New legislation is expected to bring consumer-friendly incentives to people doing comprehensive retirement planning, and relief to their families should they need long term care. How to pay for long term care is a hot topic for retirees, taxpayers and legislators. There are essentially two primary ways to pay for long term care: the government’s wallet or the wallet of the citizen who privately pays for care. When the government pays, it usually does so through the Medicaid program, which is a needs-based program funded jointly by the federal and state governments. Citizens who pay for care usually do it through personal income and assets, or with help from long term care insurance. People who have a partnership approved long term care insurance policy and go on claim often avoid the need to have Medicaid pay their long term care cost; at a minimum, the policy pays benefits first, so less Medicaid dollars are used. Wouldn’t you think that the governments – both federal and states – would have incentives for their citizens to purchase long term care insurance? The good news is that incentives do exist in the form of tax deductions or credits. But residents of four states (Indiana, New York, California and Connecticut) have enjoyed an additional incentive: a special program called the Partnership Program. Started in the late 1980’s as a demonstration program, the Partnership combines insurance with asset protection provisions under Medicaid for those exhausting their long term care insurance policy benefits. “To encourage the purchase of private partnership policies, long term care insurance policyholders are allowed to protect some or all of their assets from Medicare spend-down requirements during the eligibility determination process,” the GAO reports. In other words, if someone who owns a partnership Approved Policy finds that his or her long term care insurance benefits have been exhausted, he or she could qualify for the government Medicaid program, while preserving assets (for a spouse or other family members) that otherwise would need to be spent down. What about the rest of the country? The Deficit Reduction Omnibus Reconciliation Act of 2005, signed into law by President Bush on February 8, 2006, includes many provisions to help control Medicaid spending, including encouraging the expansion of Long Term Care Partnership Programs in other states. The state of South Carolina has recently introduced the new South Carolina Partnership Program. Now is an excellent time to consider your options for long term care planning, and find out more about your options. Recently enacted federal legislation makes it tougher to hide assets and qualify for Medicaid, and encourages the purchase of private long term care insurance. This development makes long term care insurance a critical component of retirement planning for middle-class, upper-middle class and wealthy Americans.
Contributed by Loretta Hartzell, a licensed long term care insurance agent, Hartzell & Associates, Inc. She has an office in Greenville,SC and may be reached at (864) 288-7560 or (800) 293-2246.
Consult a tax advisor for information related to your particular situation.
2 “The Long-Term Care Partnership Program: Issues and Options” Retirement Security Project, December 2004, The Brookings Institution. Ahlstrom, Clements, Tumlinson and Lambrew. www.brookings.edu
3 “Overview of the Long -Term Care Partnership Program” GAO-051021R, September 9, 2005. www.gao.gov
4 Contact your state’s Medicaid office for more details.