Partnership Long-Term Care Insurance policies look and act the same as any other LTC policy! However, they provide additional asset protection as a reward for people who have planned in advance for the cost and burdens long-term care places on our family and finances.
The first four states to adopt partnership policies were California, Indiana, New York, and Connecticut, collectively known as the original partnership states. Today, 45 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 as a way to help both the states and consumers address the high costs of long-term healthcare. This federal/state/consumer partnership allows a consumer who has a qualified Partnership Long-Term Care Policy 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.
These partnership certified plans provide the consumer with additional "dollar-for-dollar asset protection" or what is otherwise known as "asset disregard."
A Long-Term Care Partnership policy provides dollar-for-dollar asset protection. This allows you to shelter your assets in the event you exhaust all the benefits of your qualified Long-Term Care policy. This is the "asset disregard." The state will disregard the total amount of benefits paid by your partnership policy in the calculation for Medicaid Long-Term Care benefits. 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 $1500 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 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 Long-Term Care Benefits.
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. For many, this means a spend-down of their assets before Medicaid will allow them to apply. With a partnership policy, 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, the 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, in a more catastrophic long-term care situation, you will be able to safeguard a large amount of your savings and still access Medicaid benefits.
The partnership program does allow you to custom design a Long-Term Care 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 drain 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.
Each state has specific spend-down requirements.
Policies must be purchased from an insurance company which has filed their product as a partnership qualified policy. It must still have the required inflation options to be eligible for the partnership program.
In many states, any qualifying policies that meet federal guidelines, that are or were issued after January 2006, may become part of the partnership program. You should ask your insurance representative or call the insurance company for information if you own an older non-partnership policy.
All Long-Term Care Insurance policies are good anywhere in the United States and U.S. territories. Some plans have some international benefits, as well. However, for a Partnership Long-Term Care policy, most states have reciprocity, which honors other states' partnership benefits. If the state does not support the partnership program, the additional dollar for dollar asset protection will not be honored. Use the map below to see a map of states and their reciprocity.