Long-Term Care Insurance Partnership Plans

Over decades of helping families with Long-Term Care (LTC) insurance, I’ve learned that effective planning begins with understanding both a family’s health history and financial situation.

State LTC Partnership plans were created to help middle-income families protect savings while still qualifying for Medicaid. The first Partnership programs were established in 1992 in California, Connecticut, Indiana, and New York. Other states initially declined to participate because Medicaid could still recover assets from an estate after death.

Why is this important?

Medicaid is a means-tested program that generally requires applicants to spend down assets before becoming eligible. After death, states may seek repayment from the estate, often before heirs receive anything. Many states would not adopt Partnership programs until laws were added to prevent estate recovery on assets protected by Partnership-qualified LTC insurance. Once those protections were enacted, 40 additional states approved Partnership programs.

What Is a Partnership-Qualified LTC Policy?

A Partnership plan is an agreement between the state and an insurance company. The state agrees to disregard assets equal to the amount paid by a qualifying LTC insurance policy when determining Medicaid eligibility.

To qualify, the policy must be traditional, tax-qualified LTC insurance. Benefits are generally received income-tax free, and certain tax deductions may be available for business owners and self-employed individuals. Policies must also meet state inflation-protection requirements based on the applicant’s age.

What Happens Without LTC Insurance?

Without LTC coverage, the default plan is to spend assets until Medicaid eligibility limits are reached. In most states, an applicant can keep only about $2,000 in assets, while most income must be used toward care costs.

For married couples, the spouse remaining at home may keep limited assets, a home, and a vehicle, but substantial savings can still be lost to long-term care expenses. Care often costs $6,000–$12,000 or more per month, creating a significant financial burden. Most people prefer to receive care at home or in an assisted living community. Medicaid, however, primarily covers nursing home care, with limited exceptions.

How a Partnership Plan Can Help

Consider Mr. and Mrs. Smith, who have $600,000 in savings. Mr. Smith suffers a stroke and requires long-term care. His Partnership-qualified LTC policy provides $400,000 in benefits.

The insurance helps pay for care at home and later in an assisted living community that accepts both private pay and Medicaid. After the policy benefits are exhausted, Mr. Smith applies for Medicaid.

Because his Partnership policy paid $400,000, Medicaid disregards an additional $400,000 of the couple’s assets when determining eligibility. Combined with the assets otherwise allowed under Medicaid rules, Mrs. Smith can retain substantially more of the couple’s savings while maintaining her financial security and retirement lifestyle. Once Medicaid eligibility begins, the assisted living facility can transition payment from private pay to Medicaid without requiring Mr. Smith to move.

The purpose of LTC insurance is not always to purchase the largest policy available. Often, a well-designed, mid-sized Partnership policy can provide enough protection to preserve income, savings, and dignity for both spouses.

To learn more, schedule a brief introductory call or Zoom meeting, or arrange a full consultation with no obligation. Listen to and learn from my weekly podcast at https://preparing4tomorrow.com/ and schedule to design your plan today! For more information, please call Diane at 813-363-6441 or visit Preparing4Tomorrow.com.