A while back I wrote an article on long-term care insurance. In this article I would like to discuss the Kansas Partnership for Long-Term Care and how it works with qualified long-term care insurance policies. My primary source for this article is on the Kansas Insurance Commissioner's website at www.partnership forlong-termcare.com /Kansas-partnership/
Long-term care is one of those topics none of us like to talk about. Unfortunately, the reality is that as improvements in medicine allow us to live longer the likelihood that we will require some form of long-term care in our lifetime is very likely. Medicare currently only pays for short term, recuperative care. Private health insurance is pretty much the same. The only way to pay for long-term care is to have a long-term care insurance policy, pay for it out-of-pocket, or have Medicaid pay for it. I discussed each of these options in my previous article.
Now as you may recall, Medicaid will only pay for it if we are broke. In order to reduce the growing cost of Medicaid, the state of Kansas created the Partnership for Long-Term Care in order to encourage individuals to purchase long-term care insurance. The "program makes the purchase of long-term care insurance more meaningful by linking… (these partnership qualified policies) with Medicaid for those who continue to require (long-term) care."
Here is how it works. Normally to qualify for Medicaid, you have to spend down your assets to less than $2,000. If you're a married couple you can go visit an attorney and do a division of assets. Then the spouse that remains at home will have a limit on assets and the spouse requiring Medicaid will have to spend down their assets to less than $2,000. If down the road, the at-home spouse also requires Medicaid; that spouse would also have to spend down their assets below the $2,000 threshold. Once both spouses pass on, the state would seek to recover the amount spent on both spouses. The Kansas Partnership Program changes the rules.
Let's assume that both spouses purchased partnership qualified long-term care insurance policies. That means that the policies complied with State guidance on specific consumer protections, to include inflation protection. So let's say one of the spouses uses up all their benefits in their long-term care policy. Under the Kansas Partnership for Long-Term Care, an individual can apply for Medicaid under modified eligibility rules using a special feature called asset disregard. The amount of assets that Medicaid will disregard is equal to the total amount of benefits you actually received under your long-term care partnership policy.
The following is an example of how a Kansas Partnership for Long-Term Care Qualified policy works, except for the name change; it tracks with the example of the Kansas website.
Let's say Bob (remember Bob?) purchases a Kansas Partnership for Long-Term Care policy with a total benefit of $200,000. Some years later he needs long-term care and receives benefits under that policy up to the policy's lifetime maximum coverage (adjusted for inflation) now equaling $250,000. Bob uses his entire total benefit amount and requires more long-term care services. He applies for Medicaid. If Bob's policy was not a Partnership-qualified policy, in order to qualify for Medicaid, he would be entitled to keep only $2,000 in assets. He would have to spend down any assets over and above this amount.
Page 2 of 2 - However, because Bob bought a Partnership-qualified policy, if he needs to apply for Medicaid and is deemed eligible, he can keep $252,000 in assets and the state will not recover those funds after his death. However, any assets Bob has over and above the $252,000 would have to spend down order for him to be eligible for Medicaid. The same process would apply for his wife.
Previous articles are posted on my web page at http://theretirementexperts.us/. If you would like to comment or make any suggestions, contact me at larrymartin @theretirementexperts.us or call at 651-4321.
Larry Martin is a registered investment advisor offering advisory services through Main Street Advisor, LLC (MSA). The opinions expressed in these articles may not represent those of MSA. 1407 Main Street, Hays, KS 67601. The Consultants Financial Services, LLC and MSA are not affiliated.