of the white paper and we’ll bring that to you as well when it’s available.

For now, here’s the first published draft’s Executive Summary:


Long-Term Care Executive Summary

The National Association of Health Underwriters (NAHU) is the leading professional trade association for health insurance agents, brokers and consultants, and represents more than 100,000 benefit specialists nationally. Our members work on a daily basis to help millions of individuals and employers purchase, administer and utilize health insurance coverage. Many members also provide long term care insurance (LTCi) solutions to their clients.

Executive Summary September 2015

The long term care system in the United States faces significant challenges as it prepares for an increasingly aging society. The number of people over the age of 60 is growing rapidly and as many as seven in 10 individuals will require long term services and supports (LTSS) to manage their condition. However, many incorrectly believe they are already covered under their private health insurance or Medicare, when neither is true. Without LTCi, individuals can quickly spend down a lifetime of savings and then have to rely on family caregivers, or turn to Medicaid, which provides limited coverage for the destitute. Given the lack of financial preparedness for the potential future need for LTSS, individuals, employers and policy-makers need to find solutions to an increasingly growing problem as the population ages.

NAHU recommends the following to respond to these challenges:

Protect Medicaid for the truly needy. This can be done by encouraging the use of LTC Partnership Programs, closing loopholes to access Medicaid, and encouraging the use of reverse mortgages. Implementing programs to help consumers to adequately prepare for their own needs will decrease the likelihood of needing to rely on Medicaid, thus preserving it for the truly needy and extending the program’s lifetime.

Allow tax-free withdrawals from 401(k), 403(b) and IRA accounts for the purposes or purchasing LTCi. Currently, early withdrawals come with a 10% excise tax, which discourages individuals from using these funds to purchase insurance. Implementing a change so withdrawals to buy LTCi are tax-exempt and eliminating the early withdrawal penalties will help to encourage Americans to plan for their future needs. This will reduce the likelihood of the individual from later turning to public support.

Add LTCi to the types of benefits that can be purchased through IRS Section 125 plans, which is currently prohibited under federal law. Doing this will send a signal to employees about the importance of the benefit while the pre-tax treatment makes the product more affordable. Employers should also be encouraged to contribute to worksite-based LTCi benefit plans, which will both make the plan more affordable and underscore its importance.

Educating Americans about the potential need for LTSS, their role in providing for care, what care is currently covered under existing programs, and the value of purchasing LTCi as part of an overall retirement strategy is very important. Then too, implementing incentives to participate as early as possible will help to stave off potential financial ruin. In this effort, NAHU members are qualified and prepared to offer the necessary guidance and assistance for consumers to prepare for and enroll in LTCi coverage.

Encouraging more Americans to participate in LTCi through the full implementation of these recommendations will help lead to a more vital, competitive, healthy, stable and diverse LTCi marketplace. Not only will this provide financial security for individuals finding themselves with a long term chronic conditions or extensive frailties, but it also means Medicaid will not have to jump in to cover the remainder of the expenses, thus prolonging the program for future generations.