It has been six years since the Long Term Care Insurance Partnership Program came to Ohio. Although there was quite a bit of promotion at the time, there was some confusion among consumers as to the benefits of the partnership program over traditional long term care insurance.
Paying for a nursing home, assisted living facility or home health care can be very expensive. After exhausting their own funds, patients look to Medicaid to help them pay the costs of long term care. To qualify for Medicaid an individual must reduce his assets to less than $1,500. Once on Medicaid, all monthly income will go to the individual’s care except a small personal allowance ($40 per month for most nursing home patients). When a Medicaid recipient passes away, the state will seek to recover the costs paid for medical care from the individual’s estate.
Long term care insurance pays a specified daily rate toward the cost of care in a nursing home, assisted living facility or at home. The patient must meet a specified level of care and generally will have paid privately for a specified elimination period before payments start. Once payments start, the policy will pay for a specified period of time and up to a specified dollar amount. Policies vary widely as to the length of the elimination period, the daily rate, the length of time the policy will pay and the total amount that the policy will cover.
The “partnership” is between the insurance industry and the state, which provides Medicaid benefits. If a person pays for care with qualifying Long Term Care Partnership Insurance and then goes on Medicaid, he may keep extra assets above and beyond the $1,500 up to the full amount of the policy. Thus, if someone had a policy that paid up to $100,000 toward long term care services for three years, after the insurances had paid in full, the policy holder could keep
$101,500 ($1,500 + $100,000) and qualify for Medicaid.
The benefits of the partnership policy are clear:
Benefits for the patient
The additional assets can enhance a person’s life immensely providing for such luxuries as a private room, trips to the beauty shop, dinners out and plane tickets for children or grandchildren to visit.
Benefits for the spouse
A Medicaid applicant’s spouse is entitled to keep one half of all countable assets of the couple with a minimum of $21,912 and a maximum of $109,560 (in 2010). Excess assets must be spent down to $1,500 before the ill spouse will qualify for Medicaid. A Long Term Care Insurance Partnership Policy could allow the applicant to keep a significant amount of funds to insure the future of the community spouse once the other assets are exhausted.
Benefits for Heirs
If a person’s assets are spent down for long term care, he will have nothing left to give his heirs. For this reason, many people choose to make lifetime gifts. Medicaid penalizes gifts made within the 60 months prior to a Medicaid application. Long Term Care Insurance can be used to pay for care during this look back period. Estate recovery will also not require payback of funds preserved by the long term care insurance.
Be sure that your partnership policy covers enough of your costs. Suppose a person with $100,000 in savings has a long term care partnership policy that pays $100 per day for three years and up to a maximum of $100,000. If the cost of care is $210 a day, the patient would need to pay an additional $110 per day or about $3,300 per month.
If the patient’s social security and pension totaled only $1300 per month, he would need to pay the balance of the bill from savings. Two thousand dollars per month for three years would amount to $72,000. This would reduce the individual’s savings to only $28,000. If that was all he had left when the long term care insurance was fully paid, that is all he would get to keep, not the full value of the policy. The partnership policy holder would have gotten more value
from a policy that paid more money per day for a shorter period of time.
As with any insurance, each individual should consider his own needs and circumstances when choosing a long term care insurance partnership policy. An elder law attorney can assist in reviewing a policy as part of a total long term care plan.