Disclaimer: With Medicaid, VA, and insurance regulations frequently changing, past blog posts may not be presently accurate or relevant. Please contact our office for information on current planning strategies, tips, and how-to's.
When it comes to paying for long-term care, there are typically three primary payment sources. The applicant must either pay for their care out-of-pocket, obtain Long-Term Care Insurance (LTCI), or apply for Medicaid. Many clients who purchase LTCI often wonder what they can do to prevent a crisis scenario if they exhaust their policy benefits and need to turn to Medicaid. This very problem is what the Long-Term Care (LTC) Partnership Program aims to solve. The Partnership Program couples the benefits of LTCI with special Medicaid eligibility rules to provide additional coverage if necessary.
Background of the LTC Partnership Program
The concept of the LTC Partnership Program first began in the 1980s as a way to encourage Americans to purchase private LTCI policies and rely less on Medicaid for payment of their long-term care costs. Initially, only four states (California, Connecticut, Indiana, and New York) were selected to participate in the Partnership Program. The passing of OBRA ’93 all but prevented any additional states from operating a Partnership Program of their own. However, this was soon changed with the Deficit Reduction Act of 2005. Within the DRA, Section 6021 provided states the ability to offer LTC Partnership Programs. This resulted in many states quickly initiating their own Partnership Program.
Learn More: Past, Present & Future: The History of Medicaid
Similar to Medicaid, the State Partnership Program is a joint federal-state program meaning that although each state’s program must comply with certain federal limitations, each state can institute its own version of the program. As such, the LTC Partnership Program is not uniform in all states.
What is the LTC Partnership Program?
The LTC Partnership Program is a coalition between the state and an independent insurance company to provide a specialized insurance policy that qualifies the policyholder for exclusive Medicaid asset exemptions. It is important to note that not all LTCI policies qualify for LTC Partnership Programs as the policies must adhere to the specific conditions outlined in the DRA as well as state-specific requirements. Some policy requirements may include:
- The owner is a resident of the state in which the policy was purchased
- The policy offers comprehensive benefits for both in-home and institutional care
- The policy includes inflation protection
How does the LTC Partnership Program work?
For policies that meet their state’s LTC Partnership Program, the policyholder may retain an increased asset limit should they deplete their LTCI benefits and need to apply for Medicaid. This increased asset limit is allotted on a “dollar-for-dollar” basis. For every dollar of insurance benefits paid on that person’s behalf, their countable asset limit for Medicaid purposes will increase by that same amount. This compromise was created as a way to stabilize Medicaid spending and encourage people to purchase LTCI rather than rely solely on Medicaid to finance their long-term care.
An additional benefit is the elimination of estate recovery by Medicaid. Any benefits that are expended on the policyholder’s behalf by Medicaid are unrecoverable from the individual’s estate. This allows the person to not only protect their assets from a possible Medicaid spend-down but also ensure the preservation of their assets from estate recovery.
Is the LTC Partnership Program a good fit for your client?
The State Partnership Program is now offered in nearly every state, so it’s certainly something worth discussing with your clients conducting their estate planning. LTCI should be purchased while your client is in good health, so be sure to discuss this planning option with your client while they’re more likely to qualify for a policy. If you’re not sure whether your client would qualify, know that we offer anonymous pre-screening for potential LTCI applicants and have specialists on staff who can help answer your questions.
Learn More: 7 Considerations for Attorneys to Determine Whether a Client Is a Good Fit for LTC Planning
For more information on LTCI and the LTC Partnership Program, contact our office today!