SPEC. COM. REP. NO.
RE: S.C.R. 23
Honorable Robert Bunda
President of the Senate
Twenty-First State Legislature
State of Hawaii
Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twenty-First State Legislature
State of Hawaii
Your Special Joint Legislative Committee on Long-Term Care Financing, to which was referred S.C.R. No. 23, S.D. 1, H.D. 1, C.D. 1, entitled:
"REQUESTING THE DEVELOPMENT AND IMPLEMENTATION OF A LONG-TERM CARE FINANCING PLAN AND A STATEWIDE LONG-TERM CARE PROVIDED CERTIFICATION PROGRAM",
begs leave to report as follows:
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 Hawaii Medical Service (HMSA) Foundation ("Health Trends in Hawaii", Fifth Ed., 2001), the State's population growth was greatest among the elderly between 1990 and 1999. The number of residents ages sixty-five to seventy-four increased thirteen per cent (one per cent was the national average), while the number of those ages 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 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 causing 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.
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 "The 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, "The proportion of the population deemed 'work age' (19-65) is decreasing relative to the elderly, raising questions abut the social burdens this decreasing cohort must bear." These factors pose important questions for health care and public policy.
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.
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.
Pursuant to Senate Concurrent Resolution No. 23, C.D. 1, the Legislature formed a Special Joint Legislative Committee on Long-Term Care Financing (Joint Committee) composed of Representative Dennis A. Arakaki, Chair; Representative Michael P. Kahikina and Senator David M. Matsuura, Vice-Chairs; Senators Jan Yagi Buen, Russell Kokubun, Colleen Hanabusa, and Bob Hogue, and Representatives Marilyn Lee, Bob Nakasone, and Mindy Jaffe, members. The Joint Committee undertook to:
(1) Develop and implement a plan for a dedicated source of revenue that will:
(a) Assure a comprehensive long-term care infrastructure;
(b) Support the long-term care needs of all citizens in the State regardless of their income; and
(c) Control the escalating costs of long-term care and the burden on the State; and
(2) Develop a statewide certification program for long-term care providers.
Approach of the Joint Committee
The Joint Committee, with Representative Arakaki as the designated chair by agreement, held a series of informational briefings with community members interested in long-term care, including representatives of consumers, providers, government agencies, non-profit organizations, and the federal government. Their input and the discussions enabled the Committee to craft meaningful proposed legislation for the 2002 Regular Session. Meetings were held at the State Capitol on October 1, 2001; October 15, 2001; October 24, 2001; November 20, 2001; December 4, 2001; December 18, 2001; January 8, 2002, and January 22, 2002. The January 8 meeting featured First Lady Vicky Cayetano, whose presentation was in support of a long-term care financing system.
The Executive Office on Aging (EOA) assisted the Joint Committee by making available the results of its long-term care actuarial study, financed from the EOA's own funds.
The Auditor also stood ready to assist the Joint Committee with any supplemental studies deemed appropriate by the Co-Chairs of the Joint Committee.
The Joint Committee examined and discussed (1) the report of the Joint Legislative Committee on Long-Term Care, Regular Session of 1999, Misc. Comm. No. 9, pursuant to Act 339, Session Laws of Hawaii 1997; (2) Financing Long-Term Care: A Report to the Hawaii State Legislature, Executive Office on Aging, 1991; (3) Report to the Hawaii State Legislature, Long-Term Care Financing Advisory Board, 1992; and (4) Actuarial Report on the Proposed Family Hope Program, Actuarial Research Corporation, 1992. The Joint Committee took the findings and recommendations of the reports into consideration in its deliberations. The Joint Committee also discussed the Hawaii Family Hope Program, proposed by H.B. No. 31, 1993.
Pursuant to the legislative mandate, the Joint Committee has prepared three Senate and House companion bills for introduction in the 2002 Regular Session:
(1) Relating to the Hawaii long-term care financing Act;
(2) Relating to long-term care (single entry point); and
(3) Relating to Aging (caregiver support).
The substance of these three bills are discussed below.
No state has a caregiver certification program, according to the National Conference of State Legislatures. The issue has not generated much research material nationally. In Hawaii, the discussion among the Department of Health (DOH), Department of Human Services (DHS), and provider groups has been somewhat minimal in terms of identifying problems and recommending solutions. In fact, most of the representatives of consumers, providers, government agencies, and nonprofit organizations are not familiar with the issue or the problem.
The Joint Committee found that the Hawaii Revised Statutes currently regulates adult residential care homes, nurses aides, and home health care agencies.
The Joint Committee discussed the establishment of a certification program for caregivers. After much consideration and deliberation, the Joint Committee recommends against certification for the following reasons:
(1) No existing entity is capable of doing the certification;
(2) There are no certification standards;
(3) Certification means more governmental regulation;
(4) Family caregivers would be discouraged from providing caregiver services to a loved one, if they are required to be certified;
(5) If the State were to do the certification, the State would be exposed to liability if a patient is injured or has died because of fault of the certified caregiver; and
(6) The DHS is skeptical that it could afford to hire certified caregivers for Medicaid long-term care recipients.
The Joint Committee determined that the real problem is not certification, but rather the lack of adequate training. Certification is only a means to assure adequate training.
The Joint Committee appointed a Subcommittee on Certification which filed a report to the Joint Committee on November 1, 2001, recommending:
(1) No certification program for family and friends who care for individuals on a daily basis;
(2) The State appropriate funds to provide training for caregivers;
(3) No certification for government programs such as Medicare and Medicaid because adequate regulations are currently in place to address licensing and skills competency for quality assurance;
(4) No certification program for professional caregivers (private pay) at this time, in reference to insurance companies paying for or being responsible for the certification, because the Joint Committee has no information on insurance company coverage requirements for caregivers; and
(5) A registry system would escalate the cost of providing caregiver services because of the magnitude of administrative expenses entailed with providing a registry. Because a caregiver registry would be the practical equivalent of ensuring competency, the entity responsible for registration would have to assess the care provider's skills; issue the certificate; monitor for continued quality assurance; maintain an up-to-date data base; and ensure against liability. The fiscal and human resources required to implement and ensure a proper registry system is unfeasible at the state level.
The Joint Committee has prepared a bill for introduction in the 2002 Regular Session to allow the EOA to use available state funds to supplement federal grants to provide support services and training for family caregivers. The EOA receives grant moneys under the National Caregiver Support Program, Public Law 106-501, to provide basic services for family caregivers. These services include information to caregivers about available resources; assistance to caregivers to gain access to the services; individual counseling; organization of support groups; caregiver training to assist caregivers to make decisions and solve problems relating to their caregiver roles; respite care to enable caregivers to be temporarily relieved from their caregiving responsibilities; and supplemental services to complement the care provided by caregivers. Priority is given to caregivers that care for persons having the greatest social and economic need, particularly low-income individuals, and persons with mental retardation and developmental disabilities.
The Joint Committee encourages Kapiolani Community College (KCC) to provide training courses and support services for professional caregivers, including issuing a certificate of completion or issuing a certification, and maintaining a registry for those professional caregivers who complete the program or attain a certification. The KCC is particularly well suited for this endeavor inasmuch as it offers nursing courses related to long-term care. A certificate of completion or a certification could provide an incentive for professional caregivers to attend KCC, and may lead to economic growth for Hawaii in establishing a new industry. The other state community colleges are encouraged to follow the lead of KCC or initiate their own programs.
Single Entry Point System
The Joint Committee referred to the briefing paper "Single Entry Point System", prepared by the Senate Majority Office in conjunction with the Committee's work. The issue has been discussed in the Legislature since 1995, with the Legislative Reference Bureau's "Long-Term Care: A Single Entry Point for Three Populations", Report No. 8, and the report of the DHS, "Single Entry Point System", 1996. No consensus resulted from these discussions.
The Joint Committee seeks to expediently implement an effective, cohesive, coordinated, and affordable single entry point system, without doing violence to the organizational structure of the DOH and DHS. The Joint Committee has prepared a bill for introduction in the 2002 Session that vests the EOA with responsibility for establishing and administering a single entry point system of long-term care coordination that provides:
(1) A unified system of multiple entry points;
(2) Information and referral services;
(3) Needs assessment at the time of intake;
(4) Preadmission social and medical screening for institutional care;
(5) Placement of the individual into the appropriate setting; and
(6) A tentative comprehensive service plan.
The EOA may contract out for the services to a private, nonprofit entity for $1 per year. The Joint Committee has been informed that there is a reputable, experienced entity that is willing to be paid $1 per year to provide the program.
The Joint Committee believes that this approach to creating a single entry point system is the most workable, and should be given an opportunity to succeed where most proposals to date call for planning only. This measure goes beyond planning and actually establishes the system.
Current methods of financing long-term care involve predominantly Medicaid, private insurance, and personal assets. Medicaid, which is limited to financially qualified persons of low income, pays for institutional care (about eighty per cent of all nursing home residents are dependent on Medicaid) and home- and community-based services. Medicare benefits for long-term care are limited. It has been unofficially estimated that Medicaid represents only about ten per cent of the total number of long-term care eligible persons, and only five per cent of the population has private long-term care insurance. Therefore, approximately eighty-five per cent of the population must depend upon their personal assets to pay for long-term care services.
This is the large population that needs an affordable long-term care program.
Hawaii's citizens are faced with an overwhelming financial burden of caring for their elderly and disabled citizens. The elderly and disabled population needing long-term care will continue to grow as the population ages. Nursing home costs often exceed a family's ability to pay, threatening a family's financial self-sufficiency. However, nursing home care is but one component of an array of long-term care services options, including home-based services and community-based facilities.
Since increasing numbers of Hawaii's population will need long-term care services, there is a compelling need to create an affordable and universal method of financing those services. Unlike the past, federal and state moneys cannot be relied upon in the future. What Hawaii needs is another method of financing that is affordable and suitable for the vast majority of residents.
The Joint Committee recommends the enactment of the Hawaii Long-Term Care Financing Act, the bill it has prepared for introduction in the 2002 Regular Session. The main characteristics of the Act are discussed below.
Scope of Benefits
Benefits would be paid for "long-term care services", defined as a broad range of supportive services needed by individuals who are age twenty-five or older with physical or mental impairments and who have lost or never acquired the ability to function independently. Long-term care services include a range of home- and community-based services, including home health services, adult day care, adult residential care homes, extended care adult residential care homes, hospices, personal care, respite care, care at home by a relative of the caregiver, and products and implements used in the care of the individual. The benefit amount would start at $70 per day up to a period of three hundred sixty-five days. The covered services and the benefit amount were deemed to be actuarially sound for the system to sustain solvency.
A viable and actuarially sound program must have mandatory contributions. A voluntary program would:
(1) Be impossible to accurately predict the number of participants and the potential amount of benefits to be paid;
(2) Make the premium too expensive to be affordable because only a small percentage of the population could be depended upon to contribute;
(3) Not be universal because it would not cover everyone;
(4) Compete with private insurance, but probably at a higher price than private insurance (the proposal does not compete, but is supplemental to private insurance); and
(5) Make it difficult for the State to collect.
Because the system is mandatory, the most efficient and universal means of collection is to tie the contributions with payroll deduction. The mechanisms for collection and identification are built into the payroll tax withholding system. Those persons without a payroll, such as the self-employed, would contribute in the same manner as paying their income taxes. The term "premium" is used because it is not a tax, although the manner of collection is similar to a tax withholding or other collection.
The Department of Taxation expressed opposition to designating it as the agency of collection. Therefore, the proposed legislation deletes reference to the Department of Taxation and to a payroll withholding. As the bill moves through the legislative process in 2003, the respective Senate and House committees hearing the measure must designate the appropriate collection entity or create a new entity for this function.
Payment of Benefits
The system would pay long-term care benefits directly to qualified recipients of the long-term care services. The payment is intended as a reimbursement to the recipient rather than compensation to the provider of the service. This allows the recipient to choose whichever long-term care service is deemed appropriate. The concept is not to create a long-term care system, as would occur if payments were made to the providers, but to expand the provision of long-term care services, as would occur if the recipient exercises choice in selecting a long-term care service. According to the Executive Office on Aging, the scarcity of long-term care services is attributable to the lack of a payment stream for those services. It is anticipated that a reimbursement system would stimulate competition in the economic marketplace by enticing more providers to enter the market, and ultimately leading to a new growth industry for Hawaii, resulting in more tax revenue for the State.
There is no definitive age at which a person could be diagnosed with a condition or disease needing long-term care services. However, an age range must be specified for actuarial purposes and to keep the system solvent. Accordingly, under the proposed system, persons who are age twenty-five or older would be eligible to receive benefits. Those younger than eighteen who are disabled are generally eligible for lifetime government programs such as Social Security or Medicaid. Others who are age eighteen to twenty-four generally are healthy (except for the occasional critical motor vehicle accident).
Premium Contribution Amount
The amount of $10 per month is recommended as affordable. This amount is very inexpensive when compared to private insurance premiums. The public should bear in mind that their contribution will someday be returned to them in the way of benefit payments. Each person's premium will be duly and accurately identified and a running total will be maintained for that person.
Interrelationship with Other Long-Term Care Payments
The proposed system would pay primary to Medicaid and private insurance. A recipient of long-term care services would exhaust benefits under the proposed system before resorting to Medicaid and private insurance. In this manner, the State would be relieved of the Medicaid burden at least for the period of time that the recipient receives benefits under the proposed system. In addition, the recipient who is not yet on Medicaid, would have time to transition into Medicaid if necessary.
The recipient with private insurance could preserve those insurance benefits until a later time in life, particularly advantageous because insurance benefits tend to be limited in duration. Because the proposed system would be the primary payor, people may not need as much long-term care private insurance coverage.
A plan for the administration of the proposed system will be addressed in the 2003 Regular Session. The administration is viewed as secondary at this time to the passage of the substance of the Hawaii Long-Term Care Financing Act. Furthermore, the administration is predominantly germane to paying of the benefits, which will occur after several years as the system would require enough time to build up reserves to meet anticipated liabilities.
The Joint Committee's recommendations for legislative action are embodied in the three bills drafted by the Joint Committee. The Co-Chairs of the Special Joint Legislative Committee on Long-Term Care Financing, Senator David M. Matsuura and Representatives Dennis A. Arakaki and Michael P. Kahikina, will jointly sponsor the introduction of three bills as identified herein, for the consideration by the 2002 Regular Session.
Respectfully submitted on behalf of the members of the Special Joint Committee on Long-Term Care,
DAVID M. MATSUURA, Co-Chair
DENNIS A. ARAKAKI, Co-Chair
MICHAEL P. KAHIKINA,Co-Chair