Getting long-term care insurance can be time consuming, stressful, and expensive; it is important to get the most out of the policy you end up choosing. If you go with a Traditional Long-Term Care insurance policy, one perk you have access to is the partnership program.
The Long-Term Care Partnership Program is a system that allows your estate to retain a higher level of assets and still go on Medicaid if your long-term care insurance policy runs out. Most states have a partnership program that allows you to purchase a partnership-approved long-term care insurance policy. This policy was enacted with the passage of the Deficit Reduction Act of 2005, which sent a clear message that paying for long-term care was the individual’s responsibility, not the government’s. This is the government’s attempt to help people afford this cost.
While long term care is expensive, it is also expensive not to purchase it. The partnership program was especially created for people in the middle class, as they have too much money to automatically qualify for Medicaid but not enough to afford a very pricey policy that covers many years of coverage.
What is a long-term care partnership policy?
As mentioned earlier, the Long-Term Care Partnership Program allows individuals who purchase a qualified long-term care insurance policy to protect a portion of their assets from Medicaid. Typically to qualify for Medicaid, you are only allowed to have $2,000 of assets, which we explain below. This program allows you to keep a significant amount more and still receive Medicaid. Over half of people in nursing homes are being funded by Medicaid, and this is the government’s solution to try and combat this.
For example, say you purchase a long-term care insurance policy which ends up paying $200,000 out when you are in a nursing home. If they are paying out $3,000/ month, you have been there for about 3 years and 3 months. If you are still in the nursing home, you are going to have to continue paying for care even if your policy isn’t. If the policy you used qualified for the partnership program, you are allowed to keep this $200,000, plus the usual asset limit of $2,000, which means you actually get to keep $202,000. This money does not count as assets when you are applying for Medicaid, which would then keep paying the long-term care bill. Asset limits for couples are normally more generous, which means you might end up being able to keep more if you have a living spouse.
Even after you die, the partnership program protects your qualified assets from Medicaid estate recovery, which is when the government collects the money you owe them after you die. In the example above, your estate, meaning your family and loved ones, get to keep this $200,000 even after you die. This is a great gift to give your family.
Where are partnership policies available?
The original Long-Term Care Insurance partnership program was developed in 4 States in 1992: California, Indiana, Connecticut, and New York. In 2005, the Deficit Reduction Act of 2005 was passed, which allowed for the expansion of Long Term Care Partnership Programs to other States.
As you can see in the chart, now all states except the following have a Partnership program: Alaska, Hawaii, Michigan, Mississippi, New Mexico, and Utah. Bear in mind that currently the Medicaid asset protection from a partnership policy will only work if you receive your long-term care in the state where you bought the policy, or in another partnership state that has a reciprocal agreement with the first state. As you can see in the chart, most state do have a reciprocity policy.
Just as each state can decide if they want to participate, each private insurance company also has to decide if they want to create a policy that will be approved by the state. Every long-term care insurance policy that qualifies must also meet certain standards, such as including inflation protection. Remember, qualifications and requirements might vary a bit from state to state.
How do I qualify for Medicaid?
Medicaid is a joint federal and state program which pays health costs for certain people and families with limited income and resources, including children, pregnant-women, elderly adults, and people with disabilities. If you have purchased a partnership policy, and have used up the benefit, you still have to apply and qualify for Medicaid. It is important to remember that just buying a partnership policy will not automatically qualify you for Medicaid.
To apply for Medicaid and to see your states specific requirements, visit Medicaid.gov.
While the responsibility of paying for long-term care falls on you, there are ways to ease this burden, including the partnership program. Make sure to shop around with all companies before buying a policy to make sure you are getting the best deal.