Partnership Smartnership: How (and Why) to Avoid Partnership LTCI

I’ll be blunt: I don’t understand advisors’ continued glorification of Partnership LTCI plans. In fact, the only thing I like about Partnership LTCI is the additional attention it draws to the need for responsible LTCI planning.

My competitors’ quotes are often for short, fat, Partnership-designed policies; in other words, policies with high daily or monthly benefits and relatively short benefit periods. I love when a prospective client shows me such quotes, because it’s so easy to expose the shortcomings of this type of LTCI — and therefore the credibility of my competitor’s bid.

The realities of a Partnership policy

To review: Partnership LTCI offers dollar-for-dollar asset protection. Every dollar of LTCI benefits paid out equals a dollar of assets that can be exempted and preserved should Medicaid qualification be necessary.

To research this piece, I toured the nursing facility where my friend Susan works. Susan is an RN who works as a care plan coordinator in a 200-bed nursing home in Houston. Forty-two of the beds in her facility are Medicare beds. Medicare pays well. The other 150 beds are “dual-certified” for Medicaid and private-pay patients. Susan says this nursing home is budgeted for a 189-patient census.

Quality of life for patients in such facilities is often quite poor. First, the ratio of caregiver to patient at Susan’s facility ranges between 1-to-16 and 1-to-19 during the day. Overnight, it’s more like 1-to-40. Nursing home patients are often the neediest. When Susan worked at a non-Medicaid certified assisted living facility, the ratio of caregiver to patient was approximately 1 for every 6-8. Furthermore, Susan’s facility has quite a few quad rooms, which I have never seen at a non-Medicaid facility.

In addition, funds are always tight at her facility. When the census drops, employees and caregivers are urged to take unpaid one-hour lunches, and hours are cut back. Susan explained that due to low pay, many of the nursing home’s employees have second jobs. Their attendance is bad. If they are called by their other job to “emergency pinch hit” at overtime rates, they take that job instead and do not show up for their shift.

If our social programs somehow survive despite huge budget shortfalls and the fact that their budgets seem to be under constant assault, imagine what Medicaid-funded LTC will look like when Baby Boomers deluge this system in about 15 years. It’s not a pretty picture. Discuss these issues with your clients and they will want longer, leaner LTCI policies.

Looking through the windshield

The Center for LTC Reform puts out a fabulous blog that will deepen your understanding of all current events related to LTC. I strongly recommend you subscribe to it and use it as a source of insight into why Medicaid access is the last thing an LTCI policyholder ever wants.

Advisors who recommend short, fat policies and justify them by singing the praises of their Partnership status often cite recent statistics indicating that only 20 percent of all LTC lasts more than five years. I disagree with this reasoning. First, 20 percent is not a trivial percentage to me and my clients, and if you happen to be among that 20 percent, a short, fat policy will not meet your needs. Furthermore, statistics change. I believe that, due to financial and societal shifts, LTC and LTCI utilization could last much longer in the near future. As Steve Moses of the Center for LTC Reform has said, “With LTC, we need to look through the windshield, not the rearview.”

Given accurate education on what Medicaid-paid LTC is, and taking into account the current political climate, my clients are inclined to elect longer benefit periods and lower daily or monthly benefits. As a bonus, longer, leaner LTCI policies usually cost less than shorter, fatter ones with the same lifetime benefit.