A Long-term Care Partnership Policy Can Protect Your Assets When You Need Medicaid

Paying for long-term care (LTC) is costly. Many retirees divest themselves of their assets to let Medicaid pay for it for them. But this is overtaxing Medicaid and the states are changing their rules to prevent this.

To lessen the burden on Medicaid, states can team up with private insurers to offer partnership LTC policies. These policies encourage more people to buy LTC insurance because of their asset protection incentive. Individuals who purchase them can protect a portion of their assets if they apply for Medicaid after using up their LTC insurance benefits. Though still meeting other Medicaid eligibility requirements, they don't have to 'spend down' to the same asset levels as those who don't purchase Long Term Care Partnership policies.

LTC Partnership policies generally include the same features and benefits of other LTC policies, but as authorized by the DRA , they must include built-in consumer protections that traditional LTC policies are not required to have. Here are the main special features of long term care partnership policies:

Dollar-for-dollar asset protection
Here, the amount of assets protected from Medicaid spend-down requirements equals the dollar value of the benefits paid by the LTC Partnership policy. For example, if you buy a Partnership policy with a lifetime maximum benefit of $150,000, and then require LTC but exhaust the benefit amount, you can then apply for Medicaid. But since you bought a Partnership policy, you can keep $150,000 in assets in addition to any other assets allowed by your state's Medicaid program and still qualify for Medicaid (assuming you meet income standards and other eligibility requirements). So, the state won't seek recovery of those assets from your estate.

Inflation Protection
All Long Term Care Partnership policies must include age-based inflation protection if purchased prior to age 76. Inflation protection helps policy benefits keep pace with the rising cost of long-term care services.

Tax Qualified
Long Term Care Partnership policies must meet HIPAA requirements so tax-qualified policy premiums are deductible as a medical expense and policy benefits received are not included as ordinary income for federal income tax purposes.