Medicaid and State Partnership Plans

What is a Partnership Qualified Plan?

Perhaps recognizing that there was a crisis in care coming as the Baby Boomers aged, there have been laws passed that have created tax-favored status for long term care premiums and extra protection of assets from Medicaid’s spend down provision to encourage people to buy long term care policies.

If you own a policy that is “Partnership Qualified”, it is possible that Medicaid will pick up the cost of your care without having to spend down all of your assets first (as is normally the case).

Here is how it works:

1) But a long term care policy that meets the criteria in your state to be “Partnership Qualified”

2) Pay the premium and keep it in force until you need to make a claim.

3) Make a claim – and be in care so long that your policy is completely tapped out; you have used all the benefit that the policy had to pay and yet you are still alive and still need care.

4) Under “normal” conditions, you would have to go back to paying for your care out of your own assets/income until you met state poverty guides to qualify for Medicaid-paid care. However, because you had a partnership policy, the state now says that you do NOT have to spend down your net worth. Exactly how this works varies by state (so check with you state Insurance Commissioner if in doubt). Most states will give a dollar-for-dollar asset disregard. For every dollar you policy paid for care, they will “disregard” (basically pretend like you don’t have it) a dollar of your net worth. This allows someone to qualify for Medicaid-paid care without having to be poverty stricken to do so.

An example may clarify.

Say a person bought a policy many years ago whose total value was 100,000. Over time it has grown in value however because it had an inflation rider attached to it. Now, many years later, the policy is worth 300,000 in value. The policy owner makes a claim and starts using benefit from the policy. After a long time in claim, the 300,000 has been spent on care and is all gone. The policy is done – no more benefit. Well, the policy holder can apply to Medicaid in her state and on her application it will note she had a policy that paid 300K in benefits for care that was qualified for the program. This means that $300,000 of her net worth will be ignored when Medicaid determines her eligibility. So instead of having to spend down to $2000 in net worth, she can keep 302,000 (300,000 + 2000) and be Medicaid eligible.