Legislature(2009 - 2010)
03/23/2010 02:05 PM Senate L&C
| Audio | Topic |
|---|---|
| Start | |
| SB129 | |
| SB296 | |
| SB278 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 296-LONG-TERM CARE INSURANCE
2:18:17 PM
CHAIR PASKVAN announced SB 296 to be up for consideration.
2:18:30 PM
SENATOR LESIL MCGUIRE, sponsor of SB 296, explained that this
bill was borne out of a working group made up of people in long-
term care delivery and insurance. They looked at how other
states were addressing long-term care strategies. Alaska has
higher costs for assisted living and home health care, but
overall all of the states are facing this similar challenge for
long term care. The national average for nursing home costs is
$198/day; in Alaska it is over $618/day. The national average
for assisted living cost is $3,131/mo; in Alaska at the low end
it's over $4,314 - more than 37 percent above the national
average. For home health costs that have an hourly amount, the
national average is $21/hr; in Alaska it's $25/hr - 19 percent
above the national average.
The group looked at the costs of long term care and those in the
group, one of whom owns some assisted living homes, who would
speak later said that around 90 percent of her clients are on
Medicaid. So, the state is paying in her homes for roughly 90
percent of all of the people being cared for. People try to
shift assets and look for ways to cover long term care, but
unfortunately by the time you have reached that point in life,
your prospects of going into the workforce and changing any of
the decisions made prior to that are bleak. So that burden
shifts to the state.
SENATOR MCGUIRE said in the case of folks who live in the Lower
48, the majority of them have a tax base that is made up of
actual taxpayers - they have a personal income tax, sales tax,
or consumption tax. Alaska doesn't have a tax; all its tax
revenue comes from the Trans Alaska Pipeline System (TAPS). That
being said, they have an obligation to think about Alaska's tax
base because it may someday be borne by individual citizens.
2:22:21 PM
The idea behind this bill is to create a premium assistance
program within the state of Alaska. Other states have asked
individual citizens of the state to put forward an amount of
money from their own wages that would be matched by the state
and subsequently be matched in an equal amount by the long term
insurance provider, creating a partnership. In the end a policy
develops which is meant to insure that person for long-term
care.
She added that Medicare applies to those 65 and older, but in
the case of long term care the burden with very few exceptions
falls back to Medicaid. Next year the state projects those 65
and older to increase by 5.1 percent. In 2009, 8,300 elderly
were enrolled in Medicaid and an enrollment of 22,300 is
projected for 2029 based on that 5 percent average. Looking at
the growth Alaska would experience in the Medicaid budget for
those who would need long term care, she thought it was
incumbent on the state to start looking for ways to address
that. SB 296 attempts to do that.
SENATOR MCGUIRE said Alaska is unique because it has the
Permanent Fund Dividend (PFD). When the click to donate program
was finally adopted last year, it caused the group to start
thinking about what kind of an application there might be for an
individual to think both at the time they were receiving that
dividend of how they might want to give to charity and how they
might want to look at their own health needs and at their own
long term care options for the future.
She said that cynics like Senator Bunde might say that Alaskans
should be thinking about that already and why do they need the
government to remind them. He is right; but unfortunately people
get busy and don't take that time to think about it, and it is a
long ways away for most people.
If this bill passes, they are hoping Alaskans would have an
opportunity when they apply for their PFD to think about long
term care. She said they have tried to minimize the fiscal
implications to the division and will ask them to forward
information about this program to Alaskans and let them consider
it and decide. If they do, they would be giving $500 of their
own money that will be matched by the state and then by the long
term care provider.
2:27:30 PM
ERIN SHINE, staff to Senator McGuire, said sections 1-14 conform
statutes to allow for long term care partnerships which are in
place in 23 other states. It creates a group policy that is
transferable between the states and it adds provisions for
anyone who is selling or administering long term care insurance
as a partnership to do so under these guidelines.
SENATOR MCGUIRE said essentially the first part of the sections
establishes the mechanism, which is the certificate that would
come into place once an Alaskan elected to create the policy.
Other sections were put in to deal with preexisting conditions,
for example. She highlighted that the committee might want to
consider what liability the state would have with entering into
these transferability agreements.
2:31:21 PM
She said a sectional analysis goes through the mechanism. The
fiscal note is fairly substantial, which is important. The
question comes down to whether one believes that partnering in a
premium assistance program would offset costs that come in later
on in the form of Medicaid claims as people age. By 2030 she
reminded them that 23,000 Alaskans will be 65 and older, and
some of that burden will fall to the State of Alaska.
SENATOR BUNDE said he shared their concerns about Medicaid
costs, and said he wanted to hear from the Department of Revenue
what the net gain would be between someone going on Medicaid and
actually following this program.
SENATOR MCGUIRE agreed and said there is a federal tax
incentive, but to the extent that the long term care insurance
provider got a state credit, they would want to add up the
dollars on both sides and compare. If the committee ends up
deciding there is a benefit she thought it would be interesting
to observe it in other areas of the Medicaid budget as well,
because it is the one part of the state's budget that is growing
at extraordinary levels. She said 50 percent of all live births
in Alaska are now paid for by the state, as one example.
CHAIR PASKVAN said someone purchasing a long term care contract
has a number of years to pay for it. It's not just a one-time
click and he asked if she was representing that it be done for
five years or ten. Is it a fixed amount? His concern is that
people might just check in one year, but then lose 100 percent
of that money because they don't click it the next year. And
then they don't have the benefit.
SENATOR MCGUIRE responded those were excellent questions. She
just asked Hank Hodges, New York Life, a similar question. She
said that long term care insurance is also for people who become
disabled. It was May Owne's (assisted living home owner) belief
that by the next year so long as it wasn't a preexisting
condition, the person would have a policy. How many years would
you need to pay into the policy is another good question. This
issue was brought to her by constituents who deal with this
every day.
2:38:02 PM
SENATOR BUNDE wanted to know how this is impacted by the recent
health care reform, which he thinks is an unfunded mandate on
our grandchildren. Is it more essential than car or house
insurance? If the state is going to subsidize one, would it do
this for all kinds of insurance?
SENATOR MCGUIRE said those were great questions, especially how
it relates to Obama care, because the definition of a pre-
existing condition is now changed. She also wanted to know if
there would be federal incentives in the land of stimulus money
that would go toward a program like this. She would find out.
The Litmus test would be at what level the state has a financial
obligation in those other categories for unfunded liability. The
issue with long term care insurance is that the state is paying
more than $4000-5000/mo. out of Medicaid coffers for those
seniors who did not get long term care insurance.
2:40:05 PM
AMY OWNE, representing herself, said she has four assisted
living homes in Anchorage, but she is not directly affiliated
with this bill. However, it has brought to her attention an area
of conservative interest in getting long term care costs back
into the private sector. She said she had been in the assisted
living business since 2002; she has 20 beds and has never had a
long term care insurance client even approach her. So even
though they have products, she hasn't seen them. She said it's
painful to see these people who have worked their entire lives
spend down their entire savings and go on to become indigent to
get into the Medicaid program. Because when they were going
through the depression era and afterwards, even fathoming the
fact that her assisted living home could cost them $7000/mo is
staggering. What do we do to help these people?
She said that Senator Bunde actually inspired a lot of this
conversation when a couple years ago at an Anchorage caucus when
they were struggling against the rate freeze she remembered he
said, "Well if you don't like it; it's a business decision to
stay in the environment." Now she is back to say that her
business model for taking care of these residents is actually
pretty sound; so maybe it's time to change the environment and
find out what is wrong so that Alaskan seniors can be taken care
of better.
MS. OWNE said this is what she has come up with. If you can
encourage people to purchase the long term care insurance, the
partnership program is an excellent way to do it. She found 22
states with another 10-18 in the process of creating it. It
provides a mechanism to purchase the long term care insurance.
If you purchase $100,000 worth of coverage you can keep $100,000
worth of assets at the end before going into the Medicaid
program. So, you wouldn't have to give up everything you have
worked your whole life for. She suggested using outside funds to
pay down the initial coverage of long term expenses. Of the
people who go into long term care, 43 percent of them will need
a nursing home at some point. Of that 43 percent, 55 percent
will stay at least one year and 21 percent will stay five years.
At current rates ($610) staying in a nursing home for 365 days
will cost $222,650 per year and you would have to spend of your
own personal money to be in there. Most adults 65 and older put
away about $170,000 for their own retirement. So before the end
of the first year without any kind of insurance they would be on
Medicaid.
2:45:00 PM
CHAIR PASKVAN asked how much it would cost to purchase long term
care coverage annually.
MS. OWNE answered that the goal is probably set for someone in
their 40s to plan ahead. A $300/day nursing home benefit (half
of what it is in Alaska but more than the standard national
rate), with $300/day for staying at your home, a 90-day wait,
and a policy maximum of $547,000, the premium would be $897.87
annually. This would pay for roughly two years in a nursing
home.
CHAIR PASKVAN calculated that $500 would come from the
individual under her system and the state's match would be $500.
Is there another match?
MS. OWNE said the next match is a discount. They tried to create
a three-legged stool so that everyone was giving something. They
talked to a couple of providers to get this going on a large
scale and they could give a 10 percent discount. This is what
they are trying to make happen. It is not supposed to be a
double dip from the state.
SENATOR BUNDE asked why a private enterprise would give him
money for his long term care.
MS. OWNE answered they would give him a discount. Why would
anyone not give a bulk rate to a large corporation, for
instance?
CHAIR PASKVAN asked if the state's involvement would result in
gross cost savings to the consumer.
MS. OWNE said that is absolutely the goal. The idea is to
decrease the Medicaid budget.
CHAIR PASKVAN said he is looking at it from the premium cost
that they would be putting on the market. He asked if her
example of a $900/annual premium assumed the state's
participation in the program or is that the current market.
MS. OWNE answered that is the current market.
CHAIR PASKVAN asked assuming the state gets involved, does that
$900 become $750. Does the state get an 18-percent discount
because it has a larger pool?
MS. OWNE said that is exactly the point. The companies they have
already talked to have offered a 10 percent discount. Whether or
not that is legal has to be worked out through Ms. Hall and the
Division of Insurance. Her point is that they are willing to
step up to be on the short list of companies that offer this
program.
2:50:02 PM
SENATOR BUNDE said his understanding is that you would never get
more from the state than you put in yourself under this plan.
The tax credit on the premium is still basically state money
somewhere along the line in terms of taxes that didn't go to the
state. He asked Ms. Owne if Jeff, Labor and Commerce committee
aide, bought long term care insurance today, could he keep
$100,000 of his assets and still go on Medicaid.
MS. OWNE explained that could happen with the partnership. If he
bought a $100,000 policy under this partnership plan, if he went
into a nursing home, the first $100,000 would be paid by the
insurance company. If Jeff had $1 million in assets he would
have to spend down to $100,000 to go on Medicaid. You couldn't
underinsure just to get on it.
2:53:03 PM
LINDA HALL, Director, Division of Insurance, Department of
Commerce, Community and Economic Development (DCCED), said she
was available to answer questions on SB 296, but as she had
listened she developed comments. The first section through
section 14 are policies that are part of a model bill developed
through the National Association of Insurance Commissioners
(NAIC).{ They would allow the Division of Insurance to actually
approve a policy form if an insurance company wanted to
participate in one of these long term care partnerships. This
policy is different than the ones that the department has filed
today; so they would need the model language in order to approve
one.
She explained that her staff worked with Legislative Legal in
drafting policy regulatory approval using the NAIC model, but
not on the actual working of the long term care partnership. The
companies that offer those policies in other states participate
in some way in a partnership. The first tax credit in this bill
is exactly that - against their premium tax, which in turn
reduces funds going into the general fund.
SENATOR BUNDE asked if the current state benefit package
provides a long term care option and what level the state
participates in that. Would this then provide an option to the
rest of the citizens for something that is only available now to
state employees? He didn't think there was any state match for
the current program. If there is, will the state program be
undermined with the program?
MS. HALL answered that she understands there is a state retiree
long term care program. The daily limits are relatively low and
she didn't think there was a state match, and it is done as a
group program. Frequently you will have some type of reduced
premium for group participation, although when she does rate
approvals she makes sure it's not unfairly discriminatory.
2:56:48 PM
JOHN SHERWOOD, Medicaid Special Projects, Department of Health
and Social Services (DHSS), Juneau, Alaska, said this is "kind
of a novel program" for the department in terms of administering
it. They made the best assumptions they could in costing it out
with limited experience and information. He said the department
is always looking for ways of fostering personal responsibility
and planning for the future to avoid assuming more of the burden
for long term care in the Medicaid program. He said there is
uncertainty about how much this program would actually save
Medicaid.
A lot of the discussion he read comes down to how many new
people this would encourage to get insurance versus just provide
an additional benefit in the Medicaid program to people who
would already buy long term care insurance to protect their
assets. But this kind of program does have potential of saving
Medicaid some money long term. They aren't able to quantify it
and they wouldn't expect to see the savings in the lifespan of a
fiscal note that only goes about five years out.
CHAIR PASKVAN asked if in general the assumption is there would
be a fiscal savings to the state because premiums would be paid
that defer the state's obligation. Can that be measured if
people buy in and stay bought in?
MR. SHERWOOD replied that he wasn't aware of something that
would let them quantify it specific to Alaska. Because these
long term care partnerships do provide an exemption when they
look at people's assets to the extent the insurance company is
paid long term care benefits, some people can qualify for
Medicaid quicker because they don't have to spend down all of
their own assets. On the other hand, to the extent this
encourages more people to buy insurance so that even if they
qualify for Medicaid, long term care insurance is still paying
for some benefit or if the insurance substantially puts off the
point at which they might qualify for Medicaid it could save
money. There is a high degree of uncertainty in knowing what
demographic would be attracted to this program. To date, his
observation is that people tend to seek long term care insurance
if they have significant assets that they want to protect. To
get the most savings they would want something that would reach
"a broader range of people."
3:01:17 PM
CHAIR PASKVAN said he wonders what happens to the failure to
renew rate people have if they are buying long term care
insurance. There have to be some industry standards on that
where people start out with the best of intentions, spend $1000
a year, do it for three years and then they can't do it anymore.
If the state is involved in taking the money that would have to
be addressed.
MS. HALL said those are called "lapse rates" and that
information could be found in the 5,000 long term care policies
that are in effect in the state today. She said they could also
continue to pursue finding statistics from other states.
3:02:33 PM
SENATOR BUNDE noticed a representative from the Permanent Fund
Division, and in the past those folks have been rather resistant
to getting these check off things because they "Christmas tree
up." It would be good to hear their position.
CHAIR PASKVAN said they need to receive a lot of information
before advancing this bill. He said it would be held for further
information.
3:03:49 PM
CHAIR PASKVAN announced an at ease from 3:03 - 3:05 p.m.
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