1. Emerging Private LTC Financing Innovations The Second National Medicaid Congress June 14, 2007 Richard P. Nelson Erickson & Sederstrom, P.C. Nebraska Initiative

2. Agenda  Nebraska’s LTC Reform  “Own Your Future” Campaign  Answers4Families  LTC Savings Plan  LTC Insurance Partnership Program

3. 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

4. Nebraska’s LTC Reform Projected population growth

5. 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

6. “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

7. “Own Your Future” Campaign Awareness Letters Mailed Campaign PhaseTool Order Kits Response Rate 237,170Nebraska (Phase III)14,5546.14% 6,826,893Total Phase III (6 states)343,4405.03% 1,589,000Total Phase II (4 states)101,6086.39% 2,105,555Total Phase I* (5 states)187,4858.90% [All Other States 21,858] 10,521,448Grand Total (of 3 Phases)632,5336.01% 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

8. Awareness Answers4Families Awareness www.answers4families.org/ltcplanning

9. Answers4Families Awareness

10. Answers4Families Awareness

11. Nebraska’s LTC Savings Plan Advantage www.treasurer.state.ne.us/ltcsp/

12. 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

13. 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

14. 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.

15. 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

16. 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

17. 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

18. 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

19. 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