Navigating the Minnesota Long-Term Care Partnership Program: Protect Your Assets

Long-Term Care (LTC) insurance is designed to cover the costs associated with various care services that individuals may need due to aging, chronic conditions, injuries, or cognitive impairments. These services can range from custodial and personal care to skilled nursing and assistance with daily living activities. LTC insurance policies can be utilized in a variety of settings, including a person’s home, assisted living facilities, and nursing homes. These policies are available as individual plans or as certificates under group insurance contracts.

Within Minnesota, there’s a special program known as the Minnesota Long-Term Care Partnership (LTCP) Program that can significantly benefit those who need long-term care services and are concerned about asset protection. Policies that meet the specific criteria of this program are referred to as “partnership policies.”

The LTCP Program represents a collaboration between the state’s Medical Assistance (MA) program and private long-term care insurance providers. This partnership is designed to allow individuals who purchase qualified LTC insurance policies to retain more of their assets should they eventually require Medical Assistance for long-term care (MA-LTC). The core benefit of the LTCP is asset protection: it allows individuals to shield assets from being counted towards MA eligibility and from estate recovery, up to the total amount of benefits paid out by their partnership policy. This protected amount is calculated from the date they become eligible for MA-LTC.

For a deeper understanding, you can explore the official Minnesota Long-Term Care Partnership Program website.

Who Can Benefit from Asset Protection Under the LTCP Program?

To qualify for asset protection under the Minnesota Long-Term Care Partnership Program, individuals must meet specific criteria:

They must be a beneficiary of a Long-Term Care insurance policy that was officially recognized as a partnership policy at the time of purchase. Alternatively, a policy can become qualified through conversion via an endorsement, exchange, or rider. Crucially, the individual must have been a Minnesota resident when the partnership policy was initially purchased.
The program also extends to beneficiaries of partnership policies established in other states that have a reciprocity agreement with Minnesota. In such cases, the person must have been a resident of the reciprocating state on the date their policy was purchased.

How to Verify if Your Policy is a Partnership Policy

If you are applying for MA-LTC and believe you possess a Long-Term Care insurance policy that qualifies as a partnership policy, it’s essential to confirm this with your insurer. The responsibility of verification lies with the insurance provider. They will need to complete the LTC Partnership Insurance Policy Evaluation Form (DHS-5426B) or provide equivalent documentation signed by an authorized representative. This documentation must include the following crucial details:

Confirmation of whether the policy is indeed qualified as a partnership policy under the Minnesota LTCP Program.
The total amount of benefits the insurer has disbursed since July 1, 2006.
Confirmation of whether the policyholder or beneficiary has exhausted all available policy benefits.

The agency processing the MA-LTC application is required to provide the applicant at least 30 days to obtain and submit this verification from their insurer.

Processing MA-LTC Applications When a Partnership Policy Might Exist

Even if an individual hasn’t yet provided verification of their partnership policy, servicing agencies are mandated to proceed with processing the MA-LTC application within the standard processing timeframe. This is applicable if the person is otherwise eligible for MA-LTC and their countable assets are within the allowed asset limits. If the partnership policy verification arrives after the MA-LTC application has already been approved, the agency will then determine the amount of assets that can be designated as protected.

Conversely, if an individual is initially deemed ineligible for MA-LTC due to excess assets, the servicing agency must still grant a 30-day period for the applicant to provide verification of a partnership policy. If this verification is not submitted within 30 days, an extension to the processing period may be granted, provided the individual is actively working to obtain the necessary documentation, as detailed in the Minnesota Health Care Programs Eligibility Policy Manual (EPM) 1.2.4 MHCP Processing Period. However, non-cooperation from the applicant will lead the agency to assume that the insurance policy does not qualify for the partnership program.

When handling MA-LTC requests where a partnership policy may be involved, servicing agencies are required to adhere to specific step-by-step procedures outlined in ONEsource, titled “Instructions for Long-Term Care Insurance.”

Partnership Policy Notice Requirements

Once the verification of a partnership policy is received and processed, the applicant must be provided with a formal notice. This notice will clearly explain:

Whether the individual qualifies for asset protection under the Minnesota LTCP Program.
The precise amount of assets that can be officially designated for protection, based on the verified partnership policy.

Understanding Protected Assets Under the LTCP Program

Under the Long-Term Care Partnership Program, individuals with a partnership policy are permitted to designate assets for protection up to the total value of benefits that their policy has paid out. These designated “protected assets” are treated differently in the context of MA-LTC eligibility and estate recovery:

Exclusion from MA-LTC Eligibility: Protected assets are not counted when determining if an individual meets the asset limits for MA-LTC eligibility.
Protection from Estate Recovery: These assets are also shielded from estate recovery, meaning the state cannot claim them to recoup MA costs after the individual’s death.

Asset designation can occur at various stages: when MA-LTC eligibility is initially established, while actively receiving MA-LTC benefits, or even during the estate recovery process after the policyholder’s death.

An individual can protect assets up to their personal Protected Asset Limit (PAL). If the value of designated protected assets exceeds the PAL, the excess amount is then considered countable towards MA asset limits and will not be protected from estate recovery. It’s possible to reduce the excess value to maintain MA-LTC eligibility.

Key Rules Governing Protected Assets

Several important rules govern how protected assets function within the LTCP program:

Retention of Protected Assets: Enrollees are allowed to keep their designated protected assets.
Annual Value Updates: The value of protected assets is reviewed and updated annually at the time of MA-LTC renewal. This updated value is then measured against the PAL.
Asset Transfers: Protected assets can be transferred to another person without incurring a transfer penalty. The value of the transferred asset on the day of transfer is counted against the PAL.
Asset Conversion: A protected asset can be used to acquire a different asset, and the newly acquired asset will also be considered protected.
Asset Depletion: Even if a protected asset is spent or depleted, it continues to be considered protected and its original value is still counted against the PAL.
Irreversible Designation: Once an asset has been designated as protected, this designation cannot be reversed to protect a different asset instead.
Reporting Changes: Enrollees are obligated to report any changes in the status of their protected assets at each MA-LTC renewal. This includes actions like transferring, spending, depleting, or converting protected assets.
Excluded Asset Types: Certain asset types are ineligible for protection due to specific reimbursement provisions to the Minnesota Department of Human Services (DHS). These include:
- Special needs trusts or pooled trusts
- Annuity interests where the state is designated as a preferred remainder beneficiary.

Utilizing Unused Asset Protection

Individuals may find themselves with unused asset protection for several reasons:

Partial Initial Use: Not all available asset protection might have been utilized when initially applying for MA-LTC.
PAL Increases: The Protected Asset Limit (PAL) can increase if an individual continues to receive benefits from their partnership policy while also receiving MA-LTC. If the value of a protected asset appreciates, this unused asset protection will automatically cover the increased value, without needing additional designation.

Unused asset protection can be strategically employed to:

Fully protect an asset that was only partially protected initially.
Protect new assets that become available during the individual’s lifetime.
Protect assets within a person’s estate after their death.

Interaction with MA-LTC and Other Programs

Eligibility for MA-LTC, or eligibility for MA during a transfer penalty period, is a prerequisite for asset protection under a partnership policy. If an applicant designates assets for protection but is subsequently denied MA eligibility, the asset designation becomes void. They would need to re-designate assets if they reapply and become eligible in the future. Once assets are protected, they remain protected even if the individual no longer receives MA services.

Community Spouse Asset Allowance (CSAA): When a spouse requiring long-term care (LTC spouse) has a partnership policy, the calculation of the Community Spouse Asset Allowance (CSAA) and the division of assets should precede any asset designation under the LTCP Program. Assets attributed to the LTC spouse are eligible for designation as protected assets.
Transfer Penalty: Individuals applying for MA-LTC who are subject to a transfer penalty due to uncompensated asset transfers can still designate assets for protection, provided they are otherwise eligible for MA-LTC. Designating assets does not reduce the duration of a transfer penalty period.
Third-Party Liability: Long-term care insurance is considered a third-party liability resource for individuals receiving MA-LTC.
Alternative Care (AC): Asset protection under the LTCP Program does not extend to eligibility for the Alternative Care (AC) program. However, once an individual qualifies for MA-LTC, protected assets are shielded from recovery by the state to repay costs incurred under either MA or AC programs.

Estate Recovery and MA Liens

Upon the death of an individual with a partnership policy who has received MA-LTC, assets protected under the LTCP Program during their lifetime are protected from estate recovery, up to the PAL. If there is unused asset protection at the time of death, the deceased person’s personal representative can designate additional assets from the estate, up to the PAL, to be protected from state recovery.

Protected assets transferred to a surviving spouse outside of probate from a deceased spouse with a partnership policy are protected from recovery for the MA costs of the deceased spouse. However, these assets can be subject to recovery for the surviving spouse’s MA costs unless the surviving spouse also takes steps to protect these assets under a partnership program.

Legal References

Minnesota Statutes, section 256B.0571
United States Code, title 42, section 1396p(c)

Published: October 25, 2023

Previous VersionsPrevious Versions

Manual Letter #16.1, June 1, 2016 (Original Version)