Planning for the future is crucial, especially when considering long-term care. Statistics show that a significant majority of individuals over 65 will require some form of long-term care services. Contrary to common misconceptions, neither Medicare nor typical health insurance policies cover the extensive costs associated with long-term care. Therefore, proactive planning is essential to ensure access to necessary care while protecting your financial well-being.
The Deficit Reduction Act of 2005 marked a turning point, signaling the federal government’s emphasis on individual responsibility in financing long-term care. This legislation made qualifying for Medicaid-funded long-term care more stringent and simultaneously broadened the scope of Long-Term Care Partnership Programs.
A Partnership Program operates as a collaborative effort between state governments, private insurance companies offering long-term care insurance within the state, and the residents who purchase these specific Partnership-qualified policies.
The primary goal of the North Carolina Long-Term Care Insurance Partnership program is to enhance the value of purchasing more focused, yet comprehensive, long-term care insurance. It achieves this by connecting these specialized policies, known as Partnership-qualified policies, with Medicaid benefits for individuals who require extended care beyond their policy coverage.
Partnership-qualified policies are subject to specific criteria that may vary across states. Generally, these policies are required to provide comprehensive coverage encompassing both institutional and home-based services, meet tax qualification standards, include specific consumer protection measures, and incorporate state-mandated inflation protection provisions.
Often, the key differentiator between a Partnership-qualified policy and other long-term care insurance policies available in a given state lies in the mandated level and type of inflation protection.
It’s important to note that there isn’t a separate state government office dedicated solely to the Partnership program. The program is facilitated through amendments to the state’s Medicaid laws, with the state department of insurance overseeing the regulation of these policies.
If you are unsure whether your existing policy is Partnership-qualified, resources are available to help you determine its status.
Income and Asset Protection with Partnership Policies
A North Carolina Partnership for Long-Term Care qualified policy offers a significant advantage: the ability to apply for Medicaid under modified eligibility rules. A key feature of these rules is the ‘asset disregard’.
This asset disregard allows policyholders to retain assets that would typically be factored into Medicaid eligibility assessments. The value of assets disregarded by Medicaid is directly equivalent to the total benefits paid out under your Partnership-qualified long-term care policy.
Because these policies are designed with inflation protection, the actual benefits received can exceed the initial coverage amount purchased, further enhancing asset protection.
For example, if you possess a Partnership-qualified long-term care insurance policy and receive $300,000 in benefits, you can then apply for Medicaid, if needed, and retain $300,000 in assets above and beyond North Carolina’s standard Medicaid asset limit. For single individuals in most states, the standard asset threshold is often as low as $2,000. Asset thresholds are typically more generous for married couples.
In the past, strategies like creating trusts were used for asset protection. However, current regulations typically only exempt irrevocable trusts, and even these are subject to a 60-month “look-back” period. This means assets must be transferred into the trust at least 60 months before applying for Medicaid to be considered exempt – a timeframe fraught with uncertainty.
A qualified partnership policy provides a more direct and reliable method of asset protection. For every dollar of benefits paid out by the policy, a dollar of assets is disregarded when Medicaid calculates eligibility. This allows you to preserve your savings and investments instead of depleting them to meet Medicaid requirements.
Furthermore, a Partnership policy can protect your estate from recovery claims. Estate recovery refers to the state’s right to seek reimbursement from your estate for long-term care costs paid by Medicaid. Additionally, some states have filial responsibility laws that could potentially require adult children to contribute to their parents’ Medicaid expenses. A Partnership policy helps mitigate these financial risks.
Example of a North Carolina Partnership Policy in Action
Consider John, who purchases a North Carolina Partnership for Long-Term Care policy with an initial value of $300,000. Over time, due to inflation protection, his policy’s lifetime maximum coverage grows to $400,000. Years later, John requires extensive long-term care and exhausts his policy benefits. He then needs to apply for Medicaid.
If John’s policy were not Partnership-qualified, he would likely be limited to keeping only $2,000 in assets to qualify for Medicaid. He would have to spend down any assets exceeding this limit. However, because John invested in a Partnership-qualified policy, he can retain $402,000 in assets ($400,000 from the policy benefit disregard + $2,000 standard Medicaid asset limit) and still qualify for Medicaid in North Carolina, assuming he meets other eligibility criteria.
Addressing Unfunded Liability for Long-Term Care
Long-term care represents a significant unfunded liability for both families and government programs. Legislative efforts underscore the growing consensus that private insurance solutions must play a leading role in addressing Americans’ long-term care needs. Despite this, a substantial portion of the aging population, including many Baby Boomers entering retirement, have not adequately planned for potential long-term care expenses.
Moreover, retirees who once believed they could self-fund long-term care are now facing challenges due to market fluctuations and the need to safeguard diminishing assets. This makes self-insurance an increasingly precarious strategy.
Benefits of North Carolina Partnership for Long-Term Care Policies
North Carolina Partnership for Long-Term Care qualified policies are specifically designed to help individuals maintain their independence, preserve their quality of life, and protect their assets. These policies offer the same range of benefits and options as non-Partnership policies and are competitively priced.
Key benefits of North Carolina Partnership for Long-Term Care policies include:
- Choice of daily or monthly benefit amounts.
- Selection of elimination period or deductible.
- Comprehensive coverage encompassing home care, adult day care, and facility care.
- Flexible benefit periods (pool of money).
- Potential discounts.
A defining characteristic of Partnership policies is the mandatory age-appropriate inflation protection. This feature automatically increases your benefit levels over time to keep pace with the rising costs of long-term care services. Partnership policies in North Carolina must include inflation protection at the time of purchase, based on the following age guidelines:
- Age 60 and younger: Automatic compound inflation protection is required.
- Ages 61–75: Any form of inflation protection is acceptable (compound or simple).
- Age 76 and older: Inflation protection is optional and at the policyholder’s discretion.
It is crucial to understand that certain inflation options, such as the Guaranteed Purchase Option (GPO) or Future Purchase Option (FPO), commonly offered by insurers, may not qualify as sufficient inflation protection under Partnership guidelines unless you are age 76 or older. This is because these options are considered optional, as the policyholder can choose not to exercise them.
Policy Underwriting and Qualification
To obtain a North Carolina Partnership for Long-Term Care policy, you must undergo medical underwriting, similar to the process for traditional long-term care insurance. Applying at a younger age generally increases your chances of qualifying at favorable rates and with lower premiums. Resources are available to help you assess your health qualification potential, including lists of uninsurable health conditions and medications.
We offer North Carolina Partnership for Long-Term Care Insurance Policies from state-approved insurance providers.
For detailed information about Medicaid, you can visit the official Medicaid website.
To receive personalized quotes from leading long-term care insurance companies for North Carolina Partnership for Long-Term Care policies, please complete our online quote request form.
