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C6: Long Term Care
An International Perspective
Edd Moyle, Chris Reynolds
PartnerRe
11 November 2013
Disclaimer
11 November 2013 2
The views expressed today are those of the presenters
and do not necessarily reflect those of their employers,
and thus, their employers accept no liability as a result of
any reliance you may have placed or action taken based
upon the information outlined in this document /
presentation.
Some Statistics
3
P(X) = 1
11 November 2013
Some Statistics
411 November 2013
Demographics
We’re getting older
11 November 2013
The Demographic Challenge
611 November 2013
Source: Human Mortality Database
The Demographic Challenge
711 November 2013
Source: Human Mortality Database
The Demographic Challenge
811 November 2013
Source: Human Mortality Database
Life Expectancy at 65
9
Source: HEALTH AT A GLANCE 2011: OECD INDICATORS
11 November 2013
What is LTC?
10
Bathing
11 November 2013
UK – The Government’s View
11
Stephen Dorell
Secretary of State
for Health
May 1996
11 November 2013
Long Term Care - An International Perspective
0
5000
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25000
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35000
40000
45000
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5000
10000
15000
20000
25000
30000
35000
40000
45000
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0
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10000
15000
20000
25000
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35000
40000
45000
50000
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
UK – Role of the State
13
Costs
Shared
No Care
Paid
Savings and Capital
£23,250
£14,250
Only Income
Considered
11 November 2013
Critical
UK – Key Recommendations
1411 November 2013
Asset threshold
increased to
£100,000
Cap on lifetime
contribution of
between £25,000
and £50,000
Eligibility criteria
should be set on a
national basis.
Contribute £7,000 -
£10,000 p.a to
cover “hotel costs”
Dilnot
UK – The Insurance Market
15
LTCI
Pre-
funded
Care
Plans
Immediate
Needs
Annuities
Secure /
Deferred
Plans
Enhanced
Annuities
Equity
Release
11 November 2013
International Perspective
Where is LTC insurance a success?
11 November 2013
Global Leaders
11 November 2013 17
Experience
Volume
Over 20yrs
6m inforce 8m inforce
Growth
15% 12-13%
USA - Market Evolution
First product appears
in 1974
Market takes off in the
1980s
Introduction of
indemnity cover known
as “reimbursement”
products
Sales decline
6 insurers
represent 80% of
premium volume
Return to growth
11 November 2013 18
1980s
MarketProducts
1990s 2000s
Refinement of
“reimbursement”
products
Strong growth in sales
Poor experience emerges
- Rate increases
- Smaller companies exit
Fixed-benefit products
derived from health
insurance
USA – Product Design
11 November 2013 19
Reimbursement
model
Premium $
indemnity
$2‘000-$2‘500 pa
(£1‘250-£1‘550)
Limits
$150 (£90) per day
5% pa escalation
60yr old
Max 3yrs
France - Market Evolution
Launch of LTC
products derived
from annuity
products
Market dominated by
3 companies
Group contracts first
marketed
Expansion of
severity-based
payments
11 November 2013 20
1980s
MarketProducts
1990s 2000s
Fixed-benefit only
covering severe loss
of independence
Introduction of
coverage for
moderate
dependency
New entrants
5 insurers now
represent 70% of
premiums
Fixed-benefit
model
Premium € cash
€400-€500 pa
(£330-£420)
Severity-
based
€200 (£170)
per month
€600 (£500)
per month
France – Product Design
11 November 2013 21
60yr old
Role of the State
11 November 2013 22
Public Private
Role of the State
11 November 2013 23
Public Private
Role of the State
11 November 2013 24
Public Private
France - Public Provision
11 November 2013
Public
Health
Insurance
Complem-
entary LTC
benefit
LTC Tax
Benefits
25
Public Health Insurance
11 November 2013 26
Social
Assistance
Universal
Coverage of Medical Costs
Complementary State Benefit
Hotel
costs
Dependence
Costs
Medical
costs
11 November 2013
Complementary State Benefit
APADependence
€
varying by
At Home
Institution
Wealth Severity
27
Tax
Incentives
Income Tax
Deductions
Group
schemes
Insurance
payouts
France - Public Provision
11 November 2013 28
USA - Public Provision
11 November 2013
LTC Coverage
Who is covered?
Scheme
Public Provision
Medicare
Retirees
Limited
Medicaid
Poor
Covers
LTC
29
Tax
Benefits
USA - Public Provision
11 November 2013
Social
Protection
Covers
Medical
Expenses
Limited
Income
LTC
Benefits
In-kind
Not Cash
LTC from
approved
provider
Eligibility
for LTC
Dependence
Personal
resources
exhausted
Medicaid
30
Global Leaders – Summary
11 November 2013 31
Still Niche Product
Products
Clarity
Range of Policies
Global View of LTC Insurance Market
32
Israel
60% have
some form of
LTCI policy
11 November 2013
Israel – Public Provision
LTCIP
National
Insurance
Institute Providers
11 November 2013 33
Israel – Public Provision
Ministry of Health
Assessment Copay
11 November 2013 35
Individual Cover
Reimbursement
of Actual Care
1st LTCI policy
(1978)
ADLs Criterion
First
Generation
LTCI 2.0
Highly
Regulated
Min definition
for ADLs
Min gate keeper
trigger
Level premiums
from age 65
Competitive
Pressure on Gate
Keepers
11 November 2013 36
Group Cover
4 sick funds provide
basic health
insurance
Supplementary
Cover
LTCI
Group Policy with
Private Insurance
Company
11 November 2013 37
Summary
11 November 2013 38
Final Thoughts
What can the UK learn?
11 November 2013
LTC Insurance
USA
Clearly defined
Public Provision
France
Dovetailing of
Public/Private
Israel
Automatic
Enrolment
Drivers of Private Market Development
11 November 2013 40
Tax
Incentives
Specific State
Schemes
Learnings from Abroad
Conviction
11 November 2013 41
Different Approaches
Public/Private in
Partnership
Variety of Policies
42
Expressions of individual views by members of the Institute and
Faculty of Actuaries and its staff are encouraged.
The views expressed in this presentation are those of the
presenter.
Questions Comments
11 November 2013
Long Term Care
An International Perspective
Edd Moyle, Chris Reynolds
PartnerRe
11 November 2013

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Long Term Care - An International Perspective

Editor's Notes

  1. Here’s our standard disclaimer. Essentially the views expressed today are our own and if you take actions based upon them you do so at your own risk.
  2. So a happy statistic to start. With probability 1 each of us in this room is going to die. Unless something remarkable happens, that’s the certain fate for us all.
  3. Less certain is whether you will need care first … and if so, can you afford it? With improving mortality comes an increasing likelihood that we will need care in our old age. Why then isn't the UK LTC insurance market buoyant and what can we learn from other markets? I´m Chris Reynolds and this is my colleague Edd Moyle. Today, we’ll be giving an introductory talk on Long Term Care. We’ll be considering 3 key questions: 1) Where has LTC worked? 2) Why has it worked in these markets? 3) What can the UK learn?
  4. This chart shows the absolute number of over 70 years olds in the UK. Starting from just after 1920 with around 1.8 million, you can seen the constant and relentless rise over time. Up and up past the 4 million mark in the early 60s. Then as we hit 1990 we pass 6 million. Climbing all the way to approximately 7.5 million today.
  5. But it’s not just the UK. Here we have charts for France, Israel and the US. Apart from some strange anomalies in the French HMD data we see the same relentless climb.
  6. But of course looking at absolute numbers doesn’t give you the full picture. We want to see how the proportion of lives over 70 changes over time. In this snake race we can see what’s happening over time. As with the absolute numbers, the proportion of lives over 70 is increasing over time. The UK and France exhibit the same pattern and similar levels. More recently we see data from Israel. The more youthful profile of Israel is evident, but even here we see the proportion increasing.
  7. And here we have the life expectancy for the 4 countries for a 65 year old in 2009. This is the period life expectancy, so current rates don‘t change. Even with this you see that a female can expect to live another 20 years, whilst males can expect to live around 18 years. Of course if morality rates continue to fall, then this number will actually be higher. The question to you is as a 65 year old in 2009, would you rather be French or British. But how may of these years will be healthy life years? What’s the disability-free life expectancy? In Europe, Healthy Life Years are calculated annually by Eurostat. So if I show you this chart, would you now rather be French or British?
  8. So what is Long Term Care? Long Term Care is the care for people needing support in many facets of living over a prolonged period of time. Typically, this refers to the so-called activities of daily living (ADLs), such as bathing, dressing and getting in and out of bed. And where does this support come from? Well a number of sources including family and friends, home care or care within an institution. Now this support could be financed privately, but the state has a role to play too. So what’s the Government’s view?
  9. “The government wants better incentives to encourage people to protect their assets and provide for their long-term care needs. Our new options will reward the thrifty for their responsibility and retain our promise to provide help for those unable to meet their own social care costs. Elderly people want independence, choice and dignity. They do not want to be a burden on their families or the state. And many of them want to help their children by passing on some of their savings or other assets. These proposals will help them to achieve these objectives.” It sounds like a pretty sensible view for the Government to take and may lead you to think that significant steps are about the be taken. Unfortunately this isn´t a statement from the Coalition Government. It’s not even a statement from the last Labour Government. It was made by Stephen Dorell in his position as Secretary of State for Health in the last Conservative Government in May 1996. So what’s happened during the intervening years?
  10. 1996 : Steven Dorell. Government launches a consultation on “A new partnership for care in old age’” 1997 : Tony Blair (Labour Party Conference): “I don’t want our children brought up in a country where the only way pensioners can get long-term care is by selling their home.” 1999 : Royal Commission on LTC publishes "With Respect to Old Age" 2000 : but Government rejects the proposal for free personal care. 2002 : HM Treasury commissions Derek Wanless to conduct indep review of NHS spending. He recommends a more thorough assessment of social care funding needs 2003: but this is not acted on. 2004: nor in 2004 either 2005 : A Green Paper "Independence, Wellbeing and Choice" sets out a new vision for adult social care based on independence, choice and control. A white paper: "Our Health, Our Care, Our Say” builds on this but contains no specific funding Proposal 2006: Back comes Sir Derek Wanless, this time leading a review of future social care spending needs for The King’s Fund. “Securing Good Care for Older People” is published. 2007 : Spending Review welcomes the earlier assessments and commits to “undertake work to look at reform options and consult on a way forward’” 2009 : The Green Paper “Shaping the Future of Care Together” marks the launch of the ‘Big Care Debate’. 2010 : Informal cross-party talks break down following a dispute about compulsory and voluntary approaches – the so called “death tax” row. A couple more White Papers and reviews are published. 2011: In 2010 the Dilnot Commission is appointed “to make recommendations on how to achieve an affordable and sustainable funding system for care and support”. Its report “Fairer Care Funding” is published in July 2011 2012: Cross-party talks begin at the start of the year and are discontinued in July. The White Paper “Caring for our Future, Progress Report on Funding Reform” is published 2013 : In February the Government announces the introduction of social care funding reforms, including the capped cost model from April 2017. A month later the Budget brings forward the implementation to 2016, with cap to be set at £72,000. In May a Care Bill incorporating clauses to implement the Dilnot proposals is placed before parliament.
  11. So what’s the current system in England? Social care in England is basically rationed. An individual’s entitlement to state help with the costs of long-term care depends on an assessment of their care needs and on a means test Individuals are first assessed on their care needs. There are four basic levels - low, moderate, substantial and critical. The bands cover daily tasks such as washing, dressing and eating. But levels at which support is given vary between councils, with many councils no longer giving care to people in the low and moderate bands. This has created a postcode lottery for care. The second test is a means or financial assessment. If they have less than £14,250 in savings and assets then the local authority does not require them to use their saving or assets. However, the local authority can charge people a contribution towards their care from their income. Between £14,250 to £23,250 the costs will be shared between the local authority and individual. If the person has saving above £23,250, they pay for their own care. For home care, the capital excludes the value of the individual’s home, but when a person needs full time residential care, the value of the home may also be taken into account. This is costing the state 9.4 bn per annum (over 65s). Demographic and social trends have seen the number of people requiring social care growing. At the same time public spending is skewed towards a tightly rationed system focusing on fewer people – those with highest needs and lowest means. It is becoming increasingly difficult for people to access care, with 87 per cent of councils now responding only to needs that are classified as substantial or critical. Local authorities have been reducing their social care budgets, with further planned reductions. Even though local authorities have been placing fewer people in residential and nursing homes, the overall usage has been rising steadily. Why? The answer is simple, an increasing number of people are funding their own care.
  12. As mentioned earlier the Dilnot Commission was established to consider how best to achieve an affordable and sustainable funding system for care and support for all adults in England. Let’s take a quick look at the key recommendations for Dilnot and the Governement’s response to these. 1st: In order to extend protection to people falling just outside the means test, the upper asset threshold should increase from £23,250 to £100,000. Accepted – the upper capital threshold for means-tested support will rise to £118,000 and the lower threshold to £17,000 from 2016 2nd: In order to protect people from extreme care costs, there should be a cap on the lifetime contribution to adult social care costs that any individual needs to make at between £25,000 and £50,000. Where an individual’s care costs exceed the cap, they would be eligible for full support from the state. Accepted – with the cap being set at £72,000 from 2016. Once an individual has received ‘eligible care’ to the value of the lifetime cap, the state will meet their ‘eligible care costs’. It should be noted that eligible care costs are the costs of care calculated at the prices that the Local Authority pays. In residential care, eligible care excludes the so called “Hotel Costs” – general living costs such as board, food, heating etc. So what about these? 3rd. People should contribute a standard amount – £7,000 to £10,000 yearly to cover their general living costs. Accepted - from 2016 people in residential care should pay a contribution of around £12,000 per annum towards general living expenses. Finally, it is worth emphasizing that older people will only have the opportunity to benefit from the ‘Dilnot cap’ and the associated means-test if their assessed needs are sufficient to qualify them for entry to the new scheme. So possibly of even greater significance are recommendations concerning the eligibility criteria. 4th: Eligibility criteria for service entitlement should be set on a standardised national basis to improve consistency and fairness across England, and there should be portability of assessment. This is to address the so called ‘postcode lottery’ and the inability to port “care packages” between local authorities. In June the Government published draft regulations relating to their proposed new national eligibility criteria. In it the Government has said that it intends that the new national threshold should be set at roughly the equivalent of “substantial”.
  13. So that does the private UK insurance market offer? Pre-funded You can no longer buy a new pre-funded plan. When they were still being sold, you would buy one with a lump sum or regular premium. The premium would typically be reviewable (often every five years), at which time the insurer could increase premiums. Perhaps the failure of this product is best summed up by a comment made by one of the previous providers on withdrawing from the market: "We believe many people find it difficult to envisage a time when they will need long-term care. When they are planning their finances, they often have other priorities, such as pension planning and investing.“ Immediate Needs An immediate needs annuities is a type of annuity that pays out a guaranteed income for life to help cover the cost of your care fees in exchange for a one-off lump sum payment. There is only a handful of companies selling immediate needs care annuities. Despite the very substantial levels of private expenditure involved in funding long-term care in England, the market for private long-term care insurance is very small. Only 22,000 people had private long-term care insurance in 2008. Secure / Deferred Plans A variation on the immediate needs annuity are the so called Secure or Deferred Plans. The policyholder chooses how long they want to defer the care payments for – anything from 1 to 5 years. The product is potentially suitable for a person who is already receiving or about to receive care, and is able to pay the fees from their own resources but would like to limit their liability. These are the products specifically focused on Long Term Care needs. However, there are other product that may be beneficial: Enhanced Annuities If a person has a health problem or a long-term illness then an enhanced annuity may be an option. Equity release plans Provide the ability to get a cash lump sum as a loan secured on your home – these could be used by an individual wishing to fund a care plan now or in the near future
  14. The global market leaders are France and US. These are the most developed markets in terms of EXPERIENCE and VOLUME. They are the only markets that have been selling policies for overs 20 years. Both markets have written a significant number of policies - there are 6m policies inforce in France And 8m inforce in the US. And they are both growing markets, with: - France seeing annual growth rates recently at around 15% - The US 12-13% Reference “The French market, with an annual growth close to 15 percent (Kessler 2008)” ON INSURANCE FOR LONG TERM CARE IN FRANCE CHRISTOPHE COURBAGE AND NOLWENN ROUDAUT
  15. Refs https://www.genworth.com/tools-and-forms/claims/long-term-care-insurance/long-term-care-history.html Tax-qualified LTCi premiums are considered a medical expense which are deductible for income tax.
  16. Reimbursement model with maximum limits Premiums paid in exchange for reimbursement of care costs up to a certain limit. Typical example for a 60 year old Annual premium between $2,100 - $2,500 Benefit pays up to $150 a day for covered services including nursing home services, assisted living facilities, home-care services and adult day care for maximum of 3 years Product features 90 day Waiting Period - benefits start to be paid 90 days after an insured qualifies for LTC Policy typically provides for inflation protection, such that maximum daily amount would be increased by 5% compounded annually.
  17. #46620855 Indemnity vs reimbursement – see http://www.insuranceproviders.com/indemnity-reimbursement-long-term-care-insurance
  18. Fixed-benefit model Premium is paid in exchange cash benefits which are fixed at outset and depend on severity. Typical example for a 60 year old premium between €400 and €500 per annum Benefit is about €600 a month in the event of severe dependency €200 - €400 a month for more moderate dependency Product features Benefits start to be paid 3 months after insured qualifies for LTC Inflation protection available - Benefit and Premium typically subject to annual increases.
  19. You would expect the nature of State Provision of LTC to be a key determinant in the development of the Private LTC market. So given that these countries are normally thought of like this.
  20. One on the left, one on the right.
  21. What could these countries possibly have in common? The answer lies in the relationship between the State and the Private Sector. France and the US have embraced mixed funding based on public-private partnership in the coverage of LTC risk. So let‘s have a closer look at the public provision of LTC in these 2 countries.
  22. Further State support provided through Complementary benefited targeted at dependents Tax benefits
  23. stock-illustration-10508240-france-flag-map Public Health Insurance System universal coverage of medical costs With an element of copay. So covers the medical costs associated with Long Term Care. But not all LTC costs are covered by public health insurance: Hotel cost - residents are responsible for although those who cannot afford to pay the full-cost may be eligible to public social assistance for housing Dependence cost covered by complementary State LTC benefit Refs Xxxx In residential care, individuals are responsible for their accommodation costs, supported by means-tested social assistance if they lack sufficient funds.
  24. The “APA” Allocation Personnalisée d‘Autonomie For people who are dependent on care, either at home or in an institution This provides additional cash support towards the cost incurred as a result of their dependence. For those living at home: support towards expenses incurred from the employment of a caregiver For those living in an institution, offsets a portion of the dependence cost while the remaining is paid by the resident (about 33% of the dependence costs on average) Monthly cash allowance which depends on: Severity of dependence level of wealth (up to a 90 per cent reduction). The severity is assessed on the basis of standard ADL‘s which are consistent with those used in the private sector. The level of the benefit is then set between 90% and 10% of the cost of the assessed level of care needed.
  25. In addition to the support provided through the APA, the French system offers a number of tax incentives. Income tax deduction are available for individuals who pay privately for care at home. - particularly effective for higher income people - who receive the lowest levels of state support through the APA. In residential care, the costs of long-term nursing or residential care are eligible for tax allowances. Furthermore, insurance payouts are not taxable and are excluded from the income assessment of the APA means test. Collective, employer-based private insurance schemes also benefit from tax allowances, a factor which has contributed to the comparatively large uptake of voluntary private insurance policies in France, where in excess of three million policies were held in 2010.
  26. Public health insurance in the US “Medicare” created to provide health care coverage for people aged 65 and older. Designed to cover medical expenses Does cover some costs associated with Long Term Care – but in only for a short period of time. The main source of public LTC coverage is provided through “Medicaid” which targets the poor. Before we look at Medicaid in more detail, it’s worth nothing that the State encourages private funding of care through tax benefits available on LTC insurance products – these essentially treat LTC premiums as medical expenses which are tax deductible.
  27. #46620855 “Medicaid” is social protection designed to assist people with limited income to pay for medical expenses, including LTC. The benefit is not in cash but rather an “in-kind” benefit, i.e. entitlement to care from an approved provider Because of this, there is a bias towards institutional care costly and may not necessarily provide the best care for the user. To receive “Medicaid” coverage for Long-Term Care services: must have a certain level of dependence need to exhaust personal resources.
  28. In summary, what can we conclude from the successes of the insurance market in France and the US? Firstly, we can see that: Different levels of state support can foster successful private markets. What emerges as key is the need for clarity in where the Role of the State begins and ends. We see this in France, where there is a dovetailing of public and private provision through the use of consistent definitions for ADLs. In the US, there is absolute clarity over the requirement to exhaust your personal funds before receiving state support. This creates a clear incentive to seek private insurance. We can also see that different products can be succesful. With the important point that the first products launched in these markets were simple ones. It’s also worth noting that there are range of public policies adopted in these markets From multiple schemes for state-support, each with different aims,to the use of tax incentives. And a final conclusion is that while these are the most developed markets, LTC is still a niche product in these markets with scope for wider take-up.
  29. But wait ... There’s another market we should look at. A country with a private insurance market which has seen an annual increase of around 20% between 2003 and 2009
  30. The Long-Term Care Insurance Program came into force in April 1988. It is a social security program and is administered by the National Insurance Institute. The program is financed through employment-based payroll contributions of both employees and employers, and insurance is mandatory It covers home-based personal care. The national Insurance pays people of retirement age a “service annuity”. This is not money but actual help by a nursemaid or a day care facility. (Less than 1% of beneficiaries receive cash benefits, most of them as part of an experimental program) The in-kind benefits are provided via not-for-profit and for-profit providers who are contracted with the NII. In order to qualify the potential claimant, who must live at home, must pass a numbers of tests: 1) Age Test: Israeli resident who has reached retirement age. 67 for men, 64 for women. 2) Income test. This is aimed at excluding the highest income earners. The claimant and spouse must pass an income test (savings, real estate, and property are not included) 3) A Dependency Test, which considers the extent to which one requires the help of others to perform basic ADLs. An additional score is given for people living alone, as it is assumed that they require greater formal care giving The levels of benefits are then translated into weekly home care hours. Individuals receive between 9.75 – 18 hours. ----- Additional Info The claimant lives at home, not in an institution. Age Test: Israeli resident who has reached retirement age. 67 for men, 64 for women. Income test. Amounts are monthly in NIS (Israeli new shekel). LTCIP is income-tested with the aim of excluding the highest income earners. The claimant and spouse must pass an income test (savings, real estate, and property are not included) Average monthly wage is NIS 9485 ($2700). Dependency Test. The dependency test is split into 3 parts. The first considers the extent to which one requires the help of others to perform basic activities of daily living (ADL): bathing; dressing; eating (and cooking) ; mobility in the home and the occurrence of falls; control of urine and bowel movements. The second part considers the need for permanent or partial supervision due to cognitive, psychological or physical limitations. The third part is an additional score for people living alone, as it is assumed that they require greater formal care giving The levels of benefits are translated into weekly home care hours. Individuals receive between 9.75 – 18 hours.
  31. The claimant lives at home, not in an institution. Age Test: Israeli resident who has reached retirement age. 67 for men, 64 for women. Income test. Amounts are monthly in NIS (Israeli new shekel). LTCIP is income-tested with the aim of excluding the highest income earners. The claimant and spouse must pass an income test (savings, real estate, and property are not included) Average monthly wage is NIS 9485 ($2700). Dependency Test. The dependency test is split into 3 parts. The first considers the extent to which one requires the help of others to perform basic activities of daily living (ADL): bathing; dressing; eating (and cooking) ; mobility in the home and the occurrence of falls; control of urine and bowel movements. The second part considers the need for permanent or partial supervision due to cognitive, psychological or physical limitations. The third part is an additional score for people living alone, as it is assumed that they require greater formal care giving The levels of benefits are translated into weekly home care hours. Individuals receive between 9.75 – 18 hours.
  32. In the event that a person is in need of residential care, financial assistance can be obtained from the Ministry of Health. A “classification committee” at the Health Bureau will discuss the state of the candidate for care and will determine whether the candidate should be classified as “nursing” or as “mentally frail”. The financial assistance is conditional upon copay. In determining the copay of the candidate for care, it’s not only the income and assets of the individual that are considered The income and assets of the individual’s spouse, as well as the incomes of the adult children are considered. ------ Additional Info When considering the financial resources of the patient the following are considered: Nursing hospitalization insurance amounts of the candidate for hospitalization, if any. Regular incomes of the candidate for hospitalization and the spouse (any income, of any source, paid regularly or on a one-time basis) Financial assets (money belonging to the person, and which is immediately available, or which can be made available in the future, such as savings, provident funds, deposits, one-time insurance payments). Income from real estate belonging to the patient and the patient’s spouse (such as rent).
  33. And what about the private market …. In Israel 4.6 millon people (60 % of the entire population) have some form of LTCI policy purchased. Most policyholders (88%) have group insurance with the vast majority purchasing it through their health plan. But first let’s look at Individual Cover: The 1st LTCI policy was introduced in 1978 but was premature and never took off. In 1986 2 companies started to offer LTCI and were soon followed by other companies. The 1st generation of LTCI was based upon reimbursement of actual care given either at home or in an LTC facility. Later the market adopted the ADLs criterion. The initial ADL based cover paid 100% of the predetermined monthly amount for inability to perform 5 or 6 ADLs and 75% for 4 ADLs. The benefit period was 3 to 5 years. During the years fierce competition has lowered these “gate-keepers”. Most of the current policies will pay 100% of the benefit if the claimant can’t perform 3 ADLs or even 2 if one of them is incontinence. Nowadays the LTCI market is highly regulated. There is: a minimum definition for ADLs a minimum gate keeper trigger – 50% of cover for 3 ADLs. a requirement that premiums are level from age 65 (YRT basis is popular for younger ages) (Additional Info) The coverage period for a long term care insurance policy shall be the lifetime of the insured. --------------Additional Info For group policies there is a requirement for continuation of the cover on a private basis if the insured leaves the group or the policy is not renewed. Premiums are not guaranteed but the companies need regulator’s approval in order to increase the rates. The regulated definitions have triggered a rate increase of 40-50% ! ADLs … 1. Transferring 2. Dressing 3. Bathing 4. Eating and drinking 5. Continence 6. Mobility
  34. There are 4 sick funds which provide basic health insurance: Clalit, Leumit, Maccabi and Meuchedet. Since 1995 all residents have to be insured with one of these for basic health insurance. The sick funds also offer extra (supplementary) cover for an additional premium, including things like choice of doctor, extended services, etc. LTCI was initially marketed as a component of supplemental insurance. Members did not buy LTCI explicitly, but it was included in the supplementary cover. In 1998, supplemental and LTCI were separated by law. LTCI could now be offered by the sick funds but only via a group policy with a private insurance company. Those already insured were automatically covered, whilst new policyholders could purchase both types of cover (supplemental and LTCI) as a single package. All 4 sick funds offer their customers a group LTCI. This is an extra cover for an additional premium. The LTCI policies will typically pay an age related amount (reimbursement only) for a limited period (3-5 years). There are also more exclusions than a private policy. Many employers offer their employees a group policy. These policies are, naturally, cheaper but are more limited than a private policy.
  35. So in summary: LTCIP is a huge advance over what was in place prior to its introduction. However, there remain questions. Firstly over the structure of Benefit Levels. Are they sufficient. Secondly, the growing number of frail elderly people and the expected aging of the Israeli society have implications for the financial stability of LTCIP On the private side ownership remains high. Marketing through health funds has been successful, but there is: a lack of awareness that individuals have LTC insurance Potential ethical issue of having automatic coverage as the default option --- Additional information --- Israel's LTCI law represents a huge advance over what was in place prior to its introduction. Large numbers of elderly persons with functional disabilities who live in the community are receiving benefits; the scheme is broadly target efficient; the financial burden of the private purchase of home-care services has been substantially eased; there has been a significant change in the pattern of institutionalization; and the legislation has spawned a veritable explosion in the number of service provider agencies. needs to be a considerable improvement in training of home care workers, and in the development of opportunities for advancement such as entry into monitoring and supervisory roles LTCIP has become one of the fastest growing programs administered by the NII in terms of expenditure. Over the years, the share of insurance contributions and Ministry of Finance (MOF) contributions has decreased. Thus, the NII has to allocate, according to the NIA, funds from other programs to finance the rising costs of LTCIP. A major concern regarding LTCIP has been the adequacy of its benefits, especially for those in need of assistance and/or supervision for most hours of the day. Are the resources of LTCIP allocated adequately: do the severely frail receive enough home care The main goal of LTCIP has been to ease the physical and emotional, as well as financial, burden of caring for older family members, not to substitute for the family as a prime source of care giving. However, as both the number of beneficiaries and expenditure levels have increased over the years and the costs of care giving for families have risen as well, the question of whether the structure of benefits should be amended has become a pressing concern for decision-makers Whether current benefit levels meet needs is questionable. Reforming LTCIP benefits faces political obstacles as interests are affected. First, the consent of the MOF is required to promote any reform that increases the total spending on LTCIP. Second, if an increase in spending is not on the agenda, resources should be transferred from the less dependent to the more dependent elderly; that is, reducing the weekly home care hours granted to the less dependent. Since the introduction of LTCIP, various proposals to restructure benefit levels were put forward and later dismissed, as the NII and MOF could not reach an agreement. At the heart of these proposals was increasing the number of benefit levels, reducing weekly hours for the less dependent and increasing weekly hours for the more dependent Since the introduction of LTCIP, its generosity has not dramatically changed. The number of frail elderly has increased, and among them the share of the severely dependent has rapidly increased The introduction of LTCIP has shifted the burden of LTC services from focusing on institutional care to the community and home care. LTCIP has not narrowed the use of institutional solutions, but in recent years the growth rate in the number of beds in LTC institutions has become more moderate. One of the contributions of LTCIP – even if it was not a goal of the program originally – was the employment of many individuals who otherwise would have faced difficulties in the labor market [14]: 95–96. Most of these caregivers are non-professional, part-time and temporarily hired, and low-paid workers. Most of them are women and many immigrated to Israel since 1990. First, it seems that some reforms in the rules of LTCIP, especially the structure of benefit level, are required. Other than the political difficulties linked to the implementation, there is uncertainty about the implications for the behavior of clients and of service providers. Second, the growing number of frail elderly people and the expected aging of the Israeli society have implications for the financial stability of LTCIP and that of the NII in general.
  36. I‘ll close by discussing what the UK can learn by taking an international perspective on private markets in long term care. First let‘s summarise what the key drivers were for the development of Private Markets in the countries we‘ve been looking at. FRANCE In France, the public and private provision work well as a complement to each other. The best example of this is the consistency of ADL definition across private and public sectors. This can be seen as a consequence of the widespread use of private insurance to top-up state provision of health care. USA Despite the reputation of health care in the US, public provision of Long Term Care does exist but only for the very poor. Furthermore, all personal resources must be exhausted before eligibility for state aid. This creates a clear incentive to look for private cover. ISRAEL We have seen that in Israel private LTC coverage reaches 60% of the population. The key reason that there is such extensive penetration of the private market is the automatic enrolment system. It‘s also worth noting features that are common between these markets: Significant tax breaks are used to encourage the take-up of private LTC insurance. Introduction of State-benefits targetted at LTC encouraged the development of a private insurance market
  37. We’ve seen from France, US and Israel that a Private Insurance Market can develop in different contexts: - vastly contrasting levels of state provision - wide range of product designs - in a very different cultural settings. This shows that different approaches are possible. However, one thing that emerges as key is that the public and private sectors must work in partnership. The 2 systems need to dovetail into each other. And we have seen that there are a variety of public policies that can be used to stimulate a private market: - Tax incentives - Specific national insurance schemes targetted at LTC - Auto-enrolment - Programmes to promote awareness of the LTC risk. Let’s be clear about this severity of this risk - it’s the risk of living you last days in poverty without independence. So the final lesson to learn is the CONVICTION to tackle a subject people are scared to think about.