Long term care can be incredibly expensive, and planning for these costs is a critical part of financial security for many Americans, particularly those in the middle-income bracket. Long Term Care Partnership Programs offer a unique solution, blending private long term care insurance with Medicaid asset protection. These programs, officially known as Long Term Care Insurance Partnership Programs, were established to encourage individuals to purchase private long term care insurance and safeguard their assets should they require long-term care services later in life.
What are Long Term Care Partnership Programs?
The Long Term Care Partnership Program is a collaborative effort between state governments and the federal government, designed to make long term care insurance more appealing and accessible. The program gained significant momentum following the Deficit Reduction Act (DRA) of 2006, which enabled states to offer Medicaid asset protection to individuals who purchase qualified long term care insurance policies, often referred to as “Partnership” policies.
Essentially, these Partnership-qualified (PQ) policies provide a special benefit: “asset disregard” or “spend down” protection. For every dollar your PQ long term care insurance policy pays out in benefits, you are allowed to protect one dollar of your assets if you later need to apply for Medicaid to cover further long-term care costs. This is often described as “dollar-for-dollar” asset protection.
Let’s illustrate with an example: Imagine John purchases a PQ policy, and years later, requires extensive long-term care. His policy pays out $200,000 in benefits to cover his care expenses. Because of the Partnership program, John can shield an additional $200,000 of his assets beyond the standard Medicaid asset limits. This means he can qualify for Medicaid while preserving more of his savings and property for himself and his family. Furthermore, the Partnership Program extends this protection even after death, safeguarding these assets from Medicaid estate recovery in many cases.
The History and Evolution of Partnership Programs
The concept of Long Term Care Partnership Programs originated in the late 1980s as a pilot project funded by the Robert Wood Johnson Foundation. Initially, four states – California, Connecticut, Indiana, and New York – were chosen to pioneer these innovative programs. Connecticut took the lead and became the first state to offer PQ policies in 1992.
A crucial piece of federal legislation, the Omnibus Budget Reconciliation Act of 1993 (OBRA 93), initially created hurdles for the expansion of Partnership programs. It restricted new states from joining unless their Medicaid State Plan Amendment (SPA) had already been approved before May 14, 1993. This effectively limited the growth of these programs for over a decade.
The landscape changed significantly with the Deficit Reduction Act (DRA) of 2006. The DRA provided a clear pathway for states to implement Partnership programs, and since then, numerous states have adopted the necessary legislation to offer these policies to their residents. While the core concept remains the same, it’s important to note that the Long Term Care Partnership Program is not entirely uniform across all states.
Experts in the field often point out that there is greater consistency among states that adopted Partnership programs after the DRA compared to the original four pioneering states. However, even within the DRA framework, states still have flexibility in designing specific aspects of their Partnership programs. This means that the details and requirements of Partnership policies can vary from state to state.
Long Term Care Partnership Programs by State: Availability and Reciprocity
As of recent updates, a significant number of states have approved Long Term Care Partnership Insurance for sale. The availability and specific rules can change, so it’s essential to consult the most up-to-date resources for the latest information.
A key consideration when evaluating Partnership policies is “reciprocity.” Reciprocity refers to whether a state will recognize Partnership-qualified policies purchased in another state when determining Medicaid eligibility and asset disregard. Most states that implemented Partnership programs under the DRA, along with New York, Indiana, and Connecticut, generally have reciprocity agreements. However, it’s crucial to confirm the reciprocity status of specific states, as exceptions exist, such as California, which does not offer reciprocity.
| State | Effective Date | Policy Reciprocity |
|---|---|---|
| Alabama | 03/01/2009 | Yes |
| Alaska | Not Filed | — |
| Arizona | 07/01/2008 | Yes |
| Arkansas | 07/01/2008 | Yes |
| California | Original Partnership | No |
| Colorado | 01/01/2008 | Yes |
| Connecticut | Original Partnership | Yes |
| Delaware | 11/01/2011 | Yes |
| District of Columbia | Not Filed | — |
| Florida | 01/01/2007 | Yes |
| Georgia | 01/01/2007 | Yes |
| Hawaii | Pending | — |
| Idaho | 11/01/2006 | Yes |
| Illinois | Pending | — |
| Indiana | Original Partnership | Yes |
| Iowa | 01/01/2010 | Yes |
| Kansas | 04/01/2007 | Yes |
| Kentucky | 06/16/2008 | Yes |
| Louisiana | 10/01/2009 | Yes |
| Maine | 07/01/2009 | Yes |
| Maryland | 01/01/2009 | Yes |
| Massachusetts | Proposed | — |
| Michigan | Work stopped | — |
| Minnesota | 07/01/2006 | Yes |
| Mississippi | Not Filed | — |
| Missouri | 08/01/2008 | Yes |
| Montana | 07/01/2009 | Yes |
| Nebraska | 07/01/2006 | Yes |
| Nevada | 01/01/2007 | Yes |
| New Hampshire | 02/16/2010 | Yes |
| New Jersey | 07/01/2008 | Yes |
| New Mexico | Not Filed | — |
| New York | Original Partnership | Yes |
| North Carolina | 03/07/2011 | Yes |
| North Dakota | 01/01/2007 | Yes |
| Ohio | 09/10/2007 | Yes |
| Oklahoma | 07/01/2008 | Yes |
| Oregon | 01/01/2008 | Yes |
| Pennsylvania | 09/15/2007 | Yes |
| Rhode Island | 07/01/2008 | Yes |
| South Carolina | 01/01/2009 | Yes |
| South Dakota | 07/01/2007 | Yes |
| Tennessee | 10/01/2008 | Yes |
| Texas | 03/01/2008 | Yes |
| Utah | Not Filed | — |
| Vermont | Not Filed | — |
| Virginia | 09/01/2007 | Yes |
| Washington | 01/01/2012 | Yes |
| West Virginia | 17/01/2010 | Yes |
| Wisconsin | 01/01/2009 | Yes |
| Wyoming | 06/29/2009 | Yes |
Please note: This table reflects information as of March 2014 and may not represent the most current status. Always verify with official sources for the latest updates.
Understanding the Costs of Long Term Care Partnership Insurance
The cost of Long Term Care Partnership insurance policies, like all insurance, varies based on several factors. Key determinants include your age at the time of purchase, the level of coverage you select, and your health status.
Data from a 2012 report by the New York State Long-Term Care Partnership provides a glimpse into the range of annual premiums:
- Ages 50-54: Policy costs ranged from approximately $1,384 to $11,667 per year.
- Ages 55-59: The range was between $1,756 and $12,864 annually.
- Ages 60-64: Costs varied from $1,863 to $9,490 per year.
- Ages 65-69: The range was from $3,321 to $10,002 per year.
These ranges highlight how policy benefits and individual health significantly impact premiums. Furthermore, the American Association for Long-Term Care Insurance’s 2014 Long-Term Care Insurance Price Index revealed a substantial price variation – between 40% and 100% – for virtually identical coverage from different insurers. This underscores the critical importance of comparison shopping when considering long term care insurance. Working with an experienced and knowledgeable insurance specialist can help you navigate these complexities and find the most suitable and cost-effective Partnership policy for your needs.
Frequently Asked Questions about Long Term Care Partnership Programs
Q: If I purchase a partnership-eligible policy in one state and then move to another, will my policy still qualify for Medicaid asset protection?
A: Generally, yes, especially if both states are DRA Partnership states with reciprocity. Most DRA Partnership states honor policies from other DRA states. However, there can be exceptions, particularly with the original four Partnership states. For example, California does not typically offer reciprocity. It’s always best to confirm the reciprocity rules of the specific states involved.
Q: Do most states with Partnership policies have reciprocity agreements?
A: Yes, reciprocity is common among Partnership states, particularly those that implemented programs after the DRA. The original four states (California, Connecticut, Indiana, and New York) are sometimes exceptions to general rules. Connecticut and Indiana may offer reciprocity depending on the new state’s policies, while New York generally allows dollar-for-dollar reciprocity. California, as mentioned, typically does not.
Q: What inflation protection is required for Partnership policies in most states? Is 5% compound inflation protection mandatory, or are options like 3% or Guaranteed Purchase Options allowed?
A: The inflation protection requirements can vary by state and age. Most states do not mandate 5% compound inflation, especially for younger buyers. For individuals under 61, any compound Cost of Living Adjustment (COLA) is usually acceptable. Between ages 62 and 75, any automatic COLA rider may qualify. After age 75, inflation protection may not be required at all for Partnership qualification. Guaranteed Purchase Options (GPO) generally do not qualify a policy for Partnership status in most states.
However, the original four states often have stricter rules:
- California: Typically requires 5% compound inflation to age 70; after 70, 5% simple inflation may be acceptable.
- Connecticut: Usually mandates 5% compound inflation at all ages.
- Indiana: Generally requires 5% compound inflation for full asset protection. 5% simple or CPI may qualify for dollar-for-dollar protection, especially for buyers over 75.
- New York: Allows 3% or 5% compound inflation for those aged 79 and younger.
Q: Do I need to specifically request a Partnership-eligible policy, or do most long term care insurance policies automatically qualify if they meet the inflation protection and other requirements?
A: It’s essential to specifically inquire about Partnership-eligible policies. While some policies may qualify if they include the necessary COLA rider and meet other criteria, not all policies are filed and approved as Partnership policies in every state. In the original four Partnership states, separate policy forms are often used for PQ policies. In other states, policyholders usually receive a letter confirming their policy’s Partnership qualification upon delivery. It’s important to be aware that not all insurance carriers offer Partnership-qualified policies in every state.
How Much Long-Term Care Partnership Insurance Coverage Do People Typically Purchase?
The majority of Partnership policies are “comprehensive,” covering long-term care services received at home, in assisted living facilities, or in skilled nursing facilities. Benefits are usually defined in dollar amounts.
According to a January 2014 report, the maximum policy benefit levels purchased under DRA Partnership programs were distributed as follows:
- Less than $109,599: 10% of policies
- $109,600 – $146,099: 8% of policies
- $146,100 – $182,599: 12% of policies
- $182,600 and above: 54% of policies
- Unlimited Benefits: 14% of policies
Data from a California Long-Term Care Partnership report (April-June 2013) provides insights into daily benefit amounts selected:
- $170 per day: 11.28% of policies
- $180 per day: 35.50% of policies
- $190 per day: 0.89% of policies
- $200 per day: 31.00% of policies
- $210 per day: 0.60% of policies
- $220 per day: 3.44% of policies
- $230 per day: 2.87% of policies
- $240 per day: 1.21% of policies
- $250 per day: 8.03% of policies
- Over $250 per day: Balance of policies
These figures illustrate the range of coverage amounts and daily benefits that individuals choose when purchasing Long Term Care Partnership insurance, reflecting diverse needs and financial planning approaches.
If you’re considering long-term care insurance and want to explore Partnership programs, it’s recommended to consult with a qualified long-term care insurance specialist. They can help you determine your eligibility, understand policy options, and navigate the complexities of Partnership programs in your state. Click here to connect with a long-term care insurance expert and receive a free, no-obligation quote.
