What are Long-Term Care Insurance Partnership Policies?
The first four states to adopt partnership policies were California, Indiana, New York, and Connecticut, collectively known as the original partnership states. Today, most states have active partnership plans in place.
The federal Deficit Reduction Act of 2005, signed into law by President George W. Bush, gave the states the authority to set up partnership programs to encourage and reward consumers who purchased qualified Long-Term Care Insurance by giving them an added layer of asset protection.
With the passage of the 2005 Deficit Reduction Act, the Long-Term Care Partnership Program (LTCP) has emerged to help both the states and consumers address the high costs of long-term health care.
LTCP allows consumers who have a qualified Partnership Long-Term Care Insurance to protect their assets that would generally be spent down and still qualify for state Medicaid long-term care benefits without the full exhaustion of assets normally required.
Benefits of a Long-Term Care Partnership Policy
These partnership-certified plans provide the consumer with additional "dollar-for-dollar asset protection" or what is otherwise known as "asset disregard."
This asset protection allows you to shelter your assets an equal amount of the total benefits paid by the policy. This is called "asset disregard."
The state will disregard the total amount of benefits paid by your partnership policy when calculating your Medicaid long-term care benefit eligibility. This way, no matter what happens or how long your extended care event lasts, you will never fully exhaust your assets.
It also protects your estate from any subsequent recovery by the state for receipt of Medicaid-paid services.
Let's say Sally Smith from Ohio, has $410,000 in countable assets. She had purchased a Partnership Long-Term Care policy at age 52. When she is 79 need qualifies for benefits, but she exhausts all her benefits after her policy paid $395,000 in benefits. If her policy had not been a partnership policy, she would self-fund her care from that point on.
Medicaid would not consider paying until she exhausted to $2000 in assets. However, since she does have a Partnership Long-Term Care policy, the state will disregard the total amount paid by her policy in the calculation for Medicaid. In this example, it is $395,000.
Since Sally's policy is a partnership policy, she can qualify for Medicaid once she spends the difference between what the policy paid ($395,000) and her assets ($410,000). Her total spend-down is only $13,500. She has sheltered $395,000 legally and still qualified for Medicaid's long-term health care benefit.
Remember, Sally selected the total benefit value of her policy when she purchased it. These partnership policies require certain benefit levels and inflation options depending on the state of residence at the time of purchase.
Under most circumstances, if you need Medicaid to pay for long-term care services, you must satisfy the income and asset eligibility levels for Medicaid. You must have little or no income and assets.
With LTCP, the amount of assets that may be disregarded is equal to the amount of long-term care benefit paid out of the policy prior to the time you apply for Medicaid.
As a result, you may be able to receive coverage under Medicaid without first being required to exhaust your resources. Furthermore, the amount that may be shielded from estate recovery would be equal to the amount of assets disregarded for purposes of eligibility for long-term care Medicaid benefits.
For many people, this extra asset protection is a crucial ingredient to safeguard assets from the high costs of extended long-term care.
While the goal is never to try to get to Medicaid, you will be able to safeguard a large amount of your savings and still access Medicaid benefits in a more catastrophic long-term health care situation.
The partnership program does allow you to custom design a Long-Term Care Insurance policy based on the amount of savings and investments you own. This is especially useful for those with less than $1 million in assets.
For those with larger estates, the chance of exhausting your Long-Term Care Insurance benefits and draining personal assets to the amount the policy paid out is less likely but does add a tremendous amount of peace of mind.
There are also options for total asset protection. Discuss these options with Matt McCann when reviewing your situation with Matt McCann.
Remember, each state's insurance department regulates insurance products and premiums. No individual agent, agency, or advisor can offer you special deals.
Matt will match you, your health, and your family history to find the right options and save you money. He is licensed nationwide and is certified with the federal/state long-term care partnership program available in most states. Matt McCann is also one of the few agents endorsed by the American Association for Long-Term Care Insurance.
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