Soon residents in many states will be able to purchase special long-term care insurance policies that allow them to qualify for Medicaid even if their assets exceed the prescribed limits. In an effort to encourage people to purchase long-term care insurance, the Deficit Reduction Act of 2005 (DRA) created the Qualified State Long-Term Care Partnership program. The program gives all states the option to set up such partnership programs currently available in only four states.
Under the partnership programs, private companies sell long-term care insurance policies that have been approved by the state and meet certain standards, such as having inflation protection. Once the long-term care insurance is depleted, individuals may qualify for Medicaid and keep assets equal to the amount of benefits received under the long-term care insurance policy. Normally, individuals will not qualify for Medicaid if they have more than $2,000 in assets. But under a partnership policy, a policyholder who had exhausted a long-term care insurance policy that had provided, say, $150,000 in benefits would be allowed to retain $152,000 in assets and still qualify for Medicaid coverage of long-term care.
Partnership programs are currently available in California, Connecticut, Indiana, and New York. So far, according to the AARP, 21 additional states have enacted legislation to authorize plans under the new law. Those states are: Arkansas, Colorado, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Maryland, Massachusetts, Michigan, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, Virginia, and Washington. Whether more states will join this list remains to be seen.
The programs are still in the early stages of development, so it is unclear what the premiums for the policies will be or how many years of coverage individuals will be able to buy. A big question is whether individuals will be able to use a policy in a state other than the one they purchased it in. Under the current partnership programs, Medicaid asset protection will only work if you receive your long-term care in the state where you bought the policy, or in another partnership state that has a reciprocal agreement with the first state.