Long-term care partnership programs are a unique and vital link between private long-term care insurance and Medicaid, designed to offer middle-income Americans a way to protect their assets while planning for future care needs. Established through a joint federal-state initiative, these programs encourage individuals to purchase private long-term care insurance by offering a special benefit: asset protection should they ever need to apply for Medicaid. This innovative approach, rooted in the Deficit Reduction Act (DRA) of 2006, aims to expand access to long-term care coverage and safeguard individuals’ financial well-being.
What Exactly Are Long-Term Care Partnership Programs?
The concept of Long-Term Care Partnership Programs emerged in the late 1980s as a pilot project, initially supported by the Robert Wood Johnson Foundation. Four pioneering states – California, Connecticut, Indiana, and New York – were selected to test this innovative model. Connecticut took the lead, becoming the first state to offer Partnership-qualified (PQ) policies in 1992. The following year, in 1993, federal legislation (OBRA 93) was enacted which initially restricted the expansion of Partnership programs to additional states unless their Medicaid State Plan Amendment (SPA) had been approved prior to May 14, 1993.
The landscape changed significantly with the Deficit Reduction Act (DRA) of 2006. This legislation provided the authorization for more states to establish Partnership programs. Since then, numerous states have taken the necessary legislative steps to implement these programs for their residents. It’s important to understand that the Long-Term Care Partnership Program isn’t a standardized, uniform system across the entire United States. While experts note a greater degree of consistency among states that adopted the program post-DRA compared to the original four, each state still retains some autonomy in designing specific aspects of their Partnership programs.
The Unique Benefit: Dollar-for-Dollar Asset Disregard
The cornerstone of Long-Term Care Partnership Programs is the “dollar-for-dollar” asset disregard, often referred to as “spend down” protection. This is the crucial link that Partnership policies provide. When an individual purchases a Partnership-qualified (PQ) long-term care insurance policy, they essentially ‘earn’ Medicaid asset protection equivalent to the amount their insurance policy pays out in benefits.
Let’s illustrate this with a clear example: Imagine Sarah purchases a PQ policy. Years later, she requires long-term care, and her policy pays out $200,000 in insurance benefits to cover her care costs. Because of the Partnership program, Sarah is entitled to a $200,000 Medicaid asset disregard. This means she can retain an additional $200,000 in assets above the standard Medicaid asset limit and still qualify for Medicaid assistance if her long-term care needs continue beyond her insurance coverage. Furthermore, the Partnership Program extends this protection even after death, safeguarding these assets from Medicaid estate recovery in many instances.
This asset disregard is a powerful incentive. It allows individuals to protect a portion of their savings and assets while still preparing for potential long-term care expenses through private insurance. It bridges the gap between private resources and public assistance, offering peace of mind and financial security.
Long-Term Care Insurance Partnership: State-by-State Availability and Reciprocity
The availability of Long-Term Care Partnership programs varies by state. As of the last update in March 2014, a significant number of states had approved and implemented Partnership programs. A table summarizing the status by state is helpful to understand the specific landscape:
| State | Effective Date | Policy Reciprocity |
|---|---|---|
| Alabama | 03/01/2009 | Yes |
| Alaska | Not Filed | — |
Reciprocity is another important aspect. Most states with DRA Partnership programs, along with New York, Indiana, and Connecticut, honor partnership policies issued in other DRA partnership states when determining Medicaid asset disregard. This means if you purchase a PQ policy in one state and then move to another state with reciprocity, your asset protection benefit generally remains valid. California is a notable exception and does not offer reciprocity.
Understanding the Costs of Partnership Insurance
The cost of Long-Term Care Partnership insurance is influenced by several factors, primarily age, health status, and the policy benefits selected. Data from a 2012 New York State Long-Term Care Partnership report provides some insight into the range of annual policy costs:
For individuals aged 50 to 54, annual premiums ranged from approximately $1,384 to $11,667. For those aged 55 to 59, the range was $1,756 to $12,864 per year. For ages 60 to 64, costs ranged from $1,863 to $9,490 annually, and for ages 65 to 69, the range was $3,321 to $10,002 per year. These ranges reflect the variations in policy benefits chosen by individuals and their health conditions at the time of application.
It’s crucial to note that the Long-Term Care Insurance Price Index from the American Association for Long-Term Care Insurance has revealed significant price variations – sometimes between 40% and 100% – for essentially identical coverage. This underscores the critical importance of comparison shopping when considering long-term care insurance, including Partnership-qualified policies.
Frequently Asked Questions about Partnership Policies
Q: If I buy a partnership policy in one state, will it still qualify if I move to another state?
A: Generally, yes, especially among DRA Partnership states with reciprocity. However, it’s essential to confirm the reciprocity rules of both your original state and your new state, particularly if dealing with one of the original four Partnership states like California, which does not offer reciprocity.
Q: Do most partnership policies require specific inflation protection?
A: Inflation protection requirements can vary by state. Many states mandate some form of inflation protection, especially for younger buyers, to ensure benefits keep pace with rising care costs. Compound inflation protection is common, but specific percentages and age cutoffs can differ. The original four states also have unique rules regarding inflation protection requirements. It’s vital to understand the specific requirements in your state.
Q: Do I need to specifically request a Partnership-eligible policy?
A: While in many states, policies filed as Partnership-qualified and including the necessary inflation protection will automatically be considered Partnership policies, it’s always best to explicitly inquire about Partnership eligibility when purchasing a policy. In the original four Partnership states, distinct policy forms may be required. Furthermore, not all insurance carriers offer Partnership-qualified policies in every state.
How Much Partnership Protection Do People Typically Purchase?
Most DRA Partnership policies are comprehensive, covering care in various settings, including home care and nursing facilities. Benefits are usually defined in dollar amounts. Data from a January 2014 report indicates the distribution of maximum policy benefits purchased:
- Less than $109,599: 10%
- $109,600 – $146,099: 8%
- $146,100 – $182,599: 12%
- $182,600 and above: 54%
- Unlimited: 14%
Data from the California Long-Term Care Partnership (April-June 2013) provides insights into daily benefit amounts:
- $170 per day: 11.28%
- $180 per day: 35.50%
- $190 per day: 00.89%
- $200 per day: 31.00%
- $210 per day: 00.60%
- $220 per day: 03.44%
- $230 per day: 02.87%
- $240 per day: 01.21%
- $250 per day: 08.03%
- More than $250 per day: Balance of policies
- More than $200 per day in total: 11%
These figures illustrate the range of coverage amounts individuals are choosing within Partnership programs, reflecting diverse needs and financial considerations.
If you are interested in exploring whether you qualify for long-term care insurance and want to understand potential coverage costs, it’s recommended to start the process by connecting with a specialist. Click here to complete a simple online questionnaire to receive free, no-obligation information and guidance.
