New York State Long-term Care Partnership Policies:
Having your cake and eating it too?

For those of you who are regular readers of these legal guidance articles, you have read about the Deficit Reduction Act of 2005 (DRA of 2005) and how it has recently changed some of the eligibility rules for the Medicaid program (see Vol. 30, Spring and Fall 2006). These changes have made it more difficult to obtain long-term care coverage from Medicaid, without first spending down virtually all of one’s assets.

While many Medicaid planning options remain in place, the DRA of 2005 may make “Long-term Care Partnership” policies more appealing as a way to obtain Medicaid coverage while still protecting some of your assets. This short article will review what a “Long-term Care Partnership” policy is and how it could play a role in your plans for long-term care.

What is a Partnership Policy?

Long-term Care Partnership policies (Partnership policies) were developed to encourage people to buy long-term care insurance, instead of taking advantage of Medicaid rules that had allowed individuals to transfer away assets and then obtain Medicaid coverage for their long-term care needs. The general idea of a Partnership policy is to combine private insurance coverage with Medicaid coverage – a partnership. A Partnership policy covers your long-term care needs for a set period of time (i.e. nursing home care for three years and/or home care services for six years) then, when those policy benefits are exhausted, you are eligible for Medicaid coverage and you can keep whatever assets you continue to own. The recent DRA of 2005, which contains new limits on transferring assets, has made it clear that the government wants to encourage people to use long-term care insurance and limit their use of Medicaid to cover their long-term care needs. Prior to the enactment of the DRA of 2005 Partnership type policies were authorized in only four states: California, Connecticut, Indiana and New York.The DRA of 2005 now allows Partnership type policies in every state.

There are now two authorized types of Partnership policies. The first type is for “unlimited” asset protection. An unlimited asset policy allows you to become Medicaid eligible when your long-term benefits under the policy are exhausted without any limitation on the assets you own.The normal asset limit for Medicaid is $4,200. The second type of policy is for “dollar-for-dollar” asset protection. A dollar-for-dollar policy allows you to become Medicaid eligible when your policy is exhausted, but you can only keep assets equal to the amount of care you have purchased under your policy (for every dollar spent under your policy, Medicaid will let you keep a dollar). This second type can be less expensive than the first type of policy.

Please note that under all Partnership policies, once you are determined Medicaid eligible, you will be required to contribute most of your monthly income to Medicaid, even though there would be no limit on your assets.

What should a Partnership Policy cover?

These are the benefits all Partnership plans must cover: Nursing home care, Home care, Home health care, Personal care,Assisted living care, Skilled nursing care, Adult day care, Respite care (equal to 14 nursing home days per year), Care management, Alternate level of care,Nursing home bed hold, Hospice care and Inflation protection equal to 5% compounded annually. Other benefits may be added to a policy at an increased premium cost.

For additional information about New York State’s long-term care Partnership policies, visit the official home page of the NYS Partnership at www.nyspltc.org.

— Douglas J. Chu, Esq.

Douglas J. Chu is a partner at Hynes & Chu, LLP. Mr. Chu is the current Co-Chair of the New York City Citywide Medicaid Advisory Council. He is the author of “Medicaid for the Elderly, Blind and Disabled,” published in the New York Elder Law Handbook. He is on the faculty of the Practicing Law Institute of New York, where he is also the current Co-Chair of their “Annual Elder Law Institute.”

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