Report Title:

Long-Term Care; Mandatory Premium Assessment

 

Description:

Enacts the Hawaii long-term care financing Act; creates a mandatory assessment system to collect premiums from employee paychecks; establishes an initial premium amount of $10 per month and an initial benefit payment of $70 per day for 365 days; creates the Hawaii long-term care benefits fund to hold the premiums and to pay benefits.

 

THE SENATE

S.B. NO.

2416

TWENTY-FIRST LEGISLATURE, 2002

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO the hawaii long-term CARE financing act.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The Congressional Budget Office expects the national expenditures for long-term care services for the elderly (people age sixty-five and older) to grow through the year 2040 ("Projections of Expenditures for Long-Term Care Services for the Elderly", March 1999, Congressional Budget Office). The main reason for that growth is that the U.S. population is aging, and elderly people receive the most long-term care services because they are more likely than younger people to have some kind of functional limitation. Many baby boomers will begin to reach age sixty-five in 2011. In addition, more elderly people will reach advanced ages (eighty-five and older) than in the past because of declining mortality rates. These trends will cause the proportion of the population that is elderly, which was just under thirteen per cent in 1995, to rise to twenty per cent in 2040. More importantly, the population over age eighty-five, the segment most likely to require long-term care, will grow over three times its current size by 2040.

In Hawaii, according to a report by the Hawaii Health Information Corporation and the HMSA Foundation ("Health Trends in Hawaii", Fifth Ed., 2001, hereinafter referred to as the "HMSA report"), the State's population growth was greatest among the elderly between 1990 and 1999. The number of residents aged sixty-five to seventy-four increased thirteen per cent (one per cent was the national average), while the number of those aged seventy-five and older increased by sixty-two per cent (twenty-four per cent was the national average). On a county level, all counties experienced significant growth in their elderly populations, with Honolulu experiencing the greatest increase from five per cent in 1970 to fourteen per cent in 1999. Overall since statehood, the proportion of elderly to total population has increased from roughly five per cent in 1960 to fourteen per cent in 1999, when the proportion of elderly in Hawaii's population just exceeded that of the U.S. population.

As the baby boom generation ages, these figures are projected to increase and cause a host of social and economic demands. Aging brings concomitant chronic health diseases such as cancer, cardiovascular disease, and stroke, all of which necessitate intense daily care in the latter years of life.

The legislature finds that people in Hawaii are simply living longer, due in large measure to the State's excellent health care. However, the irony would be if the State could not also care for the elderly who have benefited from the enhanced health care in their younger years. The implication, according to the HMSA report, is that "[t]he increasing proportion of elderly in Hawaii's population signals the need to monitor the ability of health care resources to meet the elderly's greater need for services, including the distribution of those services to the Neighbor Islands." Furthermore, according to the HMSA report, "[t]he proportion of the population deemed 'work age' (19-65) is decreasing relative to the elderly, raising questions about the social burdens this decreasing cohort must bear." These factors pose important questions for health care and public policy.

The legislature further finds that the whole dynamic of the extended family in Hawaii will radically change to place impossible financial and social hardship on Hawaii families. As people age or become disabled, they need services to help them with activities of daily living. The approach to helping Hawaii's elderly and disabled should be prompted by compassion and caring, although the problem is inextricably one of economics.

The legislature further finds that because increasing numbers of Hawaii's residents will need long-term care services, there is a compelling need to create an affordable method of financing those services. What Hawaii needs is a method of financing that is affordable and suitable for the majority of residents. Current methods of financing long-term care in Hawaii involve predominantly Medicaid, private insurance, and personal assets. Medicaid eligibility is qualified by income limits. Private insurance is not widespread, and most people do not have sufficient personal assets. Contrary to popular belief, Medicare pays for only the initial hospitalization stay (acute care) of a patient for a limited number of days.

This Act is a product of the joint special committee of the Legislature, formed pursuant to Senate Concurrent Resolution No. 23, C.D. 1, 2001, to develop and implement a plan for a dedicated source of revenue to support the long-term care needs of all citizens in the State regardless of income.

The purpose of this Act is to create a mandatory premium assessment system that is reasonable, affordable, and equitable, to pay for long-term care expenses.

SECTION 2. The Hawaii Revised Statutes, is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER

HAWAII LONG-TERM CARE FINANCING ACT

§   -1 Purpose. This chapter establishes an equitable and affordable system of long-term care, funded by mandatory premium assessments to be deposited into the Hawaii long-term care benefits fund. Benefits under this chapter are intended to be primary to other long-term care benefits from private insurance and Medicaid. This chapter promotes individual choice and discretion in selecting and paying for long-term care services.

§   -2 Definitions. As used in this chapter:

"Activities of daily living" means at least bathing, continence, dressing, eating, toileting, and transferring.

"Benefit payment" means a payment to a recipient under section      -6.

"Fund administrator" means the department of              .

"Long-term care services" means a broad range of supportive services needed by individuals who are age twenty-five or older with physical or mental impairments and have lost or never acquired the ability to function independently.

Long-term care services include:

(1) Home health care services, as defined in section 431:10H-201;

(2) Adult day care, as defined in section 431:10H-201;

(3) Adult residential care homes, as defined in section 321-15.1;

(4) Extended care adult residential care homes, as defined in section 323D-2;

(5) Hospices, as defined in section 321-11;

(6) Personal care, as defined in section 431:10H-201;

(7) Respite care, as defined in section 333F-1;

(8) Home care by a relative of the caregiver or by another individual to assist with the activities of daily living; and

(9) Any product and implement used in the care of the recipient of a benefit payment under section      -6.

§   -3 Administration of this chapter; expenses. (a) This chapter shall be administered by the                     .

(b) Costs for the administration of this chapter shall be paid from moneys in the Hawaii long-term care benefits fund as follows:

(1) Up to four per cent of the total monthly deposit into the fund to cover general administrative expenses; and

(2) Up to four per cent of the total monthly amount of claims paid out from the fund to cover administrative expenses related to claims processing.

§   -4 Hawaii long-term care benefits fund. (a) There is established in the state treasury the Hawaii long-term care benefits fund, into which shall be deposited moneys collected as long-term care premiums pursuant to section      -8. The department of budget and finance shall cause the moneys in the fund to be deposited in federally insured financial institutions in Hawaii, so as to preserve the balance and ensure a reasonable return under prevailing interest rates.

(b) Expenditures from the fund shall be made solely for the purpose of making benefit payments by the fund administrator for long-term care services and the cost of administration of this chapter.

(c) Notwithstanding any law to the contrary, moneys in the fund shall not be transferred to another fund at any time nor for any purpose.

(d) The auditor shall conduct an audit of the Hawaii long-term care benefits fund annually for the first three years from the date the fund first receives deposits, and every three years thereafter; provided that the auditor may modify the time periods after the first three years as appropriate to the circumstances. The auditor shall publish a report of the results of every audit, including any recommendations.

§   -5 Qualified long-term care services. (a) To be eligible for a benefit payment for long-term care services under this chapter, a fully or partially vested individual must have a written certification from a physician licensed under chapter 453 or 460, or an advanced practice registered nurse recognized under section 457-8.5, assigned by the fund administrator, certifying that the vested individual:

(1) Needs assistance with two or more activities of daily living; or

(2) Is afflicted with Alzheimer's disease or dementia; and needs one or more long-term care services, for the period of time during which the individual receives the benefits under this chapter.

The written certification shall be subject to approval by the fund administrator.

(b) For purposes of subsection (a), the written certification shall specify that the individual:

(1) Is unable to perform, without substantial assistance from another individual, at least two of six activities of daily living for a period of at least ninety days due to a loss of functional capacity; or

(2) Requires substantial supervision to protect the individual from threats to health and safety to self or others due to severe cognitive impairment.

§   -6 Defined benefit. (a) Beginning                , the benefit payment for long-term care services shall be $70 a day up to a period of three hundred sixty-five days; provided that the daily benefit payment may be increased from time to time by the fund administrator in accordance with the actuarial report under section      -9.

(b) Benefit payments shall begin after the thirtieth day following the date of the approval of the written certification under section      -5 and shall be made to the recipient of a long-term care service, or to the legal representative of the recipient in the name of the recipient, as a reimbursement for long-term care service expenditures. The amount of benefit payments shall not be qualified by the income of the recipient.

(c) Benefit payments under this chapter shall be primary to private insurance and Medicaid benefits. An individual shall not receive benefit payments while the individual is receiving Medicare benefits for long-term care; provided that if Medicare benefits are exhausted, the individual shall be required to qualify under section      -5.

§   -7 Vesting to receive benefit payments. (a) Any individual who has paid the long-term care premium under section     -8 for ten years, shall be fully vested to receive benefit payments, but shall continue to be subject to the assessments under section      -8.

(b) An individual shall earn one-tenth of the benefit payment amount under section      -6 for each consecutive twelve-month period that the individual pays the premium under section      -8. An individual shall be allowed twelve consecutive months of non-payment of the premium without penalty; provided that after the twelve consecutive months of non-payment, the individual shall forfeit one-tenth of the defined benefit amount for each year of non-payment.

§   -8 Premium imposed; rates. (a) For each year beginning after December 31, 2003, there is hereby levied and shall be assessed a mandatory long-term care premium, to be collected by the department of                     , in the amount of $10 a month, from each individual who is:

(1) Age twenty-five to ninety-eight; and

(2) A regular employee, as defined in section 393-3; a self-employed individual; spouse of a regular employee or self-employed individual who is not receiving unemployment compensation benefits; an unemployed individual who is receiving unemployment compensation benefits; or a retiree;

provided the individual is not an employee or retiree of the federal government. After December 31, 2004, the premium may be increased from time to time by the fund administrator in accordance with the actuarial report under section    -9.

(b) The mandatory long-term care premium shall be withheld by the employer from the first salary or wage payment of each month, and the employer shall forward the premium to the department of                     . Self-employed individuals shall submit the premium amount directly to the department of                     .

(c) If an individual receives salary or wages from more than one employer, the individual shall elect one of the employers to withhold the premium. The election shall be made through the use of the individual's social security number, or other identifying mechanism as specified by the department of                    .

(d) If the individual receives retirement benefits, the entity paying the retirement benefits shall withhold and pay the premium to the department of                     .

(e) If the individual receives unemployment compensation benefits under chapter 383, the department of labor and industrial relations shall withhold and pay the premium to the department of                     .

(f) An unemployed spouse of an individual who pays the premium under subsection (a), shall also be subject to the premium assessment as provided under subsection (a). The spouse's premium shall be withheld from the salary or wages of the employed spouse; provided that the contributions of the unemployed spouse shall be appropriately identified to enable proper credit for purposes of vesting under section      -5. This subsection shall apply to reciprocal beneficiaries who have a certificate of reciprocal beneficiary relationship under section 572C-   .

(g) Voluntary contributions of the premium shall not be allowed.

(h) The department of                     , shall develop a system to identify and tally the premiums collected from each individual on a current basis.

(i) The department shall adopt rules and prescribe appropriate forms to facilitate the withholding and payment procedures to implement the premium assessment under this section.

§   -9 Actuarial report. The fund administrator shall cause to be prepared an annual actuarial report and actuarial opinion, as defined by the Actuarial Standards Board of the American Academy of Actuaries. The report and opinion shall be prepared by a member of the American Academy of Actuaries who is a fellow of the Society of Actuaries, certifying that the program is in actuarial balance."

SECTION 3. The Hawaii long-term care benefits fund shall reimburse the general fund, after a period of five years from July 1, 2003, for the amount of any legislative appropriation for start-up costs of the fund and for the administration of this Act, whether the appropriation is made in this Act or subsequent Acts.

SECTION 4. The department of health, executive office on aging, shall prepare legislation for introduction in the 2003 regular legislative session, to designate the entity that will serve as the fund administrator for this Act, and provide for the establishment of a governing board or a similar entity, and appropriate conforming amendments to this Act.

SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $100,000, or so much thereof as may be necessary for fiscal year 2002-2003, to carry out the purposes of section 4 of this Act.

The sum appropriated shall be expended by the department of health, executive office on aging, for purposes of this Act.

SECTION 6. If any provision of this Act is in conflict with federal law, this Act shall be interpreted to be congruent with the federal law.

SECTION 7. This Act shall take effect upon its approval; provided that section 5 shall take effect on July 1, 2002, and

section 2 shall take effect on July 1, 2003.

INTRODUCED BY:

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