Agreed, the expansion of LTC Partnerships to all states, as now allowed under Deficit Reduction Act of 2005, offers potential benefits to consumers and taxpayers. But it is not a good reason to delay purchasing long term care insurance.
Partnership tax-qualified LTC plans intend to provide dollar-for-dollar asset protection to the insured. This means if the insured has $100,000 in policy benefits paid at claim time before applying for Medicaid, Medicaid will allow retention of $100,000 in assets (not income) that would otherwise need to be spent down before qualifying for Medicaid.
The following are the top 12 reasons to act now rather than waiting for a LTC Partnership plan:
1. Having a LTC Partnership policy was never intended to assure anyone of qualifying for Medicaid.
2. The growing elderly population and constraints on federal and state budgets increase the likelihood that access to Medicaid LTC benefits will be more restrictive in the future compared to today.
3. Because of one’s assets or income, LTC Medicaid likely will not be available to a person, with or without an LTC Partnership policy.
4. Medicaid eligibility requirements and qualified service are subject to constant change and vary from state to state.
5. LTC Partnership asset protection may or may not be available in the state where a person lives when care is needed.
6. States have the option to reciprocate on LTC Partnerships and have the right to ignore a Partnership LTC policy if purchased when living in a different state.
7. It is likely that federal or state legislators and regulators will never establish consistent asset protection criteria across the states, or it could take years to do so.
8. LTC policy benefits may be greater than benefits allowed by Medicaid. It is unknown how states will apply asset protection on policy benefits for services not available to Medicaid recipients. For example, if all policy benefits are spent on assisted living, which is not usually covered by Medicaid, will asset protection apply on those benefit dollars?
9. Older age and probability of adverse health, plus greater daily benefits to cover inflation during the delayed purchase period, all increase initial LTC insurance premiums. Young healthy individuals have access to the lowest premiums. Delaying purchase costs more than acting now.
10. Compared to waiting–even when adding the time value of money or investment opportunity cost of premium–paying a lower premium for a longer period of time typically results in a lower lifetime cost of premium. In other words, the sooner the payments are started, the lower the insurance cost over your lifetime. Investing the premium and delaying purchase will not overcome the future higher cost of premium or care.
11. The potential of becoming uninsurable or needing care usually increases with age. Delaying coverage may remove insurance as an option. Partnership policies have the same underwriting criteria as any other policy.
12. Policy benefit options may be greater now than in the future. For example, unlimited benefit periods, zero and other short deductible periods, 5% compound inflation, assisted-living facility room-and-board coverage, and daily benefit levels without a required co-payment, could all become obsolete or cost prohibitive. We see evidence of these factors as carriers attempt to share greater financial risk with the insured and to keep premium levels in check.
The upshot is that LTC Partnerships may be a catalyst for more people to insure, but the primary benefit is the LTC insurance policy, whether or not its in a Partnership program. Additionally, LTC insurance implemented now costs less and mitigates the risk of becoming uninsurable for LTC.
This article originally appeared in the August 2007 issue of LTC e-Wire, an online publication of National Underwriter Life & Health. You can subscribe to this monthly e-newsletter for free by going to .
Ralph Leisle is President of LTCi Decision Systems Inc., Littleton, Colo. His e-mail address is .