As Baby Boomers enter retirement, long-term care (LTC) insurance has become an increasingly important topic. One of the biggest concerns when considering LTC coverage is cost, and that cost can be significant.
For individuals aged 50 to 54, annual premiums for an individual LTC policy typically range from about $1,400 to $12,000, depending on the level of benefits and the applicant’s health. For those between 65 and 69, premiums commonly run from roughly $3,500 to more than $10,000 per year. These ranges reflect variations in policy features and underwriting, and they illustrate how costly private LTC coverage can be.
A solution for those who are stuck in the middle
Many middle-income households face a difficult gap: they have too much in assets to qualify for Medicaid if they need long-term care, yet they find private LTC insurance premiums unaffordable. To address this, the Deficit Reduction Act of 2005 included section 6021, which created the Qualified State Long-Term Care Partnership Program.
Although not universally well known, this Partnership program can be an important option for people planning for long-term care.
Under section 6021, participating states may offer Medicaid an asset disregard—or “spend down” protection—to individuals who purchase a Partnership-qualified (PQ) long-term care insurance policy, commonly called a Partnership policy. These policies are private LTC insurance plans that meet state-approved requirements, such as including inflation protection.
Simplified translation: Purchasing a Partnership-qualified LTC policy can let you protect a portion of your assets equal to the benefits paid by the policy. If your insurance benefits are exhausted and you otherwise qualify medically, you can access Medicaid without having spent down those protected assets.
>> Related: So I’ll Probably Need Long-Term Care, But for How Long?
A real-world example
Consider a hypothetical example. If Mary purchases a Partnership-qualified private LTC policy and later requires long-term care, her policy might pay $100,000 in benefits for services she receives. Through the Partnership Program, Mary can claim a Medicaid asset disregard that allows her to retain an additional $100,000 above the normal Medicaid asset limit. In addition, when applicable, the Partnership can protect those assets from Medicaid estate recovery after death.
>> Related: I’m Moving to a CCRC: Should I Keep my Long-Term Care Insurance?
Security on top of savings
Insurance is fundamentally about risk management—paying for protection you hope never to use. While private LTC premiums can be high and may cause sticker shock, the asset protection offered by the Qualified State Long-Term Care Partnership Program can improve the value proposition for some buyers by preserving assets that would otherwise need to be spent down to qualify for Medicaid.
If you want additional background on this government-sponsored program, reputable organizations such as AARP provide further information and guidance.
To learn more about long-term care and available payment options, visit the My LifeSite Resources section.