With the Baby Boomers reaching retirement age, long-term care (LTC) insurance is an increasingly hot topic. But you can’t have a conversation about LTC policies without talking about the cost. And the expense can be substantial.
For a person 50 to 54, an individual LTC policy can cost anywhere from $1,400 to $12,000 per year. Once you reach 65 to 69 years old, a policy can vary from $3,500 to over $10,000 per year. These ranges reflect the policy benefits and health status when applying for the coverage, but you can see that the expense can be hefty.
A solution for those who are stuck in the middle
Many people in the middle-income range have too much money to qualify for Medicaid coverage should they require long-term care, but they also can’t afford an expensive private long-term care insurance policy.
In an attempt to incentivize more aging Americans to purchase a private LTC insurance policy, the Deficit Reduction Act (DRA) of 2005 (DRA) included section 6021, which created the Qualified State Long-Term Care Partnership Program.
Many older adults are not aware of this program, but they should be.
Section 6021 of the DRA authorized states to offer Medicaid “dollar-for-dollar asset disregard” or “spend down protection” for people who purchase and use a Partnership-qualified (PQ) long-term care insurance policy–referred to as a Partnership policy. These Partnership policies, sold by private insurance companies, have been approved by the state and meet certain criteria, such as having inflation protection.
Simplified translation: People who purchase a Partnership-qualified LTC insurance policy can protect their own personal assets–up to an amount that is roughly equivalent to the coverage provided by the policy–and still qualify for Medicaid if/when their long-term care policy runs out and they otherwise exhausted most of their assets paying for care.
A real-world example
Let’s say Mary buys a Partnership-qualified private long-term care insurance policy, and she does end up needing long-term care down the road. Her PQ LTC policy pays out $100,000 in insurance claim benefits for her care.
Through the Partnership Program, Mary earns a Medicaid asset disregard that permits her to keep an additional $100,000 over the asset level she would normally have to meet in order to be eligible for Medicaid coverage. After Mary’s eventual death, the Partnership Program also protects those assets from Medicaid estate recovery.
Security on top of savings
Insurance policies of all types are typically something you buy and hope you’ll never use, but they are a way to hedge your bets, helping you sleep better at night. While the cost of a private long-term care insurance policy can easily give you sticker shock, the asset protection provided by the Qualified State Long-Term Care Partnership Program can make that price tag a little easier to stomach.
More information about this government-sponsored program can be found on the AARP website.
To learn more about long-term care and the various payment options, visit the My LifeSite Resources section.
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