What is a Long-Term Care Partnership Policy?

Considered by many experts as one of the best-kept secrets in America, the federal Long-Term Care Partnership Program provides you with special consumer protections and additional asset protection when you purchase a qualified Long-Term Care Partnership policy.

The idea is to reward you when you plan in advance for the financial costs and burdens of aging when you purchase a tax-qualified Long-Term Care policy that meets federal and state guidelines.

Four states first tested this program. The first four partnership states were California, Indiana, New York and Connecticut. They are known as the original partnership states. Today, most states have qualified policies available which help American families safeguard assets no matter how long their long-term care event lasts.

The Deficit Reduction Act of 2005 was signed into law by President George W. Bush. It gave the remaining states the legal authority to set up their own partnership programs. This is intended to inspire and reward Americans who purchase qualified Long-Term Care Insurance by giving them an added layer of asset protection referred to as “asset disregard”.

What you get with a Partnership Long-Term Care Insurance policy is “dollar-for-dollar asset protection” referred to as “asset disregard”. This means that the exact amount of your resources (assets) equal to the dollar amount of long-term care insurance benefits paid to you or on your behalf under the policy may be disregarded for purposes of determining eligibility for long-term care Medicaid benefits. It also protects your estate from any subsequent recovery by the State for receipt of Medicaid-paid services.

Under most circumstances, if you need Medicaid to pay for long-term care services, you must satisfy the income and asset eligibility levels for Medicaid. For many, this means a spend-down of their assets before Medicaid will allow them to apply. With a partnership policy, the amount of assets that may be disregarded is equal to the amount of long-term care benefit paid out of the policy prior to the time you apply for Medicaid’s long-term care benefit.

This will allow you to receive coverage under Medicaid’s long-term care benefit without first exhausting most of your assets. Furthermore, the amount that may be shielded from estate recovery would be equal to the amount of assets disregarded for purposes of eligibility for long-term care Medicaid benefits.

These plans require certain inflation benefit features, among other requirements, to qualify as a partnership policy. For many people, the extra asset protection is a key ingredient to safeguard assets from the high costs of extended long-term care.

The required inflation benefits for partnership plans are as follows:

  • Individuals age 60 or younger must have "annual compound inflation protection."
  • Individuals at least age 61 but younger than age 76 must have some type of inflation protection. This need not be automatic annual compounded increases; it could be simple inflation rate increases, a guaranteed purchase option, or some other form of inflation protection.
  • Individuals age 76 or older must be offered an inflation protection option, but they are not required to purchase that option. 
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