Navigating the complexities of long-term care planning can be daunting, especially when considering the potential financial burdens. For middle-income Americans seeking added protection for their assets while preparing for future long-term care needs, the Long Term Care Partnership Program offers a valuable solution. This program, a collaboration between state governments and the federal government, is designed to make long term care insurance more accessible and beneficial. But what is the Long Term Care Partnership Program exactly, and how can it benefit you? This comprehensive guide will delve into the intricacies of this program, its history, benefits, and how it can safeguard your financial future.
Understanding the Basics of Long Term Care Partnership Programs
The Long Term Care Partnership Program is a state-specific initiative operating under federal guidelines to encourage individuals to purchase private long term care insurance. The core concept revolves around a unique benefit: asset protection through Medicaid disregard. Essentially, when you purchase a Partnership-qualified long term care insurance policy and utilize its benefits, you can protect a certain amount of your assets should you eventually need to apply for Medicaid to cover further long-term care expenses.
This protection is often described as “dollar-for-dollar” asset disregard. For every dollar your Partnership policy pays out in benefits, you get to disregard a dollar of your assets when Medicaid eligibility is determined.
Let’s illustrate with an example: Imagine Sarah purchases a Partnership-qualified policy and years later requires long-term care. Her policy pays out $200,000 in benefits. Thanks to the Partnership program, Sarah can shield an additional $200,000 of her assets beyond the standard Medicaid asset limits. This ensures that her life savings are not entirely depleted by long-term care costs before Medicaid assistance becomes available. Furthermore, in many states, this asset protection extends to estate recovery, safeguarding assets for heirs after the policyholder’s death.
The Genesis and Evolution of the Partnership Program
The Long Term Care Partnership Program’s roots trace back to the late 1980s when it began as a pilot project funded by the Robert Wood Johnson Foundation. Initially, four pioneering states – California, Connecticut, Indiana, and New York – were selected to test and implement this innovative approach to long-term care financing.
Connecticut took the lead, becoming the first state to offer Partnership-qualified policies in 1992. A year later, the federal government’s OBRA 93 legislation inadvertently created a hurdle, effectively freezing the expansion of the Partnership program to new states unless their Medicaid State Plan Amendment was already approved by May 14, 1993.
However, the landscape shifted significantly with the Deficit Reduction Act (DRA) of 2006. The DRA provided a renewed pathway for states to establish Partnership programs. Since then, numerous states have adopted the necessary legislation to offer these programs to their residents.
It’s crucial to understand that the Long Term Care Partnership Program isn’t a one-size-fits-all national program. While the DRA brought greater consistency among states adopting the program post-2006, variations still exist, especially when comparing DRA Partnership states to the original four pioneering states. Each state retains some autonomy in designing specific aspects of their Partnership programs.
State-by-State Availability and Reciprocity
The availability of Long Term Care Partnership programs varies by state. As of the last update in March 2014, a significant number of states had approved and implemented Partnership programs. A table showcasing the status of each state, including the effective date of their program and policy reciprocity, provides a clearer picture:
| State | Effective Date | Policy Reciprocity |
|---|---|---|
| Alabama | 03/01/2009 | Yes |
| Alaska | Not Filed | — |
| Arizona | 07/01/2008 | Yes |
| Arkansas | 07/01/2008 | Yes |
| California | Original Partnership | No |
| Colorado | 01/01/2008 | Yes |
| Connecticut | Original Partnership | Yes |
| Delaware | 11/01/2011 | Yes |
| District of Columbia | Not Filed | — |
| Florida | 01/01/2007 | Yes |
| Georgia | 01/01/2007 | Yes |
| Hawaii | Pending | — |
| Idaho | 11/01/2006 | Yes |
| Illinois | Pending | — |
| Indiana | Original Partnership | Yes |
| Iowa | 01/01/2010 | Yes |
| Kansas | 04/01/2007 | Yes |
| Kentucky | 06/16/2008 | Yes |
| Louisiana | 10/01/2009 | Yes |
| Maine | 07/01/2009 | Yes |
| Maryland | 01/01/2009 | Yes |
| Massachusetts | Proposed | — |
| Michigan | Work stopped | — |
| Minnesota | 07/01/2006 | Yes |
| Mississippi | Not Filed | — |
| Missouri | 08/01/2008 | Yes |
| Montana | 07/01/2009 | Yes |
| Nebraska | 07/01/2006 | Yes |
| Nevada | 01/01/2007 | Yes |
| New Hampshire | 02/16/2010 | Yes |
| New Jersey | 07/01/2008 | Yes |
| New Mexico | Not Filed | — |
| New York | Original Partnership | Yes |
| North Carolina | 03/07/2011 | Yes |
| North Dakota | 01/01/2007 | Yes |
| Ohio | 09/10/2007 | Yes |
| Oklahoma | 07/01/2008 | Yes |
| Oregon | 01/01/2008 | Yes |
| Pennsylvania | 09/15/2007 | Yes |
| Rhode Island | 07/01/2008 | Yes |
| South Carolina | 01/01/2009 | Yes |
| South Dakota | 07/01/2007 | Yes |
| Tennessee | 10/01/2008 | Yes |
| Texas | 03/01/2008 | Yes |
| Utah | Not Filed | — |
| Vermont | Not Filed | — |
| Virginia | 09/01/2007 | Yes |
| Washington | 01/01/2012 | Yes |
| West Virginia | 17/01/2010 | Yes |
| Wisconsin | 01/01/2009 | Yes |
| Wyoming | 06/29/2009 | Yes |
Reciprocity is another important aspect to consider. Most states with DRA-based Partnership programs, along with New York, Indiana, and Connecticut, offer reciprocity. This means if you purchase a Partnership policy in one of these states and later move to another state with reciprocity, your policy’s asset protection benefits will generally be honored. California, notably, does not offer reciprocity. Always confirm the reciprocity rules of your specific state and any state you might relocate to.
Costs of Long Term Care Partnership Insurance
The cost of Long Term Care Partnership insurance policies, like all insurance, varies based on several factors. These include your age, health status, the level of coverage you choose, and the specific insurance carrier.
Data from a 2012 New York State Long-Term Care Partnership report provides insights into the potential cost ranges:
- Ages 50-54: Annual premiums ranged from approximately $1,384 to $11,667.
- Ages 55-59: Annual premiums ranged from roughly $1,756 to $12,864.
- Ages 60-64: Annual premiums ranged from about $1,863 to $9,490.
- Ages 65-69: Annual premiums ranged from approximately $3,321 to $10,002.
It’s important to note that these ranges reflect the variety of policy benefit options individuals select, as well as their health at the time of application. Furthermore, a 2014 Long-Term Care Insurance Price Index highlighted significant price variations (40-100%) for virtually identical coverage across different insurers. This underscores the critical importance of comparison shopping to secure the most competitive rates for the desired coverage.
Frequently Asked Questions about Partnership Policies
To further clarify the nuances of Long Term Care Partnership programs, let’s address some common questions:
Q: If I buy a Partnership-eligible policy in one state, and then move to another, will it still qualify for Medicaid asset protection?
A: Generally, yes, especially if both states are DRA Partnership states with reciprocity. However, rules can vary, particularly with the original four Partnership states. For instance, California does not offer reciprocity, while Connecticut and Indiana offer it conditionally based on the new state’s rules. New York typically allows reciprocity on a dollar-for-dollar basis. Always verify the specific reciprocity agreements between states.
Q: Do most states mandate 5% compound inflation protection for Partnership policies, or are other options like 3% or Guaranteed Purchase Options acceptable?
A: No, a 5% compound inflation rider is not universally required. Most states offer flexibility, especially for younger applicants. For individuals under 61, any compound Cost of Living Adjustment (COLA) is usually acceptable. For those between 62 and 75, any automatic COLA rider may qualify. After age 75, often no COLA rider is mandated. Guaranteed Purchase Options (GPO) generally do not qualify a policy for Partnership status in most states.
However, the original four states have distinct requirements:
- California: Requires 5% compound inflation to age 70; after 70, 5% simple inflation is permissible.
- Connecticut: Mandates 5% compound inflation at all ages, though options may exist for those under 65.
- Indiana: Requires 5% compound inflation for full asset protection; 5% simple or CPI (Consumer Price Index) riders offer dollar-for-dollar protection only.
- New York: Accepts 3% or 5% compound inflation for those aged 79 and younger.
Q: Do I need to specifically request a Partnership-eligible policy, or will most policies qualify if they meet inflation protection and other criteria?
A: It’s essential to confirm that the policy is explicitly designated as Partnership-qualified. While policies must meet certain criteria like inflation protection, not all policies automatically qualify. In the original four Partnership states, distinct policy forms are often used. In other states, while separate forms may not exist, policyholders typically receive confirmation letters stating their policy’s Partnership qualification upon delivery. It’s vital to verify that the insurance carrier has filed the policy as Partnership-eligible in your state.
Coverage Amounts in Partnership Policies
DRA Partnership policies are predominantly “comprehensive,” covering care received at home, in assisted living facilities, or skilled nursing facilities. Benefits are usually dollar-denominated, representing the maximum amount the policy will pay out.
Data from a January 2014 report indicates the distribution of maximum policy benefits purchased:
- Less than $109,599: 10% of policies
- $109,600 – $146,099: 8% of policies
- $146,100 – $182,599: 12% of policies
- $182,600 and above: 54% of policies
- Unlimited: 14% of policies
California-specific data from April-June 2013 reveals daily benefit amounts selected by policyholders:
- $170 per day: 11.28% of policies
- $180 per day: 35.50% of policies
- $190 per day: 00.89% of policies
- $200 per day: 31.00% of policies
- $210 per day: 00.60% of policies
- $220 per day: 03.44% of policies
- $230 per day: 02.87% of policies
- $240 per day: 01.21% of policies
- $250 per day: 08.03% of policies
- Over $250 per day: Balance of policies
- More than $200 per day: 11% of policies (This seems to be redundant or potentially mislabeled in the original data)
This data suggests a trend towards purchasing policies with substantial maximum benefits and daily coverage amounts, reflecting a growing awareness of the significant costs associated with long-term care.
Is a Long Term Care Partnership Policy Right for You?
The Long Term Care Partnership Program offers a compelling approach to long-term care planning, particularly for middle-income individuals who want to protect their assets while preparing for potential future care needs. By purchasing a Partnership-qualified policy, you gain peace of mind knowing that you have a financial safety net and the ability to safeguard your savings.
To determine if a Long Term Care Partnership policy is the right choice for your individual circumstances, it’s recommended to:
- Assess your financial situation: Evaluate your assets and income to understand your potential exposure to long-term care costs and the level of asset protection you might need.
- Research state-specific program details: Understand the specifics of your state’s Partnership program, including reciprocity rules and policy requirements.
- Compare policies and costs: Obtain quotes from multiple insurance carriers and carefully compare policy benefits, premiums, and Partnership qualifications.
- Consult with a Long Term Care Insurance Specialist: Seek guidance from a knowledgeable professional who can help you navigate the complexities of Partnership policies and choose the most suitable coverage for your needs.
Ready to explore your long-term care insurance options and see if you qualify for a Partnership policy? Click here to complete a simple online questionnaire and connect with a specialist in your area for free, no-obligation information.
