What is the Long Term Care Insurance Partnership Program?

Is it possible to purchase long term care insurance and be able to protect more than the minimum number of assets that Medicaid allows to qualify for benefits?  The question is a reference to something called the Long Term Care Partnership program.

The partnership program is designed to encourage people to purchase long term care insurance and thereby reduce the reliance on Medicaid to pay for long term care.  Very simply, this is the way it works.  For every dollar of benefits paid out under your insurance policy, you can protect a dollar more in assets above Medicaid’s asset limit, should you apply for Medicaid benefits.

If your policy pays out $100,000 and then you exhaust the policy limits and need Medicaid, you can keep $100,000 of your own assets.   Not every state participates in this program and not every long term care insurance policy qualifies.  Currently more than one half the states offer partnership programs.

The program was instituted in the 1980’s but only 4 states – New York, Connecticut, Indiana and California – offered them when the federal government eliminated the program in the 1990’s.  The most recent Medicaid changes under the Deficit Reduction Act of 2005, however, brought the program back and now more than 30 states offer the partnership program.  New Jersey has chosen to participate.

So, what qualifies as a “partnership policy”?  Because Medicaid is run on a state level the specifics can differ from state to state.  But, there are some commonalities.   Partnership policies must have an inflation rider.  For anyone under age 61 the policy must contain a compound inflation rider.  For example, if the policy pays $100 a day with a 5% inflation rider, each year the policy is increased by 5% of the previous year’s daily benefit.

For anyone between ages 61 and 75, the policy must have an inflation rider that can be compounded, simple or adjusted according the CPI (consumer price index).  A simple inflation rider of 5% means the daily benefit in the example above would increase by the same amount, $5, each year.  For those over age 75, no inflation rider is necessary.

Next week we’ll answer some common questions such as, “will the policy work if I move to another state?”  Be sure to check in.