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Marc A. Hebert's Money Sense: Long-term care Partnership policies can protect your assets

August 19. 2017 2:46AM

Long-term care has become extremely expensive. For example, the cost of care in the Manchester area for a private nursing home room is $10,501 per month according to a Genworth Cost of Care Survey for 2016. For the rest of the state, it is $9,110 per month.

This high cost has placed a burden on individuals and the state Medicaid programs that step in and contribute to expenses when a person runs out of funds.

To address the situation, more states are asking people to plan for their own long-term care needs. If more did so, the risk of impoverishment becomes less and the cost to Medicaid decreases. Long-term care Partnership policies are considered part of the solution.

Partnership policies are similar in many respects to traditional long-term care insurance policies. The idea of a Partnership Program started in 1992 in four states: California, Connecticut, Indiana and New York. The Deficit Reduction Act of 2005 (DRA) authorized all states to adopt long-term care Partnership Programs. Many states have done so.

How does this process work? Medicaid steps in and pays for nursing care for those who can't afford it. As the cost of care rises, more and more Americans rely on Medicaid to pay. But Medicaid has strict eligibility requirements. For example, certain medical criteria and asset and income limits must be met. Residents must "spend down" their assets in order to become eligible. States also have the right to seek reimbursements from a recipient's estate for Medicaid payments made on the person's behalf.

The Partnership Programs address this on some levels. States vary in what the policy must contain, but all new Partnership policies must meet the DRA guidelines, which include:

. Medicaid asset protection using the dollar-for-dollar asset protection model

. An automatic inflation projection if issued to anyone younger than 76

. Following the consumer protection guidelines of the National Association of Insurance Commissioners Long-Term Care Insurance Model Act

. Be tax qualified

The dollar-for-dollar requirement refers to the fact that a certain amount of assets are protected from the Medicaid spend-down requirements by purchasing a qualified policy. The amount paid by the long-term care insurance contract in benefits is protected from Medicaid spend-down requirements on a dollar-for-dollar basis. This is in addition to any asset protection for Medicaid limits that already apply.

Let's look at an example: Bob has a long-term care Partnership policy that provides for $200,000 of benefits. He enters a nursing home and uses all of the benefits that the policy provides. At that point, Medicaid starts to pay for expenses. According to the Medicaid rules in Bob's state, he would be entitled to keep $2,500 of assets, but because of the policy payments, he can now keep $202,500 and still qualify for Medicaid.

It should be noted that long-term care Partnership policies provide estate protection as well. Medicaid will not attempt to recover those assets after death.

It should also be noted that Medicaid qualification isn't automatic. Just purchasing a Partnership policy doesn't mean a person will automatically qualify for Medicaid.

Purchasers also will need to check for portability. The asset protection provisions from a policy purchased in one state won't necessarily be honored in another state. Check the laws in states that you could possibly need care in prior to purchasing a policy.

Finally, having an existing traditional long-term care policy in place does not mean it will automatically convert to a qualifying Partnership Program policy. Purchasers need to check the laws in their state to see if existing policies may be exchanged for a Partnership-qualified one. You will also want to look at the costs involved to do so.

Marc A. Hebert, M.S., CFP, is a senior member and president of the wealth management and financial planning firm The Harbor Group of Bedford. Email questions to Marc at Your question and his response might appear in a future column.


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