Indiana Long Term Care Partnership Policies Offer Asset Protection For Medicaid Eligibility

The Indiana Long Term Care Insurance Program is a “partnership” between the State of Indiana and private insurance companies which provides an incentive to Indiana residents to purchase long term care insurance against the cost of their future long term care. Among the unique features of Partnership Policies is the benefit that the policyholder under a qualifying policy has the right to apply for Medicaid under modified eligibility rules that allow the insured to keep, and pass on to family members, assets that would otherwise have to be spent in order to receive Medicaid assistance for long-term care services after benefits under a Partnership Policy have been exhausted.  (Normally, in order to qualify for Medicaid, an unmarried applicant may not have countable assets in excess of $1,500.00 and a married applicant may not have countable assets in excess of $2,250.00).

Assets are protected in either of two ways: (1)  Total Asset Protection – All assets will be excluded from consideration in determining Medicaid eligibility if the maximum benefit of the Partnership Policy is equal to or greater than the maximum benefit dollar amount that is required by Indiana for the year of the policy’s effective date (the amount of such maximum benefit for policies issued in 2012 is $277,190).  (2)  Dollar-for-dollar Asset Protection – If the maximum benefit of a policy is less than the maximum benefit dollar amount that is required by Indiana for total asset protection, for every $1 of insurance benefits paid by a Partnership Policy, a minimum of $1 worth of the policyholder’s assets will be protected.  Other benefits of a Partnership Policy are an Indiana income tax deduction for premiums paid for Partnership Policies and state reciprocity with a number of other states. This means that Indiana recognizes asset protection from other states which grant reciprocity, and vice versa, but on a dollar-for-dollar basis only. A map of states that grant reciprocity can be viewed at w2.dehpg.net/LTCPartnership/StateReciprocity.aspx

Not all long term care policies are “Partnership Policies.”  The Indiana Department of Insurance determines which policies qualify, and qualifying polices must explicitly state that they qualify under the Indiana Long Term Care Insurance Program. A list of insurance companies with approved Partnership Policies is available at http://www.in.gov/iltcp/2360.htm.

Some of the requirements for a qualified Partnership Policy are:
•    The Policy must cover at least one year of nursing home care
•    Home and community care, as well as nursing home care, must be offered, although the purchaser can choose to exclude home and community care
•    Maximum policy benefits must be stated in dollar terms, not days
•    Daily nursing home benefits must be at least 75% of the average private pay rate
•    The policy must include inflation protection
•    Premiums must be based on the age of the policyholder and cannot increase strictly due to the policyholder’s advancing age

Persons must qualify medically for a Indiana Partnership for Long-Term Care Insurance policy just as they would for traditional long-term care insurance. The younger the age at the time of application, the better the chance to qualify at favorable rates and a lower premium.  In many cases an individual who purchases a long term care policy will obtain coverage sufficient to meet future care needs without ever needing Medicaid assistance.  However, the Partnership Policy acts as a back-up security for the worst-case scenario if, in fact, selected policy benefits are not adequate.

If you have moderate income to pay long term care insurance premiums and are interested in protecting assets valued at less than the Indiana maximum benefit amount required to obtain total asset protection, then perhaps a dollar-for-dollar protection Partnership Policy may be right for you.

Planning For Nursing Home Costs

There are a number of methods of providing for in-home care or nursing home care for persons who cannot be properly cared for in their homes, including:

• Payment by you or your family members from personal income or     assets;
• Medicaid assistance for people with low income and limited assets;
• VA nursing home care for honorably discharged veterans;
• Accelerated benefits from your life insurance policy or loans against cash value of policies;
• Income or principal payments from an annuity or trust fund;
• Payments from a reverse mortgage from the equity in your home;
• Long term care insurance coverage.

Not every method may be available to everyone, and some methods may be more or less attractive than others.  Many seniors want to preserve assets in order to pass them on to their spouse and children.  With nursing home care currently costing $50,000.00 or more per year, an extended nursing home stay could substantially diminish or deplete your assets.  If you do not qualify for Medicaid assistance or VA nursing home care, and you want to address the risk of incurring substantial nursing home costs that might result from extended nursing home care, long term care insurance may be an option you may want to consider.  I will discuss common questions and issues concerning long term care insurance and other methods of paying for long term care in future posts.

Personal Care Contracts And Medicaid

Many children provide full or part-time care for their elderly parents—sometimes for years—so that the parents can remain in their home as long as possible. But at some point a child or other caregiver may no longer be able to provide the level of care that is needed, and nursing home care may become necessary. The average cost of nursing home care now approaches $4,000.00 per month. How will a parent pay for nursing home care? Medicare does not cover on-going nursing home care, and Medicaid will pay nursing home costs only after the parent meets financial (and other) eligibility conditions. For an unmarried parent, those financial eligibility conditions currently require that the parent have countable resources totaling not more than $1,500.00. Even though a child may have provided care worth tens of thousands of dollars, in the absence of a personal care contract any money paid to a child in order to reduce countable resources below $1,500.00 will be considered a “gift”—an uncompensated transfer that will render the parent ineligible for Medicaid assistance for a period of time. A personal care contract can provide many benefits, including fairly compensating a family member for valuable care and be part of legitimate long term care planning by helping to spend down resources so that the parent might more easily qualify for Medicaid assistance with nursing home costs. For a personal care contract to be respected for Medicaid purposes, a written contract spelling out the caregiver’s duties and compensation terms should be put in place before services are rendered. Payment may be made by an up-front payment or in installments, but it is essential that compensation not exceed what a parent would have to pay to a non-family caregiver. The key is to create a written contract which provides fair and reasonable compensation to the caregiver, and not an uncompensated transfer. Therefore, in order for the contract not to be treated as a transfer of assets for less than fair market value, the contract should provide for the return of any prepaid monies if the caregiver becomes unable to fulfill the caregiver’s duties under the contract, or if the parent should die before the parent’s life expectancy. This post is just a brief overview of personal care contracts as a part of long term care and Medicaid planning. Because the laws concerning Medicaid are complex and always changing, consult with an attorney who is familiar with Medicaid planning before executing a personal care contract.

Protecting Medicaid Eligibility For A Person In A Nursing Home

Spouses typically create estate plans that leave property to the surviving spouse or a surviving child with no strings attached.  That is reasonable and works fine in most cases.  However, doing so when a spouse or child is in a nursing home, or when it is probable that a spouse or child will require nursing home care, could render the spouse or child ineligible for Medicaid assistance to cover the substantial cost of nursing home care.  In such a situation, a solution is to create a will that contains a “special needs trust” for the spouse or other relative in need of nursing home care, rather than the usual plan of leaving property outright to that spouse or other relative.  The special needs trust, if done properly, would be a “discretionary” trust which authorizes the trustee (which could be a family member) to pay or apply trust funds to care for the person needing nursing home care, but if such person is eligible for Medicaid assistance, to do so in a way that may only supplement, not replace, Medicaid assistance.  Under current Medicaid rules, such a special needs trust may not be contained in a living trust, but must be contained in a will.  By creating a special needs trust in the situation described above, property in the special needs trust can provide funds to supplement the very small monthly cash allowance that Medicaid permits to nursing home residents, but such property will not be counted as a resource that would make the surviving spouse or other relative ineligible for Medicaid assistance, as it probably would if it were given outright to the surviving spouse or other relative under a will or trust.