By all accounts, the government program that pays for Long Term Care needs is running out of money. One of the contributing factors is the middle class individual who elects a “spend-down” plan to qualify for Medicaid rather than to avoid Medicaid completely.
The Deficit Reduction Act of 2005 allowed states to develop Partnership plans to encourage the middle class to be responsible for their own Long Term Care costs. This would take pressure off Medicaid and allow the program to do the job for which it was intended.
Below is a snippet from the e-book on common questions about Long Term Care insurance that I am working on.
Q. What are Partnership Plans?
A. Partnership plans were originally only available in 4 states. With the passage
of the federal Deficit Reduction Act of 2005, the idea was encouraged to be
adopted by the other 46 states. Today, Partnership plans are available in the majority of states.
Partnership plans form a partnership for paying for Long Term Care expenses between private insurance companies and Medicaid.
With a Partnership plan, if you need Long Term Care in the future, your LTCI policy will pay for your initial expenses. If you run out of money in your LTCI policy, Medicaid will waive the Asset Test on a dollar-for-dollar basis. If you are able to pass your state’s Income Test to qualify for Medicaid, the government will pick up your Long Term Care bills.
One of the elements of most Partnership plans that is often ignored is its affect on your estate plan. If you use regular Medicaid to pay for your Long Term Care needs, when both you and your spouse die, Medicaid has a right to recover as much of the money they spent for your care from the sale of your home. Their right supersedes the rights of your children. If your Long Term Care bills exceed the equity in your home, your Long Term Care could disinherit your children from the family home.
A Partnership plan shelters the value of your assets from Medicaid’s estate recovery. That means that if you purchase a Partnership plan with a value equal or greater than the value of your assets, you can preserve your estate for your children.
Partnership plans are relatively new to LTCI. Unless you live in one of the original 4 Partnership states, it is possible that your older LTCI policy is not
Partnership qualified. Pull out your policy and look for the disclaimer, “Partnership Policy” or other required verbiage. If you do not see
it anywhere, you should contact your insurance agent to see if there is
anything you need to do. Not every state grandfathered older LTCI policies with the new “Partnership” rules.
Related articles
- An Alternative To A “Spend-Down” Program (theinsurancebarn.wordpress.com)
