The Unicorn of Long-Term Care Insurance

As an estate planning firm that also specializes in elder law, we are always heartened to see a potential Medicaid applicant client’s portfolio containing a long-term care insurance (“LTCI”) policy. This is because, as planners, we know that the client is uniquely positioned to take advantage of creative strategies to accelerate his or her eligibility for Medicaid while protecting some assets from getting swooped up to pay for long term care.  More importantly, it buys us and our clients precious time to think and plan.

 

As excited as we are when a potential Medicaid applicant has a long-term care insurance policy, we get even more excited for the rare moment when we discover that the client’s long-term care insurance policy participates in the New Jersey Long-Term Care Insurance Partnership Program – making them “unicorns” among LTCI plans! This is truly a happy occurrence because in these cases we can protect assets by setting aside amounts equal to the insurance benefits received from such a policy so that such assets are treated as “unavailable” or “disregarded” for Medicaid qualification purposes.

 

Here is how it works–

 

Medicaid has strict limitations on income and assets.  Typically, an unmarried individual Medicaid Applicant (Institutionalized or Ill Spouse) can only have $2000 in resources.  For a married couple, the spouse of the Medicaid applicant (“Community Spouse”) can only keep $130,380 in resources (2021 figures).  These numbers are adjusted for inflation, and every year the government circulates information establishing the thresholds for the following year. If an individual has more assets then the established threshold when applying for Medicaid, he or she is at  risk for being considered over-resourced and therefore would be denied eligibility.

 

Due to these strict thresholds, elder law attorneys like myself analyze our client’s countable assets that are deemed “available” for Medicaid purposes and separate those from exempt or “unavailable” assets prior to submitting the application. We want to ensure as much as of the client’s assets as possible are exempt from Medicaid and any excess assets are “spent down” in a Medicaid permissible manner to achieve the maximum benefits.

 

This is where long term care insurance and the NJ Long-Term Care Insurance Partnership Program comes in.

 

The Partnership Program is a public/private arrangement between the state government and private long-term care insurers to assist individuals in planning for their long-term care needs.  People who purchase these specific types of policies can protect more of their assets should they later need to have the state pay for their long-term care. According to the bulletin issued by the State of New Jersey, “These special rules generally allow the individual to protect assets equal to the insurance benefits received from a Partnership Policy so that such assets will not be taken into account in determining financial eligibility for Medicaid and will not subsequently be subject to Medicaid liens and recoveries”1. For example, if you received $100k in benefits under your long-term care insurance, you may be allowed to protect an additional $100k in assets at the time you apply for Medicaid through a feature known as “Asset Disregard” under the New Jersey Medicaid Program.

 

Our office has had the good fortune of being presented with such a “unicorn-like” situation recently.  Because of  our thorough oversight together with our patience & persistence working with the Medicaid caseworkers, we were able to  have them disregard a significant amount of our client’s assets over and above the Medicaid threshold limits and get  our client eligible for Medicaid.  The amount set aside in turn has helped the Community Spouse retain more of the assets than originally anticipated, which became a win-win for all.

 

If you have a stand-alone long term care insurance policy, look at the benefits to see if you have this “unicorn plan” or call your agent to find out.  And if and when the time comes where the policy needs to be triggered, call our office immediately so we can provide the proper assistance and guidance on what your next steps ought to be.

 
  1. 1. The Deficit Reduction Act of 2005, Public Law 109-171, (the “DRA”) allows for the expansion of Qualified Long Term Care Insurance Partnership Programs by states (nj.gov)