Long-Term Care Insurance Partnership Policies

[This article was originally published on March 11, 2013.  The links were updated on August 23, 2018.]

Many middle-income people have too much money to qualify for Medicaid but can't afford a pricey long-term care insurance policy. In an effort to encourage more people to purchase long-term care insurance, the Deficit Reduction Act of 2005 (DRA) created the Qualified State Long Term Care Partnership program. The program offers special long-term care policies that allow buyers to protect assets and still qualify for Medicaid when the long-term care policy runs out.

The program authorized by the DRA expands to all states the partnership programs that were previously available in only four states: California, Connecticut, Indiana and New York.

The DRA-approved programs work this way: Private companies sell long-term care insurance policies that have been approved by the state and meet certain standards, such as having inflation protection. The program offers incentives for people to purchase long-term care insurance policies that will cover at least some of their long-term care needs. The asset protection offered by most partnership programs is dollar-for-dollar: for every dollar of coverage that your long-term care policy provides, you can keep a dollar in assets that normally would have to be spent down to qualify for Medicaid. So, for example, if you're single, you would normally be allowed only $2,000 in assets in order to qualify for Medicaid coverage of long-term care. But if you buy a long-term care insurance policy that provides $150,000 in benefits, you would be allowed to retain $152,000 in assets and still qualify for Medicaid. (The states set limits on the assets that can be protected.)

California's and Connecticut's older programs work this way, as well.  In New York, the partnership program benefits are even more significant. If you purchase a partnership policy with a minimum duration of three years of nursing home care or six years of home care, once you have exhausted the benefits from the policy you can qualify for Medicaid coverage no matter your level of assets. In other words, an unlimited amount of assets can be protected. Indiana offers either of these models, depending on when the policy was purchased and the policy's design.

Most states have implemented partnership programs.  For more information on these programs and on long-term care insurance in general from LongTermCare.gov, click here.

Bear in mind that currently the Medicaid asset protection will work only if you receive your long-term care in the state where you bought the policy, or in another partnership state that has a reciprocal agreement with the first state.

Although the purpose of the partnership programs are to reduce Medicaid costs, a 2007 study by the Government Accountability Office indicated that any cost savings to Medicaid programs would be limited. A 2013 study by Boston College’s Center for Retirement Research suggests that these programs are actually money losers for the states, costing more in Medicaid subsidies to those who would have purchased non-partnership policies anyway than they save in overall Medicaid costs.

For more information about each state's program, see the American Association for Long-Term Care Insurance partnership page.

For more information on the four original state partnership policies, visit the following Web sites:

• California: https://www.dhcs.ca.gov/services/ltc/Pages/CPLTC.aspx
• Connecticut: https://www.ct.gov/opm/cwp/view.asp?a=2995&q=383452&opmNav_GID=1814
• Indiana: https://www.in.gov/iltcp/
• New York: www.nyspltc.org

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