If you’re researching long term care insurance, you’re probably aware that the 2005 Deficit Reduction Act (DRA) extended the “look back” period for Medicaid eligibility from three years to five years – ie, assets transferred to someone else anytime in the five years prior to applying for Medicaid will be taken into consideration when determining eligibility for Medicaid coverage.
But the DRA also expanded access to Long Term Care Partnership programs by lifting restrictions and allowing any state to participate (Colorado is one of the participating states). Although the DRA made it more difficult for elderly Americans to transfer their assets to their heirs and then rely on Medicaid to pay for their long term care needs, the expansion of the Long Term Care Partnership program makes it easier for people to retain a portion of their assets (and thus avoid having to become impoverished) and still qualify for Medicaid coverage for long term care if needed – as long as they have purchased a qualifying long term care insurance policy.
The basic premise for the Long Term Care Partnership programs was to encourage people to purchase long term care insurance that would be utilized if and when the person requires long term care. If the policy benefits are exhausted and the person is still in need of long term care, he or she could then apply for Medicaid benefits to fund additional long term care, and would be able to retain assets totaling the amount that the private long term care policy covered. So if the person has a long term care insurance policy that covers $200,000 in benefits and then requires additional long term care after the private policy is exhausted, the applicant could qualify for Medicaid while still retaining $200,000 in assets beyond the standard allowances for a home, car, term life insurance policy, etc. It’s important to note that purchasing a long term care policy under a state’s Long Term Care Partnership program does not guarantee eligibility for Medicaid if and when the beneficiary has exhausted the private long term care coverage. This is because the state’s income and functional eligibility criteria for Medicaid still have to be met (see 2012 Colorado requirements here). In addition, participants should be aware that the private long term care policy may offer more flexibility in terms of care options than Medicaid. So although the private policy may allow home based care, they may be required to transfer to a nursing home if and when the private policy runs out and they switch over to Medicaid coverage. Obviously, the more private long term care insurance a person can afford to purchase, the greater the likelihood that the participant will be able to rely on the more flexible private coverage for as long as care is needed. But the Long Term Care Partnership program allows participants who would otherwise meet the income and functional eligibility requirements for Medicaid rely on Medicaid as a safety net without having to spend down almost all of their assets.
This report from the Center For Health Care Strategies, Inc. is one of the most informative I’ve found on the topic of Long Term Care Partnership programs. Another report from the Kaiser Family Foundation has additional information regarding the DRA’s impact on Medicaid and long term care. Both will be helpful for families and individuals contemplating their long term care planning.