LONG TERM CARE PARTNERSHIP PROGRAM
The Long-Term Care Partnership Program is a Federally-supported, state-operated initiative that allows individuals who purchase a qualified long term care insurance policy or coverage to protect a portion of their assets that they would typically need to spend down prior to qualifying for Medicaid coverage. Once an individual purchases a Partnership policy and uses some or all of the policy benefits, the amount of the policy benefits used will be disregarded for purposes of calculating eligibility for Medicaid. This means that they are able to keep their assets up to the amount of the policy benefits that were paid under their policy or coverage.
HISTORY OF THE LONG TERM CARE PARTNERSHIP PROGRAM
The Long-Term Care Partnership Program originated in the late 1980s to address the increasing cost of state Medicaid expenditures for long term care. It allowed individuals to purchase a long term care insurance policy that protected an individual’s assets up to a predetermined amount of policy benefits. Benefits used would be disregarded when determining the individual’s eligibility for state Medicaid. Effective February 8, 2006, the Federal Deficit Reduction Act of 2005 (DRA) allowed for the nationwide expansion of the Long-Term Care Insurance Partnership Program beyond the four original “grandfathered” states (California, Connecticut, Indiana, and New York) which implemented a Partnership program and asset protection on a dollar-for-dollar basis. Each state can elect to implement a DRA Partnership Program for the citizens of that state. The DRA does not require states to participate. In turn, insurance companies need to decide if they will offer Partnership policies, and the policies must be certified as qualifying as Partnership policies.
BENEFITS OF THE LONG TERM CARE PARTNERSHIP PROGRAM
Assets worth up to the amount of policy benefits paid out from a qualified partnership long term care policy will be sheltered from liquidation when trying to qualify for Medicaid.
Premiums paid for a tax qualified, partnership qualified long term care policy can be deducted off of taxes as a medical expense. The amount deductible is dependent upon your income level and the instruction from a qualified tax professional.
Policy benefits paid out of a partnership qualified long term care policy are tax free regardless of additional benefits gained due to inflation protection.
EXAMPLE OF THE PARTNERSHIP PROGRAM IN ACTION
Your estate is valued at $500,000 and you are contemplating self-insuring. You find yourself in a long term care situation and you exhaust your estate. Then what? You go on Medicaid.
Your estate is valued at $500,000 and you have a Partnership qualified long term care policy worth $300,000. You find yourself in a long term care situation and you exhaust your policy. Then what? You spend down the difference in the value of your estate and then go on Medicaid while maintaining your remaining estate.
The Partnership Program is the government’s way of saying thank you for getting a private long term care policy.