As our population increases in age, our need for long term care will increase proportionately.
Most people want to stay at home as long as possible, and never enter into a skilled nursing facility or nursing home. The best way to plan for independence and to stay at home when incapacity sets in is to have a long term care insurance policy.
Long term care (LTC) may be paid for by the client with “out of pocket” money, by private insurance or by the government through Medicaid. One myth is that Medicare (not Medicaid) pays for nursing homes, but that is not accurate.
• Medicaid is on course to become insolvent on a federal basis in 2018.
• Medicaid has become the No. 1 state expenditure in Florida, exceeding education.
• Long term care costs are the fastest growing portion of the Medicaid budget.
• Baby Boomers turn 62 at the rate of 7,900 a day, hence there will be a doubling of the over-65 population in the next 20 years.
While the majority of LTC takes place in the home, Medicaid recipients are primarily found in nursing homes. (For info go to http://www.flltc.com/?TID=847)
Medicaid is a needs-based program and the participant in the “institutional care program” (nursing home) has two primary tests to meet before he or she is eligible for Medicaid assistance. The first test is the income test and the second test is the resource test.
The person requiring Medicaid assistance is the institutional participant. The institutional participant may have up to $1,911.00 a month in income (2008), and countable resources of $2,000.00. Many clients may have to “spend-down” their assets to below $2,000 before becoming eligible for Medicaid benefits.
If the participant is able to shelter liquid assets, he or she may later use the sheltered assets to improve the quality of life while being assisted by Medicaid in the nursing home. For example, the supplemental funds may be used to provide a private room, a telephone, cable TV, shopping extras, and the like.
One of the most significant ways to shelter the liquid resources to provide for a better quality of life under Medicaid is to purchase an appropriate LTC insurance policy. The primary benefits of the policy include:
• Allowing custodial care in the home through LTC insurance not available through Medicaid.
• Sheltering dollar for dollar cash up to the LTC insurance benefit amount.
How does the partnership work?
In an effort to encourage more people to purchase long-term care insurance, the Deficit Reduction Act of 2005 (DRA) created the Qualified State Long Term Care Partnership program, effective July 29, 2007. The partnership program allows buyers to shelter liquid assets to the extent of the LTC policy benefits and immediately allows the participant to qualify for Medicaid (if other eligibility factors are met).
The partnership program is available in Florida and a hand-full of other states. Under the new Qualified State Long Term Care Partnership program, the asset protection offered by partnership policies is a dollar-for-dollar set aside, i.e., for every dollar of coverage that the LTC policy provides, the client may shelter that dollar in assets that normally would have to be spent down to qualify for Medicaid.
Much like the incentives the government encouraged in the 1970s with the introduction of tax deferred IRAs, the government is providing incentives for people to purchase private long term care insurance. As the U.S. society has come to embrace and depend on individual retirement savings, with this new Medicaid partnership program, the same society will most likely embrace and depend on individual’s owning long term care policies for the latter years.