Protect Assets & Receive Medicaid with Long Term Care Insurance Partnership Programs

Summary
Combining private long term care insurance with Medicaid programs specifically for older adults can help save money and preserve assets. In fact, the process of applying for Medicaid can be made much easier for policyholders under the Long Term Care Partnership Program, available in most states, which lowers certain financial eligibility limits and protects a Medicaid recipient’s property after death.

 

What Are Long Term Care Partnership Programs?

Long Term Care Insurance Partnership Programs combine private long term care insurance and Medicaid programs for older or frail adults—specifically Nursing Home Medicaid, Home and Community Based Services waivers, and Aged, Blind and Disabled Medicaid.

One of the important advantages of partnership programs is protecting assets. The partnership protects a recipient’s assets two ways:
1. Someone applying for Medicaid benefits can have assets valued above the asset limit (usually $2,000) in their state of residence and still be approved for benefits, eliminating the need to spend down in order to be eligible.
2. Assets including the beneficiary’s home are protected from Medicaid’s Estate Recovery Program after death.

These “asset disregards” are meant to work like an incentive for someone to purchase private Long Term Care insurance before getting on publicly funded Medicaid. In other words, someone who might use Medicaid to finance long term care costs, like moving into a nursing home, might be motivated to purchase private insurance to cover those costs because the partnership allows for special assets rules.

Utilizing a Long Term Care Insurance Partnership Program is a good idea for someone who wants protection for the possibility of needing long term care in the future, and worries about having too many assets (including money in retirement and bank accounts) to be accepted into a Medicaid Long Term Care program.

 

How Do Insurance Partnership Programs Work?

Long Term Care Partnership Programs provide a dollar of asset protection for every dollar of insurance coverage paid on one’s behalf. An individual who owns long term care insurance will pay into the policy over a period of time, usually on a yearly or monthly basis, and then receive a large amount paid out by the policy when long term care becomes necessary. That amount paid out then changes the eligibility requirements by significantly increasing the asset limit when the individual applies for Medicaid.

As an example, let’s say someone purchases long term care insurance that pays out $150,000 when they can no longer live independently because of old age or a chronic illness like Alzheimer’s disease. In a state with a Long Term Care Partnership, the recipient earns a dollar of asset protection for every dollar paid out by their private insurance. So after the insurance benefits are exhausted or entirely spent on care, the applicant can have $152,000 in assets ($150,000 more than the $2,000 limit in most states) and still be eligible for state Medicaid to take over their coverage.

Someone who needs Medicaid Long Term Care insurance but has assets above the limit would usually need to spend down their assets before becoming eligible, but with the partnership programs described here that wouldn’t be necessary. Put another way: Long Term Care Partnerships help one avoid needing to spend down assets in order to qualify for Medicaid benefits.

 Assets, Not Income. Keep in mind that Long Term Care Partnerships may change the asset limit for someone applying for Medicaid Long Term Care benefits, but the income limit ($2,523 per month in most states, though it can vary) remains the same.

 

Why Partnerships Work

The basic premise of Long Term Care Partnership Programs is that they save Medicaid money by postponing when an eligible individual begins to receive benefits. It works like this: Someone who is still in relatively good health purchases a Long Term Care insurance program that is part of the state partnership. When the policy holder needs home and community based services, or to move into a nursing home, their insurance policy covers those costs until the benefits are exhausted, and then Medicaid takes over.

 

Which States Have Long Term Care Partnerships Programs?

In 2022, every state except Hawaii, Alaska and Mississippi have a version of the long term care partnership program. Anyone interested in this program is encouraged to confirm that their state of residence has such a program by contacting their state’s Department of Insurance via this link.

 Do Long Term Care Partnership Programs require a recipient to exhaust insurance benefits before applying for Medicaid? Like most things Medicaid, it depends on the state. In some states, one can apply for Medicaid Long Term Care before private insurance has run out, while in others this is not allowed. Contact your local Medicaid office (here) to ask when a policyholder may apply for Medicaid.

 

Partnerships and the 3 Types of Medicaid Long Term Care

Medicaid has multiple long term care benefits programs for people who are older or have a chronic illness. These provide services that are considered personal care, like meals and help with activities of daily living, rather than medical care like a visit to the hospital.

Nursing Home Medicaid
Nursing home Medicaid is an entitlement, meaning anyone who qualifies both physically (meaning there is a demonstrable need for care) and financially (meaning an applicant’s income and assets are under the limits) must receive this benefit from the state. Nursing Home Medicaid is also called Institutional Medicaid, and it will pay 100% of the cost of living in a nursing home, though a recipient must pay all their income, minus a small personal needs allowance, into the program.

Nursing homes are expensive, with an average annual cost above $100,000 in the U.S. For this reason, a person might want to purchase private Long Term Care insurance that will cover the cost of nursing home care when it becomes necessary, while also preparing to join Medicaid when the insurance funds are exhausted. These are the circumstances under which a Long Term Care Partnership Program can help.

Participating in a Long Term Care Partnership Program can also protect one’s assets after death. If a senior has lived in a nursing home for the last several years of life, and was a participant in Nursing Home Medicaid, the state is obliged to seek repayment after death through estate recovery, often by selling the recipient’s home. If one has bought private insurance and worked through the partnership program, however, the recipient’s assets are protected from estate recovery.

Home and Community Based Services Waivers
HCBS waivers are a program available in every state, and pay for personal care services in someone’s home or assisted living community. Often, a recipient of HCBS waivers requires a Nursing Facility Level of Care (NFLOC) but may avoid moving into an expensive nursing home with the benefits provided through these waivers, like help with dressing and bathing, hot meal delivery, or home modifications.

HCBS waivers are not an entitlement, so someone who qualifies does not automatically receive benefits and may be placed on a waitlist.

The income and assets limits for HCBS waivers are usually $2,523 per month in income and $2,000 in assets (though these numbers vary in some states). Someone who has participated in a long term care partnership program, however, can have significantly more assets and still be accepted for benefits.

Partnership programs will also protect assets, including one’s home, from being taken by the state’s estate recovery program that recoups the cost of Medicaid’s care coverage after the recipient dies.

Aged, Blind and Disabled Medicaid
ABD Medicaid, also called Regular Medicaid, also offers personal care assistance in one’s home or assisted living community, though at a lower level than the HCBS waivers described above.

Income and assets limits apply for anyone who applies for ABD Medicaid, though the income limit is often lower under this program. Unlike with other types of Medicaid long term care, ABD Medicaid does not evaluate applicants for physical need. Also, ABD Medicaid is an entitlement, so any qualified applicant must be approved for services.

Someone who has exhausted their private long term care insurance, if the insurance was part of a long term care partnership, will have a much higher asset limit depending on how much the insurance paid out before Medicaid kicked in. The income limit, however, remains the same.

The long term care partnership program would also protect an ABD Medicaid recipient’s assets upon death, meaning one’s house and other assets would not need to be sold to pay back Medicaid for the cost of care while the recipient was alive.

 

When to Purchase a Partnership Policy

Someone who wishes to participate in a long term care partnership program would need to buy private long term care insurance when they are still relatively healthy. This means the long term care partnership program is best for someone who thinks they may need long term care benefits sometime in the future, but is not experiencing symptoms already. This is because most insurance companies screen for wellness and health conditions before approving someone’s insurance plan.

For someone who has been diagnosed with Alzheimer’s disease, for example, or has moved into a nursing home, it is probably too late to purchase private long term care insurance and participate in the partnership program.

 

Requirements for a Long Term Care Partnership Program

– The insurance company and policy must be approved by the state where the recipient lives. If the policy is not part of the state’s partnership program, there is no protection for assets.
– The long term care insurance policy needs to be bought while still in relatively good health in order to be approved.
– The policy must be tax-qualified, meaning some of its cost is tax-deductible.
– The policy must be inflation-protected, meaning the potential benefits paid out increase as the cost of long term care increases. (The exception to this rule is that seniors older than 75 do not need inflation protection.)
– To receive the benefits of asset protection and increasing one’s asset limit, an individual must be approved for Medicaid Long Term Care (Nursing Home Medicaid, HCBS waivers or ABD Medicaid) in the state where the partnership policy was purchased, or in a state that has an agreement with the state where the senior wants to receive Medicaid long term care benefits. This option, available between some states but not others, is often called a “reciprocal agreement.”

 If someone buys private long term care insurance in one state and then moves to another state, it is still possible to receive asset protection if the two states have a “reciprocal agreement.”

 

How to Find a Partnership Policy

A good way to find long term care insurance that partners with state Medicaid programs is to contact the nearest state Department of Insurance (contacts at this link). One can also call their nearest Medicaid office and ask about long term care partnership programs.