Are All Partnership LTCI Policies Ideal?

Private insurance companies and various state government agencies collaborated on the partnership long term care insurance program mainly to get the whole nation to plan their future healthcare needs and be prepared for the cost of care in the future.

At present, professionals in lucrative jobs can look at the rates of long term care (LTC) facilities and confidently say that they'll manage to have more than enough in their nest egg when it's their turn to receive care. What they do not understand is that a nursing home's annual rate won't always be $84,775; an assisted living facility's monthly rate is not stuck at $3,096; and home health aides will naturally charge higher than $19, too, in the future.

The fact of the matter is that the cost of care will continue to rise without putting consideration on people's money. Its principle determinant is the growing population that requires LTC and this is comprised of elderly people, children, disabled and injured adults.

For as long as people continue to grow old, the cost of care will not cease to rise. Perhaps this is reason enough to plan your future healthcare needs. Without a definite plan, you will wind up depending on Medicaid.

Now going Medicaid is not going to be a problem if your current monthly income is below the poverty level and you could not care less if you would lose your job tomorrow because you don't have a family to feed anyway. But if you're not a nomad sure you would want to receive quality care someday and you wouldn't want to burden your loved ones, right?

It's only with a well thought out LTC plan that you can make this possible. One of your options is a long term care insurance (LTCI) policy.

Go Standard or Partnership Long Term Care Insurance?

If you shop around, you will find different types of LTCI policies each designed for a particular individual's healthcare needs.

There are reimbursement LTCI policies, indemnity policies, and those that comply with the partnership program.

Purchasing any of these products will protect your finances someday should you wind up receiving care. If you choose a reimbursement or indemnity policy just see to it that your benefits won't get exhausted before the end of your benefit period or you will be forced to pay for your LTC expenses out-of-pocket.

To continue receiving LTC coverage after having exhausted your LTCI benefits, you will need a partnership qualified policy. With this product, the insured shall be exempted from Medicaid's spend down rule should he apply for Medicaid assistance to receive extended care if he had already used up his benefits.

Partnership qualified policies come with a special feature called dollar-for-dollar asset protection. This allows the insured to keep an amount of his assets that is equivalent to the benefits he receives from his policy in case he decides to apply for Medicaid eligibility.

If your state of residence participates in the reciprocal agreement of the partnership program then well and good, as you will be able to use your partnership long term care insurance in other states participating in the said LTCI program. If not, perhaps you should study it first or discuss your other options with your family and LTCI broker.

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Reinsuring the Risk - Medicaid Compliant Annuity or Promissory Note

Generally speaking, after the Deficit Reduction Act of 2005, if a community spouse uses a Medicaid Compliant Annuity, or promissory note, to eliminate the spend-down amount an institutionalized spouse is immediately eligible for Medicaid benefits. After the purchase, if the community spouse's income is less than his or her monthly maintenance needs allowance the shortfall would be shifted from his or her institutionalized spouse's income prior to determining the Medicaid co-pay. Thus, maximizing the term of the annuity to the full extent of the community spouse's Medicaid life expectancy results in an income planning opportunity. The only downside of a maximized stretch is that if the community spouse predeceases the term, leaving an opportunity for the state Medicaid agency to recover from the residual benefits.

For example, assume that Alice resides in the community, and her husband Roger is in a nursing home. The monthly private pay rate for Roger's care is $6,500, while his monthly income is only $1,500. With a Medicaid per diem rate of $150, Roger's facility receives approximately $4,562 per month for a Medicaid resident.

With Alice being 77 years of age she knows that her Medicaid life expectancy is 11.26 years/135 months. If she eliminates their $226,000 spend-down amount by purchasing a Medicaid Compliant Annuity she would receive $1,724 per month for 135 months. The total pay-out is $232,740. With Alice having a monthly maintenance needs allowance of $2,841, and monthly income of $2,224, Alice has a monthly income shortfall of $617. With that amount being shifted from Roger's monthly income, less his $35 monthly personal needs allowance, his Medicaid co-pay is $848. For each month that Roger is on Medicaid benefits, his Medicaid claim amount increases by $3,714. The $3,714 consists of the Medicaid rate of $4,562 being reduced by Roger's monthly co-pay of $848.

If Roger dies after receiving 38 months of Medicaid benefits the Medicaid claim amount is fixed at $141,132. If Alice dies 24 months later, 73 monthly payments still remain in the Medicaid Compliant Annuity - residual balance of $125,857.11.

To protect against such a result, at the commencement of the plan Alice could have purchased a term life insurance policy with a face value of $130,000. The policy would have had an annual cost of approximately $4,034.60 - assuming a standard rating. With a preferred rating, the annual cost of the policy would have been much less. Nonetheless, without any question the policy would have reinsured against a risk of a Medicaid claim.

Learning the Ropes of LTC Insurance   Finding the Right Long Term Care Resources   Long Term Care Costs and How Age, Health, and Location Affect It   Is 30 Year Term Life Insurance the Best Protection for Your Family?   Finding Ways to Lower Long Term Care Premiums   Which LTCI Policy Is Right For You?