Long Term Care Insurance Partnership Program – Frequently Asked Questions

Last week we were discussing the long term care partnership program which was reinstated as part of the last round of changes to the Medicaid laws in 2006. Now let’s answer some frequently asked questions.

Purchasing a “partnership policy” allows you to protect an additional dollar amount in assets above the Medicaid limit equal to the amount of benefits paid out under the policy.  “But what happens if I move to another state?”  This refers to what is called reciprocity.

Currently, there are 40 states that offer long term care insurance partnership programs.  All but one, California, offer reciprocity.  For example, if you purchase a policy in New Jersey and then move to New York and apply for Medicaid there, you’ll be able to invoke the asset disregard provision.

Say you bought and used a $100,000 long term care policy, meaning the insurance company paid $100,000 of benefits on your behalf for nursing home care.  You’ll be able to protect an additional $100,000 in assets whether you apply for Medicaid in New Jersey, New York or any other state that participates in the reciprocity program.  If you move to California, it will not honor your policy unless it was a California partnership policy.   (And other states will consequently not honor a California policy.)

Let’s look at a married couple situation.  Under Medicaid’s community spouse resource allowance, the healthy spouse can keep ½ of the couple’s countable assets up to a maximum amount of $117,240.  Under asset disregard, the healthy spouse can keep more than that amount.  But, keep in mind that all other Medicaid eligibility rules still apply.

Another example will clarify.  Wife has a partnership policy that pays out $100,000.  Husband has an IRA with an account balance of $217,240 and he is entitled to keep the maximum CSRA amount.  Can he keep the additional $100,000 and can he keep it in his IRA?

Clearly, under the asset disregard, the additional $100,000 can be protected.  However, the asset disregard applies to the Medicaid applicant and the law states that all other Medicaid rules still apply.  This would suggest that in order to protect that additional amount, Husband must take the $100,000 from his IRA and transfer it to Wife’s name so that he would have no more than $117,240 in his name as Medicaid rules permit.

It is possible that under the spirit of the rule, some states may allow the husband to keep the funds in his account.  After all, doesn’t Medicaid treat the married couple as one unit anyway?  But, like many of the Medicaid rules and regulations, the answer isn’t clear cut, may differ from state to state, and leaves the applicant at the mercy of the states to decide how they will enforce it.