Using Partnership Plans in Long-Term Care Planning

It’s one of the things we like to think about the least: needing help caring for ourselves when we are older.

While living to a ripe old age sounds great—and statistics show that many of us might be headed in that direction—the idea of not being able to fully care for ourselves is so daunting that we put off planning for it, or perhaps never plan for it at all.

Yet it’s an issue that is much better dealt with now, when we are best equipped to explore our options.

Maybe it’s sticker shock that prevents some of us from taking action. The cost of long-term care, known as LTC, is well reported. Genworth, a provider in the long-term insurance space, has published its Cost of Care Survey for the last 15 years.

The most recent figures in Genworth’s 2018 report highlighted these annual national median costs:

• Homemaker Services: $48,048
• Home Health Aide: $50,336
• Adult Day Health Care: $18,720
• Assisted Living Facility: $48,000
• Semi-Private Room in a Nursing Home: $89,297
• Private Room in a Nursing Home: $100,375

To see how the costs compare where you live, Genworth offers a handy tool that can even project these expenses into the future as you reach certain ages.

How Partnership Programs Might Help You

Unless you have begun researching long-term care, you may not have heard about one option at retirement investors’ disposal, long-term care partnership programs.

The Partnership for Long-Term Care, part of the Deficit Reduction Act of 2005, was created to pave the way for private long-term care insurance plans to work in tandem with Medicaid. The goal was to help people who are caught in the middle of the two options.

The issue for many middle-income and retired Americans is that they are unable to afford the cost of a long-term-care policy. And yet they can’t qualify to have Medicaid pay their long-term-care expenses because they have too many assets.

Increase Your IQ on PQs

To serve the people caught in this gap, participating insurance companies provide special Partnership-qualified (PQ) LTC insurance policies and states who participate allow people holding these policies to have access to Medicaid without depleting their assets to almost poverty levels if the insurance benefits run out.

According to LongTermCare.gov, the official website managed by the U.S. Department of Health & Human Services, these PQ policies:

• Help people purchase shorter term, more complete long-term care insurance
• Include inflation protection, so the dollar amount of benefits you receive can be higher than the amount of insurance coverage you purchased
• Allow you to apply for Medicaid under modified eligibility rules if you continue to need long-term care and your policy maximum is reached
• Include a special “asset disregard” feature that allows you to keep assets like personal savings above the usual $2,000 Medicaid limit.

How Does a Partnership-Qualified Long-Term Care Policy Work?

This example from the LongTermCare.gov illuminates how the PQ policy works:

• John, a single man, purchases a Partnership policy with a value of $100,000.
• Some years later he receives benefits under that policy up to the policy’s lifetime maximum coverage (adjusted for inflation) equaling $150,000.
• John eventually requires more long-term care services, and applies for Medicaid.
• If John’s policy was not a Partnership-qualified policy, in order to qualify for Medicaid, he would be entitled to keep only $2,000 in assets.
• He would have to spend down any assets over and above this amount.
• But because John bought a Partnership-qualified policy, he can keep $152,000 in assets and the state will not recover those funds after his death.
• John would only have to spend down his assets over and above the $152,000 in order to be eligible for Medicaid.

Partnership-qualified policies are required to include inflation protection. So, as shown in the example above, your benefit amount could be higher than the amount of insurance protection you purchased.

Policies May Differ From State to State

In most states, the Medicaid asset limit is $2,000 for a single person, and often higher for couples. With a Partnership-qualified LTC insurance policy that provides you $100,000 in benefits, you can apply for Medicaid and, if eligible, retain $100,000 worth of assets over and above your state’s Medicaid asset threshold.

Each state that participates outlines specific requirements the Partnership policies must meet. They also outline who is eligible to sell these policies to consumers, ensuring that agents are trained in Partnership policies and how they fit into the big picture of public and private coverage options.

Don’t let unplanned for long-term-care expenses take a wrecking ball to your retirement income resources and assets. If your long-term financial plan has limited assets to work with, this may be an option to check out.

First confirm that your state offers this program by contacting your state’s Department of Insurance. Then reach out to an insurance professional who can help you walk through different policy options that help you meet this need.

Need Help Planning for Long-Term Care?

Of course, partnership plans are just one possibility for managing long-term care needs. There are other long-term care strategies that you might explore, including asset based long-term care policies. And long-term care is just one part of a retirement financial picture.

Should you need help putting together a reliable long-term care strategy, help is a click away. Financial professionals at SafeMoney.com are ready to assist you.

Use our “Find a Financial Professional” section to connect with someone directly. Should you need a personal referral, call us at 877.476.9723.