“Public Health remains a high‑risk agency due to weaknesses in program administration and because it has been slow to implement recommendations. In fact, its unresolved recommendations more than one year old have increased from 23 to 33 since our last high-risk report in 2013. More than half of these recommendations have a direct impact on public health and safety and, if not implemented, could adversely affect the state,” Howle wrote in a terse four-page letter to Gov. Jerry Brown, Assembly Speaker Toni Atkins and Senate President Kevin de Leon.

Twelve of the deficiencies have been cited in annual audits since 2008 without ever being adequately addressed.

Howle’s biggest concern is the Public Health department’s failure to address severe problems with long-term health care facilities. She said the department is not coming close to meeting its statutory responsibilities in investigating individual health-care workers accused of incompetence, wrongdoing or dangerous behavior and facilities providing substandard care. As of last April, 11,000 complaints had yet to be processed.

“DPH needs to act to eliminate its deficiencies, and request the necessary resources from the Legislature to perform its statutorily required duties,” said Dr. Richard Pan, a pediatrician who serves as a Democratic state senator for a Sacramento district, in a media statement.

Top two department officials leave under pressure

The critical audit comes after a November series in the Sacramento Bee found chronic problems at nursing homes and a failure of state oversight. That series and previous critical state watchdog reports led Public Health Director Ron Chapman to announce his resignation. On Feb. 11, the department confirmed that Kathleen Billingsley, the department’s chief deputy director of policy and programs, would serve her last day on Feb. 27. Replacements have not been announced.

The California Advocates for Nursing Home Reform had called for Chapman’s and Billingsley’s outster. A group spokeswoman told the Sacramento Bee last month that the leaders of the department “appear immune to accountability.”

The Fresno Bee noted last year that nursing home regulation has been a state problem throughout this century:

“More than a decade ago, Gov. Gray Davis signed legislation that raised fines. It worked for a time.

In 2000, 2001 and 2002, regulators issued a combined 2,202 citations and levied $10.3 million in fines. In the three-year period ending in 2013, the state issued 1,575 citations and imposed $7.9 million in fines, according to the California Healthcare Foundation.”

The same opinion piece noted why this issue is important and will keep growing in importance:

“There are 4.27 million Californians 65 and older now. There will be 6.05 million by 2020. We all have a stake in improving care provided by nursing homes … .”

By Dave Roberts

If you’re curious what health care insurance might be like when the government takes it over, a preview was provided on Tuesday at an informational hearing of the Assembly Committee on Aging and Long-Term Care. State Capitol Room 127 was packed with seniors angry about the false promises, mismanagement and exorbitant rate increases of the long-term care insurance program provided by the California Public Employees Retirement System.

The retirees are among the 150,000 state employees who thought they were doing the right thing for themselves and their families by agreeing to pay monthly premiums for the rest of their lives to ensure that they would be taken care of should they become incapacitated in their old age. About 119,000 of them signed up when the insurance was first offered in 1995. Many of them bought policies providing lifetime coverage and inflation protection. They believed that rate increases would not occur or would be modest if they did.

But CalPERS, which had no experience providing long-term coverage, over-promised and under-delivered. Officials failed to do the underwriting necessary to ensure that only the better risks would be allowed to purchase insurance. They failed to invest the premiums wisely and safely, and the fund was hit hard by the Great Recession. They failed to anticipate that people are living longer. And they didn’t recognize how expensive it would be to care for patients for those extra years.

As a result, just eight years after the long-term insurance program was launched, it was nearly broke.

“The margin in the fund had begun to decrease and was down to about 2 percent,” CalPERS Deputy Executive Officer Ann Boynton told the committee. “In 2003, the board then began the difficult process of implementing premium increases to address the shortfall.” But those increases were so inadequate, only four years later “the fund was in serious trouble.”

Rate increase Hell

Since then, policy holders have been in rate-increase hell with many suffering annual 5 percent hikes. And in 2015-16, they will be hit with a whopping 85 percent increase. Letters informing them of the bad news were sent out at the end of April. The only way to avoid the hike is either to drop coverage, thereby losing the tens of thousands of dollars already paid into the program with nothing to show for it, or to opt for lesser coverage in the form of a 3-, 6- or 10-year benefit plan.

But there’s no guarantee that these will be the last rate hikes.

“We believe, but cannot guarantee, that this [85 percent rate hike] action will avoid the need for further rate increase in the future,” said Boynton.

That statement was met with groans by many in the audience, prompting a call for civility by committee chair Mariko Yamada, D-Davis.

Earlier in her remarks, Boynton acknowledged, “We know this has been an incredibly difficult time” for the policy holders.

Tales of woe

That might be an understatement. Dozens of retirees on fixed incomes told the committee their tales of woe, complained about feeling ripped off and pleaded for help.

One Bay Area woman, who is 68 and her husband 74, said they have already invested more than $50,000 in their policies and now are “facing dropping our policies and losing our investment. We are victims of circumstances and consequences by an agency that has had no oversight or regulation [by government]. There is no guarantee that after 2015 there won’t be additional consequences. There has been 400 percent of increases. That is a violation of public trust. Why would we continue to invest one more dollar in this program? This must stop. We have done our part to protect ourselves in our desire not to be a burden to our society. The increases need to be halted.”

Another woman complained, “I feel I was the victim of fraudulent practices. Where is the honesty and integrity? When I first enrolled I was paying $40 a month. Now my premiums will go close to $200 a month. How many people can afford that. Is that fair?”

Ivonne Ramos Richardson, who said she had been a negotiator in the administration of Gov. George Deukmejian, is one of those who signed up for long-term insurance in 1995.

“I did it because my Mom died of cancer and Dad became caretaker,” she said. “That will not happen to us. We started at $42 per month and are now paying $142. It will go to $588 a month. Money that we don’t have. In my family there is dementia, Parkinson’s, Lou Gehrig’s disease. It frightens me to leave that lifetime and inflation protection [benefit].”

Richardson complained that the CalPERS letter she had received a few days earlier specified a May 29 deadline to decide whether she wants to exchange her current benefit plan for a shorter-term option in order to avoid the 85 percent rate hike.

“That is not enough time,” she said. CalPERS officials need to provide more education on the various options through “dog and pony shows” around the state, she added.

Boynton, who is as well versed in the program as anyone, acknowledged that it can be confusing.

“I’ve had a long-term care representative come to my house, and it makes no sense when trying to understand it,” she said. “Most people, until they have someone in a claim circumstance, don’t really understand the nuances of what’s going on when you talk about long-term care insurance. People carrying insurance may not know what they purchased, they may not know what the real value of what they currently have in their hand is worth.”

Legislature’s hands are tied

Although the policy holders are seeking help in stopping the rate hikes, Yamada told them the state Legislature’s hands are tied.

“The Committee on Aging and Long-Term Care does not have jurisdiction,” she said in her opening remarks. “CalPERS has its own independent board. We are bringing this hearing forward today in an effort to get at some of the facts. I know there is a lot of concern and fear and anger, quite frankly, about these issues.”

The one thing Yamada offered to do was to author a letter to CalPERS signed by other legislators asking that the May 29 deadline for switching benefits be moved back to allow more time for policy holders to consider their options.

“At our very minimum, I think in the strongest terms that we can articulate to the president of the CalPERS board there’s insufficient time for retirees to process this information and these kinds of changes,” she said. “I will start a sign-on letter to get an extension on the time for these life-changing elections. It takes time and effort. We do have to address this immediately as well as on a mid-term and long-term basis.”

Although there is widespread concern about losing lifetime benefit coverage, Boynton indicated that those fears are overblown for the vast majority. Fewer than 1 percent of policy holders require care for longer than nine years, she said. The average length of care is about 3.6 years.

Nearly one-third of those needing long-term care do so as a result of dementia, followed by cancer (18 percent), stroke (13) and fractures and injuries (9).

The highest rate of recovery , 17 percent, is for those with fractures and injuries, followed by stroke (11 percent), cancer (10) and dementia (9).

How long will it last?

In terms of how long benefits last for those with limited coverage, it matters where the care is received. A five-year policy actually may not last five years if the person is in the most expensive option, a skilled nursing facility. But it may last longer than five years if the patient is cared for at home with nursing support.

In 2012, only 7,300 of the 59,000 CalPERS benefit claims were used in skilled nursing facilities. The cost for those claims totaled $34 million. In contrast, more than three times that number of claims, 26,000, were used for home health care. But the cost, $59 million, was less than double the cost of the skilled nursing facility claims.

It’s estimated that about 70 percent of people who reach 65 will require long-term care at some point, but few have prepared for that contingency, according to The SCAN Foundation. That could result in a crisis as the Baby Boomers age, decline and become debilitated.

Currently, older Americans comprise 12 percent of the population. By 2030, they will make up 19 percent of the population, a cohort of 72 million.

By Dave Roberts

When tens of thousands of state employees signed up for the California Public Employees Retirement System‘s long-term care insurance plan as it was first offered in 1995, they thought they were doing the prudent thing for themselves and their loved ones. For a reasonable premium, they were ensuring they would not be a burden to their families should they become incapacitated in their old age.

But the CalPERS plan has been so over-promised and under-funded that what was supposed to be a comfort for retirees has instead turned into a nightmare of premium increases and benefit cutbacks. The latest rate hike — a whopping 85 percent — has been hitting in recent days. Many policy holders threatening to cancel, thereby losing the tens of thousands of dollars they may have already paid in. There even are calls for a class-action lawsuit against CalPERS.

Employees and retirees recently have contacted CalWatchdog.com. And a September, 2010 article on CalWatchdog.com, “CalPERS’ Ailing Long-Term Care Plan,” started lighting up with new comments from those affected and outraged.

Outrage

Their outrage was eloquently expressed by Katie Greene, a long-time care policy holder and member of the Retired Public Employees Association. She was speaking at the October 17, 2012 CalPERS meeting just before the board considered the 85 percent rate hike:

“I adamantly oppose, object and disagree with this proposal before you today. This proposal is onerous, noxious and unfair. It is punitive to those of us who chose the ‘lifetime with inflation protection.’ It appears designed and calculated to force us in the lifetime with inflation protection out of this plan and into the 10-year plan. Or to force us out of CalPERS long-term care, period. This is a huge increase in rate. And it’s contrary to the basic spirit, reason and rationale for purchasing long-term care insurance.

“I chose a long-term care plan to be prepared and ready for the anticipated demands of my health needs in my old age. Instead I find myself in old age with a fixed income in a battle with CalPERS, which I trusted, with an ever-rising premium and an ever-changing long-term care insurance program. I entered into an agreement with you, which has turned out to be troublesome, tumultuous and now a financial disaster.

“Over 150,000 of us trusted and depended on CalPERS to hire competent, capable, intelligent experts, managers and administrators of this program to invest our long-term care funds wisely and prudently. Instead, you’re here today saying to me, who’s now a senior on a fixed income, that I have to agree to a lesser policy or face this 85 percent increase. I ask, ‘Is there any health care plan that isn’t being inflated?’ Yet you’re asking me to decide on a different policy without inflation [protection].

“You have not been forthcoming with us. You have not given us any assurances that this plan will work. How do we know that in 3, 5, 10, 15 years you will not be here asking us to suck it up again and take a huge increase? This is certainly not the bargain I made with you over a decade ago. I urge you to vote a resounding no on this unfair proposal. It is not in keeping with an agreement that we made. Send it back to us with a more fair, more fair, fair and equitable, solution. Honor your agreement.”

The 85 percent rate hike would have CalPERS retirees who are 70 and older and want lifetime protection paying $21,475 annually for a joint policy. That’s about three times the rate for federal employees and double the rate of some private insurance plans. And that’s for just the base plan without optional riders covering things like inflation protection, the restoration of benefits and the return of the premium death benefit, which can add thousands more to the annual cost.

Two years

To lessen the pain, CalPERS is spreading the 85 percent rate hike over two years beginning in July 2015. For those who prefer to take their medicine in one lump in just one year, the rate hike would be “only 79 percent,” as it’s phrased in a CalPERS press release.

The rate hike is targeted at those who purchased policies between 1995 and 2004 that provide three-year, six-year or lifetime benefits with inflation protection. (Benefits automatically increase with health care inflation.) Or lifetime benefits without inflation protection. Comprising the majority of the more than 148,000 LTC policy holders, they are starting to receive letters from CalPERS notifying them of the rate increase.

They can avoid the rate hike by reducing their coverage to a maximum of 10 years of benefits without inflation protection. The 85 percent rate hike was calculated based on the assumption that 10 percent of those with lifetime benefits will switch to the 10-year maximum plan.

If more than 10 percent switch, the rate hike might be reduced. But if fewer than 10 percent switch, the rate hike could be greater than 85 percent. CalPERS officials argue that it makes sense to switch to shorter term coverage because the average long-term care claim lasts 3.6 years.

The rate hike is just the latest in a series of premium increases since 2003. In July 2010, policy holders were hit with a 15-22 percent hike. Many have also suffered 5 percent increases annually since then.

Higher claims

According to a CalPERS press release, the 85 percent increase “is necessary to offset the effect of higher-than-expected claims, lower-than-expected investment income, the Board’s adoption of a more conservative LTC Fund investment mix, and a lowering of the Fund’s investment discount rate to 5.75 percent to align with the more conservative investment portfolio.”

Concerning the higher-than-expected claims, CalPERS officials “missed two key factors: the enormous increase in Alzheimer’s Disease and more families’ willingness to move their loved ones into a facility for care,” wrote California State Retirees President Susan Sears in the December CSR newsletter. “Decades ago, both personal bankruptcy and ‘rest homes’ had a fair amount of stigma attached to them; both have become fairly commonplace nowadays. Exhausted caregivers are discovering they simply cannot provide 24/7 care for loved ones; they are forced to find a safe, comfortable place with different people working three shifts to care for the residents.”

Like CalPERS officials, Sears is hoping the 85 percent rate hike will induce many of those with lifetime benefits to switch to 10-year plans.

“Because the 10-year option is finite, people might not rush into receiving care until they’re absolutely sure it’s needed,” she wrote. “With the present, unlimited plans, people often go into care sooner than they really need to — which drives up the cost. We’re all living much longer, and the likelihood of most of us needing more than 10 years of LTC is greatly reduced.”

She’s also looking forward to CalPERS re-opening enrollment in its long-term care plan at the end of this year, which would bring in more revenue from younger policy holders. Currently the average age is 65.

CalPERS’ decision

CalPERS officials believe they’ve done the right thing for their policy holders with the 85 percent rate hike.

“We took great care to listen to the concerns of our policy holder constituent groups, and weighed staff proposals for these options carefully before making our decision,” said Board President Rob Feckner. “We are taking these actions to ensure the sustainability of the Long-Term Care Fund and the availability of benefits for our policy holders.”

Priya Mathur, chairwoman of the board’s Pension and Health Benefits Committee, said, “We feel the plan options we will offer our policy holders make this a win-win situation, especially for those with lifetime benefit policies. With the average length of stay in a care facility a little over three years, we think the 10-year conversion option will provide more than adequate coverage when our policy holders need it.”

Ann Boynton, CalPERS’ deputy executive officer in charge of the LTC program, responded to Greene’s allegation that CalPERS failed to hire “competent, capable, intelligent experts, managers and administrators.”

“The staff has been working incredibly hard to ensure that this program is sustainable over the long-term,” Boynton told the CalPERS board. “The issues that we are facing relative to the need to propose to you a rate increase are not tied to the competency of the managers of the program.”

But Boynton then stated that previous managers had failed to ensure adequate funding.

“This is a fundamental question of a failure to set these premium levels at a rate that will be sustainable into the future,” she said. “As a board you’ve been wrestling with this challenge since 2003, when you first began to really look at it. We understand that this has been a long journey for the policy holders. We are full intent by bringing this to you at this point with a single rate increase spread over two years or taken in one that we will finally be able to provide the policy holders with sustainability and predictability into the future.

“That is, to the best of our ability to predict what will happen, they will be able to count on their premiums staying stable. If we ever for whatever reason should need to come before you again to look at a premium increase, we will work that issue with you well in advance apprising you of all of the circumstances that might lead to that.”

Meetings

Although the vote for the 85 percent rate hike was unanimous, some board members were not happy about it.

“This is a very painful pill to swallow, and obviously a difficult issue to vote for just based on the percentages,” said Dan Dunmoyer. “The challenge of long-term care is that as people live longer it becomes, as we can see here, very, very expensive to sustain it. … It’s the joy of life expectancy growing and living longer. But it’s also the challenge from an actuarial and benefit perspective of providing this benefit with any degree of success. We should stick to our knitting. And in this case this is really not our best knitting. I’m going to support this. But this is a very difficult business to be in.”

The CalPERS Pension and Health Benefits Committee, which oversees the long-term care program, meets Wednesday, Feb. 20 at 8:30 a.m. in the Lincoln Plaza North auditorium in Sacramento. The full board meets on Thursday, Feb. 21 at 9 a.m. in the same location.