LTC Partnership cheat sheet

Partnership programs are state-run arrangements in which a Partnership-qualified long-term care insurance policy lets the insured keep more assets and still qualify for Medicaid long-term care benefits.

The core mechanism is dollar-for-dollar asset disregard: each dollar of policy benefits paid out increases the amount of countable assets the insured may retain above the state's ordinary Medicaid asset limit.

Partnership authority originated in the 1993 Omnibus Budget Reconciliation Act, which permitted states to operate programs under Medicaid waivers; the Deficit Reduction Act of 2005 made Partnership programs available to all states through state plan amendments.

Dollar-for-dollar disregard is the dominant model; a few states historically used a dollar-for-dollar model with total-asset protection features, but the DRA 2005 framework standardized the dollar-for-dollar approach for new programs.

Four states had Partnership programs predating DRA 2005 (California, Connecticut, Indiana, and New York); these retained approved variations, which is why state rules are not uniform.

Partnership status attaches to the policy and the insured, not to the state of purchase; reciprocity rules determine whether a policy purchased in one Partnership state is recognized if the insured later moves.

Each participating state must have a designated Medicaid agency agreement, a qualified policy design, and a mechanism for tracking benefit payments so the disregard can be calculated at Medicaid application.

Partnership policies must include inflation protection, and the required form depends on the insured's age at purchase, which links policy design directly to the program's consumer-protection purpose.

Partnership programs are intended to reduce Medicaid reliance by encouraging private coverage purchase, so marketing claims that a policy guarantees Medicaid eligibility are inaccurate.

Long-term care insurance pays for covered services such as nursing home care, home care, assisted living, adult day care, and respite care, triggered by inability to perform a set number of activities of daily living or by cognitive impairment.

Benefit triggers typically require inability to perform two of six ADLs (bathing, dressing, eating, toileting, transferring, continence) expected to last at least 90 days, or a severe cognitive impairment such as Alzheimer's disease.

Benefit amount is usually expressed as a daily or monthly maximum; the benefit period is the length of time benefits continue and is often stated in years or as a total dollar pool.

A pool of money equals the daily maximum multiplied by the number of days in the benefit period; expenses below the maximum may extend how long the pool lasts.

Elimination period is the waiting period before benefits begin, commonly 0, 30, 60, or 90 days; a longer elimination period lowers premium but increases out-of-pocket cost at claim time.

Inflation protection increases the benefit amount over time, commonly as a compound annual percentage; compound increases produce substantially larger future benefits than simple increases over long durations.

Nonforfeiture provisions protect policyholders who lapse; contingent nonforfeiture of a paid-up policy is required in many states when the insured has held the policy for a specified period.

Tax-qualified policies receive favorable tax treatment: benefits from a qualified contract are generally excludable as reimbursement for long-term care, and premiums may be deductible within age-based limits.

Premium is influenced by age at purchase, benefit amount, benefit period, elimination period, inflation protection, and underwriting class; rate increases on in-force blocks require state regulatory approval.

To be Partnership-qualified, a policy must be a tax-qualified long-term care insurance contract under Internal Revenue Code section 7702B.

The policy must provide inflation protection meeting the DRA 2005 standard: compound annual inflation of at least 5 percent for buyers under age 61, and some form of inflation protection for buyers age 61 to 75, with no requirement above age 75.

The insured must be a resident of the Partnership state at the time the policy is issued, and the policy must be issued in a participating state under that state's approved plan.

The policy must contain a disclosure statement and an outline of coverage explaining Partnership status and the Medicaid asset disregard, and the insurer must provide a specified consumer education component.

The insurer must report policy and benefit information to the state so the Medicaid agency can verify the disregard amount at application; failure to report can delay or defeat the disregard.

States may impose additional requirements, such as minimum benefit periods, specific daily benefit minimums, or required offer of home care coverage, so a policy qualified in one state may not qualify in another.

Reciprocity agreements allow the disregard earned under one state's Partnership policy to be honored if the insured moves to another Partnership state, but the receiving state applies its own Medicaid rules.

Policies purchased before a state's Partnership effective date generally do not qualify unless the state provides a conversion or endorsement pathway; grandfathering varies by state.

A policy that loses tax-qualified status or is materially amended may lose Partnership qualification, so endorsements that change benefit structure require review against state requirements.

Medicaid long-term care eligibility uses income and countable-asset tests; the asset test compares countable resources to a state limit that is tied to federal minimum and maximum figures.

The home is often an excluded resource during the spouse's or dependent's lifetime, but estate recovery rules allow states to recover Medicaid costs from the probate estate, subject to federal limits.

The community spouse resource allowance lets the spouse at home retain a share of countable resources within federal minimum and maximum bounds; the Partnership disregard is applied on top of these rules.

The five-year look-back and penalty period apply to uncompensated transfers made before a Medicaid application; Partnership policies do not exempt the insured from transfer-of-assets rules.

Partnership asset disregard protects only the amount of policy benefits actually paid, so an unused policy produces no disregard; the protection is earned, not granted at purchase.

Suitability review for Partnership policies should compare the client's asset level, income, health status, family caregiving expectations, and ability to sustain premium against the cost of self-funding care.

A client with very low countable assets may gain little from the disregard and may be better served by understanding Medicaid planning options, while a client with substantial assets may need a longer benefit period to earn meaningful protection.

Consumers should understand that Partnership policies do not guarantee Medicaid eligibility, do not cover all long-term care costs, and may still require spend-down of assets beyond the disregard amount.

Agents marketing Partnership policies must disclose the interaction with Medicaid, the effect of inflation protection choices on premium, and the possibility of future premium increases.