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The Partnership for Long-Term Care
(includes update on proposed legislation to restore the Partnership for all states)
The Partnership for Long-Term Care is a public/private alliance between state governments and insurance companies that was originally funded with $14 million in grants from the nation's largest health care philanthropy, the Robert Wood Johnson Foundation. The program is fully operational in Connecticut, New York, Indiana, California and with one insurance carrier in Iowa.
The idea of the partnership is to provide a way for the Medicaid program to work together with private long-term care insurance to help those people who are caught in the middle: they can't afford to pay the cost of the care or even the cost of a long-term care insurance policy with unlimited benefits, yet their assets are too high to qualify for Medicaid to pay their long-term care expenses. Many middle-income workers and retirees also find themselves in this position.
Participating insurance companies in the Partnership recognize the needs of these middle-income Americans by providing LTC insurance policies that have built-in consumer protection benefit standards, and participating states cooperate by allowing these policyholders to access Medicaid without spending down their assets almost to poverty level if the insurance benefits run out. Without the Partnership, people have three choices to pay for long-term care:
1) Pay for care out of assets and income, which can lead to financial ruin if long-term care costs wipe out savings.
2) Transfer assets to qualify for Medicaid either to children or other family members or to a trust—either way means losing control of the money and losing financial independence.
3) Buy a standard long-term care insurance policy which works—unless the policy runs out of benefits or the benefit isn't enough to cover the cost of care. This can happen because you bought what you could afford, and it turns out not to be enough when you need it. (For example, you couldn't afford the premium for inflation coverage, you could only afford a one- or two-year benefit period, or you bought a daily or monthly benefit significantly lower than the cost of care in your area and you couldn't make up the difference at claim time.) A fourth option is available with the Partnership for Long-Term Care. Now consumers can purchase a state-approved LTCI policy that provides asset protection after the benefits run out. Here's how it works in all of the above-mentioned states except New York.
You purchase a special Partnership policy from an insurance agent. For every dollar in benefits paid by the policy, you can shelter a dollar in assets. For example, let's say you buy a two-year benefit period because that's what you can afford. If this policy pays, say, $60,000 in benefits, and if the Medicaid asset eligibility in your state requires you to spend down to $2,000, in this example you would be able to qualify for Medicaid when your assets reach $62,000, not $2,000. In other words, you get to keep, or "shelter" $60,000 of your assets and still get Medicaid to start paying your long-term care expenses after your policy runs out.
In New York, Partnership policies must cover three years of nursing home benefits or six years of home care (or a combination of both), and once the benefits are exhausted, the policyholder can qualify for Medicaid regardless of the amount of assets. While New York offers unlimited asset protection, this desirable feature only happens after you have used up the benefits of the policy. A danger is that if you purchase a daily benefit that is inadequate for your needs, you could use up your assets paying the difference between your policy's benefit and the cost of care before your benefits are used up.
For example, in 2005 New York requires new Partnership policy purchasers to purchase a minimum of $180 for the daily benefit. The New York City metropolitan area averages $354 1, not counting the miscellaneous charges for drugs and medical supplies. If you only buy the minimum, you could easily wind up paying $174 per day or more out of your pocket, which amounts to almost $200,000 over the three-year benefit period for nursing home care.
Indiana provides a combination of these two models. The combo plan provides the dollar-for-dollar asset protection just as it does now for all of the states except New York, but if the policyholder purchases a benefit maximum that will pay about four years of benefits, the policy will provide total asset protection like the New York model. Since $196,994 represents about four years of benefits at current costs, purchasing a policy that would pay out that much in benefits would qualify you for the total asset protection feature in Indiana. (The $196,994 is the 2005 amount and will increase each year to account for inflation – see the Indiana Partnership website for future amounts.) The Indiana Partnership maintains a list of agents who have had special Partnership training and publishes the names in a directory for consumers. Call the Indiana Partnership telephone number or access the website listed at the end of this chapter for information on how to be listed in the directory of approved agents.
Massachusetts offers another variation: Medicaid guidelines have to be met as usual so there is no up-front asset protection, but the house is not subject to estate recovery if the policyholder enters a nursing home with a long-term care insurance policy with a minimum daily benefit of $125 and a minimum two-year benefit period. The caution here is to be sure that much in benefits is available at the date of nursing home admission – if a portion of the benefits have been used on other services such as home care, adult day care or assisted living, the protection would not be available. Also, the state could up the minimum and not grandfather policies already purchased, so applicants are well advised to purchase a much higher minimum - $150, for example.
In all states, your income goes to pay for the cost of care once you qualify for Medicaid. So the Partnership program protects assets, not income. But income is important for three reasons:
1) If your income is greater than your long-term care costs, you won't qualify for Medicaid and wouldn't benefit from a Partnership policy. People in this situation can consider a standard long-term care insurance policy—perhaps with an unlimited benefit maximum.
2) Income can guide you to a benefit selection. For example, if nursing home care averages $150 per day in your area, and you can afford to pay $30 a day from your income, you might purchase a policy for $120 a day for a lower premium than a $150/day policy. (In higher cost areas like New York, Connecticut or California, you would probably be purchasing policies in the $200-300+/day range - the average cost of care in Connecticut, for example, is $300 in Bridgeport but $255 in the rest of the state.)2 Just be careful—if your care costs more than the insurance policy pays in benefits, you will be responsible for paying the additional costs, and don't forget that drugs and medical supplies are usually billed on top of the room and board charge. Consider carefully how much you can afford to pay out of your income and insure yourself adequately. The Partnership policies include an inflation benefit for appropriate ages so that inflation doesn't erode your benefit.
3) Since you are responsible for paying your premiums, your discretionary income must be sufficient to pay your long-term care premiums and keep your policy in force, although there is a premium waiver if you have a claim. Individuals with income less than $20,000 or couples with incomes less than $40,000 may not have enough discretionary income to purchase long-term care insurance as premium payments may significantly impact their standard of living. If you fall into these income categories, and if you have assets less than $50,000, not counting your house and car, you probably will qualify for Medicaid in a short period of time, and LTC insurance of any type—standard or Partnership—may not be an appropriate purchase for you.
For many people, however, the Partnership LTCI policies offer a wonderful alternative to transferring assets and relying on the government (Medicaid) to pay for their long-term care expenses.
A few points you may be wondering about with the Partnership policies:
Benefit Choices—Benefit choices are the same as for non-Partnership policies, in that there is a daily or monthly benefit, an elimination (waiting) period, a home health care/adult day care benefit level, an inflation feature, and a benefit period/lifetime maximum. You may be surprised to learn that many California and Connecticut Partnership policyholders purchase a lifetime (unlimited) benefit period. They do this because they really don't intend to access Medicaid, but if for any reason their assets are lowered for reasons beyond their control; i.e. a stock market plunge, they have asset protection provided by their Partnership policy. This is true because at any time benefits paid out equal your assets plus the amount Medicaid (MediCal in California) allows the healthy spouse to keep, the policyholder is allowed to access Medicaid and shelter their assets. For example, if a policy had paid out $250,000, the person receiving care could apply for Medicaid when the couple's assets are spent down to $346,600, which is equal to the $250,000 in benefits plus $95,100 (the 2005 asset maximum for the healthy spouse) plus $1,500 (the asset maximum for the person needing care). (Indiana and New York have total asset protection after benefits paid equal $196,994 for Indiana for 2005 purchasers and after the three-year benefit period for New York is exhausted.)
Portability—If you move to another state, the Partnership policy will pay, and the benefits will accumulate toward your asset protection threshold. However, to qualify for Medicaid and take advantage of the asset protection offered by the Partnership policies when your benefits run out, you must move back to the state in which you bought your Partnership policy and re-establish residence. Future legislation may make it possible for Partnership states to reciprocate the asset protection feature with each other, and Indiana and Connecticut accomplished reciprocity 1/1/01. However, an Indiana resident receiving care in Connecticut will not be eligible for the total asset protection as described above for Indiana residents; they will receive the dollar-for-dollar model like other Connecticut residents; i.e. the asset protection will be equal to the Medicaid benefits paid on the person's behalf. Vice versa, a Connecticut resident receiving care in Indiana will still receive the dollar-for-dollar protection and will not be eligible for the total asset protection.
Underwriting—You still must qualify for the Partnership policy medically just as you would for a standard long-term care insurance policy. The younger you are, the better the chance to qualify for a policy, and the lower the premiums. Pre-retirement ages (40's and 50's) are strongly encouraged to apply. In fact, the AVERAGE age for all Connecticut Partnership purchasers through June 30, 2005 was 58 with an age range of 20-89! 2
Arbitration—In some states, the Partnership policies have stronger mechanisms for claims appeals than standard long-term care policies. In those states, a rigorous consumer protection appeal process is in place for any Partnership policyholder who disagrees with a benefit determination.
Policy Continuance—If for any reason the Partnership program is discontinued either nationally or in its particular state, all policies will be honored and appropriate benefits paid by the insurance company that issued the policy.
Due to a change in the 1993 budget bill, Partnership states other than Connecticut, New York, Indiana, California and Iowa can offer asset protection only during the policyholder's lifetime. At death, the state is required to seek estate recovery for Medicaid’s payment. This unfortunate legislation slowed development of Partnership programs in other states, but Illinois and Washington tried to push ahead by allowing certain transfers during a person's lifetime as a reward for purchasing a Partnership policy. These programs met with little success without the full strength of the original Partnership concept and are no longer in existence.
Proposed legislation that would restore the Partnership is S. 1569, "State Long-Term Care Partnership Program Act of 2005", introduced 7/29/05 by Sen. Larry E. Craig (ID) and S. 1602, "Improving Long-Term Care Choices Act of 2005", introduced 8/4/05 by Sen. Charles Grassley (D-IA); Sen. Evan Bayh (D-Ind.) and Hillary Rodham Clinton (D-NY). Legislation of this type would remove the current federal impediment that prevents develop of partnership programs beyond the original five states and allow other states to move forward with long-term care insurance partnership programs. Spurring this important legislation is the fact that only 125 policyholders have accessed Medicaid after exhausting their Partnership benefits in all four Partnership states since the inception of the entire program. 3
At least nine states have passed the necessary legislation to implement a Partnership plan once the Federal legislation is passed: Arkansas, Georgia, Florida, Idaho, Michigan, Nebraska, Oklahoma, Pennsylvania and Virginia. For a current list, see http://www.nahu.org/government/issues/General_LTC.htm
Interested in finding out about your state's position on the Partnership program? Just call the National Partnership office at the number below.
State and National Partnership Offices
National Partnership Office (housed at George Mason University)
703-993-1909 (Mark Meiners, Director)
301-405-2532
California
(916) 552-8990
http://www.dhs.ca.gov/cpltc
Connecticut
860-418-6319
http://www.ctpartnership.org
Indiana
800-452-4800 (in IN only)
317-233-3475
http://www.state.in.us/fssa/iltcp/index.html
Iowa
515-281-6867
New York
518-473-8083
http://www.nyspltc.org
Sources:
1. "Genworth Financial 2005 Cost of Care Survey"
2. Per David Guttchen, Director of the Connecticut Partnership, 9/26/05
3. Survey by Phyllis Shelton of the four Partnership Directors 9/23/05
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