long-term care insurance and its partnership with medicaid
DESCRIPTION
Long-Term Care Insurance Partnership Programs afford purchasers additional protection for Medicaid qualification. Participating states allow exempt assets (for Medicaid qualification) to increase “dollar for dollar” with benefits paid under an LTCI policy.TRANSCRIPT
Long-Term Care Insurance and Its Partnership with MedicaidWhat to Consider When You’re Considering Buying
Authored by: David Wolf, Wolf & Associates
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A Reward for Proactive LTC Planning
The majority of states currently offer a program that rewards Long-Term Care Insurance (LTCI) purchasers for their proactive planning. In these states, owners of “Partnership Qualified LTCI” products no longer have to reach state impoverishment levels ($2000 in liquid assets)1 if they exhaust their benefits and need to qualify for Medicaid (the Long-Term Care funding source for financially impov-erished individuals).
1 May vary by state from $1000–$4000.
These state laws allow non-exempt assets (for Medicaid qualification) to be protected “dollar for dollar” through benefits paid under an LTCI policy. This means that if an LTCI policy pays you (regardless of the amount, e.g. $1 million) in a claim, it allows you to keep additional assets equal to this amount without impairing your ability to qualify for Medicaid-funded Long- Term Care. This can be advantageous as most consumers purchase a limited pool of LTCI benefit dollars with a lifetime cap on the benefit pay-out. Also note that “Partnership Qualified” policies in ALL states have minimum inflation protection requirements based on the age of the individual at the time of purchase.
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Partnerships and ReciprocityAmong States
If you reside in one of these few exception states, it is pertinent to understand the rules that may differ. All current DRA Partnership States have Reciprocity Agreements with other DRA Partnership States. This means that if you buy a policy that qualifies for DRA Partnership participation in
your state of residence and then move to a state with differing rules, your policy does not need to meet the guidelines of the new resident state as it qualified for Partnership participation at the time of purchase. This is not always the case with all of the Pre-DRA States.
Most of these state laws are referred to as DRA (Deficit Reduction Act ‘05) Long-Term Care Partnerships. A few states had pre-existing Partnership Programs (pre-DRA) that may have vastly different rules or qualifications for participation (CA, NY, CT, & IN).
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No Partnership Program
Original Partnership State - No Reciprocity
Original Partnership State - With Reciprocity
New DRA Partnership State With Reciprocity
Approved State Plan Amendment
State Documents Available
Policies for Sale
No documents available for these States
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Source: aaltci.org/long-term-care-insurance/learning-center/long-term-care-insurance-partnership-plans.phpNote: State specific Medicaid Partnership rules are subject to change.Note: State Partnership approvals subject to change, current as of June 2016
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Partnerships ProtectAssets NOT Income
It is important to understand the benefits these State Partnerships have to offer with regard to shielding assets. However, it is equally important to understand that Partnership Programs shield assets and NOT income. All state Medicaid rules have an Asset Cap among their qualifying criteria for benefits, which can be increased via a participating LTCI policy. However, most states require that a qualifying individual must spend some or all “income in their name” to fund care (aside
from a very small “Personal Needs Allowance”). Some states are INCOME CAP STATES and do not allow an individual to qualify if personal income exceeds $2199 (2016). For some individuals this may not present much of an obstacle. For others the obstacle may be significant. The degree of this challenge depends on marital status and the amount of income that is in the name of the impaired “ill spouse” a�empting to qualify for Medicaid funded LTC benefits.
Long-Term Care Partnership Programs are designed to allow individuals who have exhausted LTCI benefits to shield additional assets. These non-exempt assets no longer need to be spent on care in order to qualify. This reward allows these consumers to protect assets that might be needed by a surviving partner a�er their death. It also helps clients who value leaving an inheritance to heirs or charities.
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Incentive to Purchase
Likewise, these programs potentially create incentive for consumers and a protection for state Medicaid budgets. A�er all, if consumers prudently plan for the future it is less likely that they will need to readily qualify for Medicaid benefits, further burdening this public financing system. This allows Medicaid to use their limited resources caring for the truly financially needy. Both parties could win if more consumers take action. Herein lies the debate: Will more consumers “proactively plan” because of this incentive?
Despite the fact that Income Participation Requirements or Income Caps may create obstacles to qualification for some individuals, the Partnership Programs afford freedom, choice, dignity, and a valuable safety net to those who choose to responsibly plan for a potential Long-Term Care need.
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