Long Term Care Insurance Partnership Programs – Shielding your Assets from Medicaid Spend-down & Estate Recovery
Before you can qualify for government aid, Medicaid requires that you spend down your assets by paying for your long term care, until you are basically at poverty level. If you have a spouse/partner that depends upon your assets for a decent quality of life, it is wise to plan ahead to protect your estate for the sake of your loved one’s comfort.
Many people try to give away their assets to family or trusts as soon as they know they will need long term care, but this isn’t a smart strategy, nor is it as easy as it used to be. Depending upon the state, Medicaid’s “look back period” can reach back as far as 5 years.
However, if an individual owns an LTC insurance policy, it can buy them some time. How? Assets can be protected if a policy pays out for as long as the Medicaid look back period. Of course, a person using this asset protection strategy will need to plan ahead by buying a regular Long Term Care insurance policy (while they are healthy). It must pay out for the entire look back period or else the individual risks having to self-pay any remainder, which could be a financial disaster.
This is where a Long Term Care insurance Partnership Program policy can help.
State Long Term Care insurance Partnership Programs join the forces of Medicaid and private long-term care insurance companies. Who might benefit from these programs?
* Those who can’t afford to self-pay expensive long term care and also
* Can’t afford a Long Term Care insurance policy with higher benefits, but
* They have too many assets to be able to qualify for Medicaid.
For people who have some assets to protect (for themselves or their loved ones) and enough discretionary income to pay for basic LTC insurance (lower benefit amounts, without all the bells and whistles), a Partnership Program may be just the thing.
All of the Partnership Programs that have been created since the Deficit Reduction Act of 2005 have certain requirements:
* They are tax qualified.
* They must provide annual compounded inflation protection for people 60 years old or younger and “some type” of inflation protection for those who are 61 – 76 years old.
* They protect your assets dollar for dollar, meaning that for every dollar your LTC Partnership policy pays out you get to keep a dollar of assets. If you buy a $200 per day 3 year policy you will get to keep $219,000 of your assets for yourself or your partner, plus whatever your state Medicaid allows everyone to keep.
The biggest drawback with Partnership Programs is if for some reason your long term care needs exceed your policy benefits, you will end up on Medicaid. If you’re very lucky, the facility you originally chose will have an open Medicaid bed, but don’t count on it. You could also be sent to an open Medicaid bed in another care facility that takes both private pay and Medicaid recipients. Lastly and most likely, but least desirable, you could be sent to a Medicaid-only care facility. However, having an LTCi policy might postpone an unpleasent move.
Long Term Care Scenario: Your Partnership Program Long Term Care Insurance policy pays for a room in a nice facility or even at home. The insurance benefits are eventually depleted and you qualify for Medicaid. The state starts paying their part of your long term care, but you must move to a facility with an available Medicaid bed. BUT…if there are no Medicaid beds available in your state, you can stay in the higher end facility until there is an open Medicaid bed. This means, if you originally chose a facility close to home, it will be easier for your friends and near-by relatives to visit you. So you’ll likely enjoy your living conditions better than if you had to move.
If you have protected your assets with Partnership Program policy, and you finally do have to go to a Medicaid facility, you will have some assets saved that can make your life a little more pleasant.
State LTC Insurance Partnership Program Caveats:
* Partnership program protects assets, not income. If your income is too high, you won’t qualify for Medicaid when a Partnership policy runs out, so it wouldn’t be your best bet. You may want to consider a standard LTCi policy with a longer benefit period.
* For individuals with income less than $20,000 or couples with incomes less than $40,000, paying Long Term Care insurance premiums may not make financial sense.
* If you move to another state, the Partnership policy will pay, and the “benefit-matching” will accumulate toward your asset protection, but you may have to move back to the state in which you bought your Partnership policy in order to qualify for Medicaid and take advantage of any asset protection you gained. Some states have reciprocal Partnership Programs, but it is wise to find out how they work together before making a move.
* The inflation protection wording that qualifies policies for Partnership Programs is vague. It says that policies must provide Annual Compounded Inflation protection for people under 61 and Simple Inflation for those ages 61-75, yet it doesn’t specify any percentages. Many private Long Term Care insurance policies have inflation riders of 5% Compounded or 5% Simple and for good reason. The care sector’s inflation rate is about 6% per year, so a 5% Compounded is a smart choice. If your State’s Partnership Program offers less of a percentage, make sure you have enough savings or assets to help cover any possible future costs.
In what phase of LTC Insurance Partnership Program creation is your State?
As of June 25th, 2009 *
Partnership Program Policies are currently for sale in:
AL, AR, CA, CO, CT, ID, FL, GA, IN, KS, KY, MD, MO, MN, ND, NE, NJ, NV, NY, OH, OK, OR, PA, RI, SC, SD, TN, TX, VA
These States have an Approved State Plan Amendment:
These States have documents available:
DE, MA, ME, MT, VT, WA
State Plan Amendments have been submitted in:
No Documents Available – These States are in the planning phase or have no plans yet:
AL, IL, LA, MI, MS, NC, NM, SC, UT, WV, WY
There are 4 states that originally created Partnership Programs. They were grand-fathered in to the Federal Partnership Program. These are New York, California, Indiana and Connecticut. These states have different policy standards than the states that created Partnership Programs after the Deficit Reduction Act’ of 2005 was passed. Let’s look at New York for example:
New York offers four different Partnership policies, 2 Total Asset and 2 Dollar for Dollar. The Total Assets policies do just what they say, shield all your assets from Medicaid. The Total Asset 50 requires 3 years in a Nursing Home or 6 years worth of Home Care. Once the benefits run out, the policyholder can qualify for Medicaid regardless of the amount of assets he or she has accumulated.
But Buyers Beware! Since there is a longer period of facility or home care required, if you did not purchase a high enough daily benefit, there is a possibility that you could use up your assets by having to pay the difference between your policy’s daily benefit and the actual cost of care in your area.
For instance: Charlotte buys a Basic Policy Total Asset 50 policy with the minimum required daily benefit of $208 (the minimum for 2008). She lives in New York City and wants to stay close to friends and family, but the private skilled nursing facility rooms in her area cost from $250 to $476, with the average being $375 dollars per day. Charlotte could be stuck paying anywhere from $40 – $268 per day out of pocket. Over the lifetime of the 3 year nursing home stay, Charlotte would end up paying between $43,200 – $289,440 of her own assets.
The #1 Long Term Care Insurance Lesson: No matter what state you live in and what kind of LTC insurance policy you buy, make sure you buy enough protection to cover the long term care costs in your area. Check our Long Term Care Cost calculator for average care costs, then call a few long term care facilities in your area. You may also want to visit a few facilities to see if there is a difference between cost and quality of living/care.
Besides offering full asset protection, New York Partnership Policies also provide 5% annually compounded inflation protection for everyone age 79 or younger. Considering the rate of inflation, this is a very good thing! People 80 years old have the options of buying a policy without inflation protection.
* Check here for current State Partnership map: www.dehpg.net/ltcpartnership/map.aspx
If you have questions about how Long Term Care Insurance can help secure your future, please visit us at www.californialongtermcare.com.