Summary
There are no restrictions on simultaneously having both long-term care insurance and Medicaid. The two can work together to enhance coverage in nursing homes, in the beneficiary’s home or in the other locations in the community. Long-term care partnership programs offer additional benefits to Medicaid recipients. These include keeping assets far beyond the normal asset limit and still qualifying for Medicaid Long Term Care, and protecting assets from Medicaid Estate Recovery.
Long-term care insurance covers the cost of long-term care in nursing homes, in the beneficiary’s home or in other locations, such as the home of a loved one, assisted living residences and memory care facilities for seniors with Alzheimer’s disease and other dementias. Neither Medicare nor typical medical insurance will cover the high costs associated with this kind of long-term care, which makes long-term care insurance very helpful.
Individuals buy long-term care insurance while they are still healthy and well before they need it, usually some time in their 50s or 60s. They pick a policy with coverage that suits them, and then they make monthly or yearly premium payments. When the policy owner needs long-term care, the insurance will kick in and cover the long-term care costs (the conditions for “needing” that care will be specified in the policy). Policies generally have a maximum daily benefit amount and a maximum lifetime benefit amount they will pay out. These amounts depends on the initial policy and how much the owner paid into the policy over time.
Unfortunately, individuals with long-term care insurance may still be unable to afford their care costs, but this is where Medicaid comes into play. For example, Mary’s long-term care insurance policy covers nursing home expenses up to $140/day, but Mary’s actual cost is $250/day. This leaves a deficit of $110/day. Medicaid will cover that deficit because Mary has Nursing Home Medicaid in addition to owning long-term care insurance.
Medicaid will also work in conjunction with long-term care insurance the same way if individuals are receiving care at home. Seniors can be partially covered for in-home services and supports (like nursing visits, home modifications and personal care help with bathing, dressing and eating) through their long-term care insurance policy, and Medicaid may cover the deficit for qualified individuals through Home and Community Based Services (HCBS) Waivers or Aged, Blind and Disabled (ABD) Medicaid.
It’s important to note that if long-term care insurance payments are made directly to policy owners instead of their care providers, the payments may be considered income by Medicaid. That could disqualify one from Medicaid, which requires all beneficiaries to meet an income limit.
The Problem of Cash Surrender Value: While almost no long-term care insurance policies have a cash surrender value (CSV), there are hybrid Life and long-term care insurance policies that sometimes do have a CSV and the value of the CSV will be counted as an asset and could possibly prevent the policyholder from qualifying for Medicaid. There are methods to qualify even if you have assets beyond the limit, but these methods are complicated and shouldn’t be attempted without the help of a professional, like a Certified Medicaid Planner.
Long-term care partnership programs are especially beneficial for people who will likely require Medicaid. The partnership is between private insurance companies and a state’s Medicaid agency, and it allows Medicaid applicants to keep assets above and beyond the normal limit and still qualify for Medicaid. These kind of long-term care insurance policies also protect assets from Medicaid Estate Recovery Programs, which are required by law to try and collected reimbursement for long-term care through the estates of deceased Medicaid recipients.
Here’s how it works. Joe lives in Ohio buys a long-term care policy from an insurance company that’s part of the partnership program. He pays his premiums and when he needs long-term care, the insurance policy kicks in and will cover $300,000 in long-term care expenses. After the policy has paid out the $300,000 in coverage, Joe can apply for Medicaid to cover his long-term care expenses. Normally, Ohio has a $2,000 asset limit to qualify for Medicaid. But because the long-term care insurance policy was part of the partnership program, Joe’s asset limit is $302,000. Not only can Joe keep the extra $300,000 while he’s alive, whatever is left of it will also be protected as a family inheritance after their death. That’s because, as mentioned above, these long-term care partnership programs protect assets from Medicaid Estate Recovery.
Nearly all states offer long-term care partnership programs. Currently, the only states that have no program are Alaska, Hawaii and Utah, as well as Washington, D.C. And Mississippi does not currently have a program, but legislation has been passed approving a program and the state is working to establish one.
Medicaid eligibility is complicated, and the application process is full of potential pitfalls. Families should consider working with a Medicaid Planning professional when applying. These fee-based experts help people become eligible, while streamlining the application process and preserving assets for spouses and family members.
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