Partnership is now available In Illinois
On January 1, 2019, the State of Illinois became the 44th state to implement the federal/state partnership program which was authorized by federal law in 2005. The financial burden of long-term care can be so large that, for many individuals (particularly those with moderate and upper-middle-income) the only option is Medicaid, which requires spending down all assets in order to qualify to receive long-term care benefits unless an advance plan is in place prior to needing care. Long-Term Care Insurance becomes a primary way to plan with the added benefit of the partnership program which features additional asset protection.
The Illinois General Assembly declared that Medicaid is not intended to cover the majority of long-term care expenses. Medicaid is the largest source of funding for long-term care in the United States, making the financing of long-term care costs a significant issue for both state and federal budgets. Furthermore, the growth in spending by both entities via through Medicaid will likely continue to increase as the American population ages.
Federal Partnership Program
One way to help address climbing Medicaid expenditures is to encourage individuals to plan for their own long-term care events. As an incentive, the Long-Term Care Partnership Program was created. This program is a public-private partnership between states and private insurance companies that aims to reduce future Medicaid costs for long-term care by delaying or eliminating dependence on Medicaid.
With a qualified Long-Term Care Insurance policy, a consumer can shelter an amount equal to the amount of benefits paid out by the policy and still qualify for Medicaid’s Long-Term Care benefit. This “dollar-for-dollar” asset protection safeguards your savings and allows for a considerable amount of assets to be protected. Usually, an individual/couple would have to exhaust a majority of their savings in order to qualify for Medicaid’s Long-Term Care benefit.
This program rewards Illinoisans by providing additional asset protection in the event they spend all their benefits in their Partnership Long-Term Care policy. If you exhaust benefits in your policy you can access Medicaid’s Long-Term Care benefits without going through the normal asset depletion rules. This means you can shelter your assets on a dollar-for-dollar basis equal to the amount of benefits received from your partnership policy. This is called “asset disregard”. This allows you to protect your savings affordably.
For example, your policy pays out $400,000 in benefits but you still require care. You earn a Medicaid asset disregard that allows you to protect that same amount over the asset level you would otherwise be forced to meet in order to be eligible for Medicaid’s Long-Term Care benefit. The Partnership Program also protects those assets after death from Medicaid estate recovery.
Most states have reciprocity with other states' long-term-care partnership programs including Illinois. This means if you move from or to Illinois your partnership asset protection follows you as well.
Long-Term Care Medicaid spend down is $2,000. A spouse’s minimum asset allowance is $109,560. Your spouse’s minimum monthly income allowance is $2,739 * The home equity limit is $603,000.
For more information about the Medicaid program visit www.medicaid.gov.
Rate Stability Rules
In addition, Illinois consumers enjoy additional peace-of-mind as the state has adopted Long-Term Care Insurance Rate Stability Rules. These rules, developed the National Association of Insurance Commissioners, makes it much harder for an insurance company to get an approved rate increase.
Products Approved in Illinois
A variety of products are approved in Illinois for Long-Term Care planning. These include traditional plans, including partnership certified policies, short-duration policies, and asset-based “hybrid” plans.
There are no current state tax incentives available at this time, federal tax incentives do apply.
Reverse Mortgages in Illinois
In Illinois, reverse mortgages can be an opportunity for those who are "house rich and cash poor" to access money from their homes. The money can fund retirement, provide money to pay for Long-Term Care Insurance, or even provide the funding for care when a crisis hits and no other plan is in place.
If you are age 62 or older, own your home, have substantial equity in your home, a reverse mortgage may be an option to consider. You can secure a loan against the equity in your home. The loan is paid out as income, tax-free. Since you retain the title to the property, the lender cannot seize the home.
The borrower does not pay back the loan until they sell the property, permanently move out of the home, or passes away. In the case of a couple, it is the second to move out or die that triggers repayment. Until these events take place, you can live in the home and make no payments at all.
Learn more about reverse mortgages by clicking here.
*The federal government sets a new minimum and maximum amounts each year, but states can set their own minimum requirements at any level between the federal limits. This information is based on the best available sources.