How Purchasing Long Term Care Insurance Can Help Medicaid Beneficiaries Protect their Homes & Assets

Last updated: February 08, 2024


What are Long-Term Care Partnership Programs?

Long-Term Care (LTC) Partnership Programs are a collaboration between private long-term care insurance companies and a state’s Medicaid program. The intention of Partnership Programs is to encourage the purchase of long-term care insurance to help cover the costs of long-term care, while also alleviating the burden on the states to pay for this type of care via Medicaid. Of particular relevance to seniors who may need long-term care Medicaid in the future, participating in a Partnership Program protects some (or in some cases, all) of a program participant’s assets (resources) from Medicaid’s asset limit.

The “protected” assets are also safe from Medicaid’s Estate Recovery Program (MERP), sheltering assets as inheritance for family after the passing of a Medicaid recipient. Partnership for Long-Term Care Programs can be thought of as a Medicaid asset protection technique for healthy seniors who do not have an immediate need for long-term care.

  Medicaid applicants who participate in Partnership Programs can retain assets above and beyond the limit set forth by Medicaid.

These programs, also called Qualified State Long-Term Care Partnership Programs, originated in 1992 in four states (California, Connecticut, Indiana, New York). In 1993, the Omnibus Budget Reconciliation Act (OBRA) prevented the expansion of these programs to additional states. However, with the passing of the 2005 Deficit Reduction Act (DRA), all states were given the option of creating Partnership Programs. Our research indicates these programs are available nearly nationwide. The exceptions are the District of Columbia, and the states of Alaska, Hawaii, Utah, and Mississippi. To ensure there is a Long-Term Care Partnership Program in any specific state, one should contact that state’s Department of Insurance. Note that many Partnership Programs have state-specific names, such as the Indiana Long Term Care Insurance Program (ILTCIP), the New York State Partnership for Long-Term Care (NYSPLTC) Program, and the Arizona Long Term Care Partnership Program.

Long-term care, as defined by Partnership Programs, encompasses a variety of services to assist persons who are unable to independently perform day-to-day activities, such as bathing, dressing, and toiletry. Examples of long-term care might include in-home personal care assistance, home health aides, adult day care, assisted living, memory care, and nursing home care.


Benefits of Long Term Care Partnership Programs

Participating in a LTC Partnership Program offers asset protection (protection of savings from the asset limit and protection from Estate Recovery of the home) to Medicaid applicants. To be clear, this program protects assets, not a Medicaid applicant’s income.

Let’s back up; all states (except for California) have an asset limit for long-term care Medicaid, which generally speaking, is $2,000. See state-specific asset limits. Certain assets are exempt (noncountable) from this limit, including one’s primary home, household furnishings, personal items, and a vehicle. Applicants who have countable assets over the Medicaid limit must “spend down” the extra assets in order to meet Medicaid’s asset limit, and hence, qualify for long-term care Medicaid.

Medicaid has a Look-Back Period of 5 years in which all asset transfers immediately preceding one’s long-term care Medicaid application date are scrutinized to ensure none were given away or sold for less than fair market value. New York is an exception and currently has no Look-Back Period for long-term Home and Community Based Services. The state plans to implement a 2.5 year Look-Back Period sometime in 2025. If one violates the Look-Back Rule, Medicaid assumes it was done to meet the asset limit, and persons are penalized with a period of Medicaid ineligibility. With the elimination of California’s asset limit eff. 1/1/24, any asset transfers made in this state, on or after this date, are not subject to the Look-Back Rule.

Returning to the topic of Qualified State Long-Term Care Partnership Programs, these programs protect all, or a portion, of an elderly individual’s assets from Medicaid’s asset limit should they require long-term care Medicaid. Stated differently, assets above and beyond the asset limit (generally $2,000) are protected and do not have to be “spent down” for qualification purposes. The exact amount that is protected is based on the amount a senior’s Partnership Policy has paid out for long-term care. Essentially, an amount equal to that paid out by one’s Long-Term Care Partnership Policy is protected from Medicaid’s asset limit.

Asset protection extends to Medicaid’s Estate Recovery Program (MERP), in which a state attempts reimbursement of funds paid for long-term care following the death of a Medicaid recipient. One’s home is often the only remaining asset of any value, and it is through one’s home that the state usually attempts to be reimbursed. To be clear, while one’s home is usually exempt from Medicaid’s asset limit, it is not exempt from MERP. Through participation in a LTC Partnership Program, a Medicaid recipient can declare their home as a “protected” asset, protecting it from MERP. The “protected” home can then be passed on to family as inheritance, rather than the state forcing the sale of the home to be reimbursed the funds in which it paid for long-term care.


Fred has a Long-Term Care Partnership Policy that paid out $100,000 in long-term care services for him. Since his policy paid out $100,000, an equal amount ($100,000) is protected from Medicaid’s asset limit and Estate Recovery program. Remember, Medicaid’s asset limit is generally $2,000. This means that Fred is entitled to $2,000 in assets, plus the $100,000 that is protected, allowing him to retain $102,000 in assets. His home is valued at $75,000, he has $25,000 in a money market account, and there is $2,000 in his savings account. Therefore, he declares the home and money market funds as “protected” assets, and after Fred passes away, they can be passed on to his family.


How LTC Partnership Programs Work?

To protect one’s assets from Medicaid’s asset limit and Estate Recovery, one must have purchased and received long-term care benefits from a Qualified Long-Term Care Insurance Policy, also called a Partnership Policy. For each dollar the insurance policy pays out for long-term care, a dollar will be protected from Medicaid.

One might be wondering if it is possible to purchase a Partnership Policy in one state, apply for long-term care Medicaid in another state, and the asset protection still be upheld. The answer is dependent on a few factors. Both states must have Partnership Programs, the policyholder must meet the requirements for the Partnership Program in the state in which they will apply for long-term care Medicaid, they must meet the Medicaid eligibility criteria in that state, and the two states must have a reciprocal agreement, which allows a policyholder in one state to move to the other state and still receive asset protection.

As per the requirement that a senior must meet the Partnership Program eligibility in the state in which they plan to relocate, in some states, a policyholder is required to “exhaust” their insurance benefits. This means the entire sum for which they are insured must be paid out prior to applying for long-term care Medicaid. In other states, a policyholder does not have to deplete their total benefits prior to applying for long-term care Medicaid, and they will still receive asset protection in the amount that the policy paid out before application.


LTC Partnership Program Eligibility Criteria

How Far in Advance Do You Need to Buy the Policy?

Persons who wish to participate in a Partnership for Long-Term Care Program should purchase a Partnership Policy while they are still fairly healthy and do not have an immediate need for long-term care. If a senior is already residing in a nursing home residence, it is too late to participate in this program, as they won’t qualify for the policy. Similarly, if an individual is in good health but has been diagnosed with Alzheimer’s or related dementia, it is unlikely a company would offer them a policy. Most, if not all, companies require a health screening prior to the sale of a long-term care insurance policy.

There are two components of eligibility for LTC Partnership Programs; the partnership requirements associated with a Qualified Long-Term Care Insurance Policy and the eligibility criteria for long-term care Medicaid. While we include the general requirements below, please keep in mind that requirements are state-specific. The exact rules are not uniform across states.


Partnership Program / Policy Criteria

• The state in which a senior resides must have a Partnership Program.
• The senior must purchase a partnership-qualified policy from a private insurance company. The insurance company and long-term care policy must be approved by the state Partnership Program in which the purchaser resides. To be clear, if a senior purchases a non-partnership long-term care insurance policy, they will have insurance coverage, but there will be no Medicaid asset protection / Medicaid Estate Recovery protection should the need for long-term care Medicaid arise.
• The senior must be in reasonably good health. Otherwise, insurance coverage will likely be denied.
• The partnership-qualified policy must include inflation protection. This means that the available amount of benefits are adjusted as the cost of long-term care increases. Stated differently, the total amount the insurance company pays out might be higher than the benefit amount originally purchased. One exception exists; seniors over 75 are not required to have inflation protection.
• The Partnership Policy has to be a federally tax-qualified long-term care plan. This means that part of the premium cost can be used as a tax deduction.
• The senior must be able to afford the monthly / annual premium (the cost of the policy).
• For asset disregard (asset limit and Medicaid Estate Recovery), a senior must receive long-term care Medicaid in the state in which they bought the partnership policy OR receive long-term care Medicaid in a state that has a LTC Partnership for Long-Term Care Program and has a reciprocal agreement with the state in which the senior wants to receive Medicaid benefits.


Long Term Care Medicaid Eligibility Criteria

For a senior to be eligible for long-term care Medicaid, they must meet the following criteria:

• Have a functional need for long-term care. This often means they must require a Nursing Home Level of Care.
• Have limited monthly income, which as of 2024, is generally limited to $2,829.
• Have no more than $2,000 (in most states) in countable assets. With a Partnership Policy, an additional amount of assets will be protected. CA has no asset limit, and therefore, persons in this state can qualify with unlimited assets.

See state-specific Medicaid long-term care requirements. Being over the income and / or asset limitation(s) is not automatic cause for Medicaid disqualification. See Medicaid planning strategies.


LTC Partnership Programs Costs

The cost of a Long-Term Care Partnership Policy can vary significantly, and depends on a variety of factors, such as the insurance company, the age of the person purchasing the policy (younger persons have a lower annual premium), marital status (premiums are generally lower for a couple versus an individual), sex (coverage for a female tends to be more costly), and the coverage / benefit amount (the higher the coverage, the higher the premium).

According to the American Association for Long-Term Care Insurance (AALTCI), in 2022, for a single male who is 55 years old, the average annual cost for a traditional long-term care insurance policy with $165,000 in coverage is $950 ($79.16 / month). In comparison, for a woman of the same age and same amount of coverage, the average annual premium is $1,500 ($125 / month). For a married couple, also 55 years old and $165,000 in coverage for each spouse, the average annual cost is $2,080 ($173.33 / month). The price increases with inflation growth options. With initial coverage of $165,000 with a 2% benefit increase, the average annual cost for a 55 year old single man is $1,750 ($145.83 / month), for a woman of the same age and same amount of coverage and benefit increase option, it is $2,815 ($234.58 / month). For a married couple, both 55 years old with $165,000 in coverage and a 2% benefit increase, the average annual cost is $3,870 ($322.50 / month).


Which States Have LTC Partnership Programs?

Most states have a Long-Term Care Partnership Program. To the best of our knowledge, Alaska, Hawaii, Utah, and Mississippi, as well as Washington DC, do not. Although Mississippi does not currently have a Partnership Program, a bill has been passed to establish this program. It will hopefully be established before the end of the year. Alaska has also taken steps to implement a Partnership Program. Utah legislation authorized a Partnership Program in 2014, but it has never been fully implemented because no long-term care insurers have chosen to file a Partnership Policy with Utah’s Insurance Department. To confirm that the state in which you or a loved one resides has such a program, contact the state’s Department of Insurance.


How to Get Started

One should contact their state Department of Insurance to confirm that their state has a Long-Term Care Partnership Program. They can also provide additional information about the program and offer direction in finding insurance companies in one’s state that sell Partnership Policies. Alternatively, the Medicaid agency in your state may be helpful.

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