Long-Term-Care Help From States

What do you think of state long-term-care partnership programs?

I think that state long-term-care partnership programs are a great way to provide extra protection against the high cost of long-term care.

Thirty-four states have passed partnership laws, and several more plan to do so soon. If you buy an approved long-term-care insurance policy in one of these states and use all of your benefits, you can qualify for Medicaid without having to deplete almost all of your assets first.

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State partnership programs allow you to protect assets equal to the amount your long-term-care insurance policy pays. For example, if you have a policy that pays a total of $200,000 in benefits (usually your daily benefit multiplied by your benefit period), you can protect an extra $200,000 in assets above the Medicaid limits (which vary by state).

For a list of states that offer a long-term-care partnership program or plan to adopt a program soon, see the Long Term Care Partnership Tracking Map.

Ask your agent or insurer if your policy qualifies for this program. Most policies sold in the past few years qualify, and many older ones do, too.

If your state has a partnership program, it’s better to select a “short and fat” benefit period for your long-term-care policy rather than a “long and lean” policy. For example, if long-term care costs about $200 a day in your area, it’s generally better to buy a policy that covers $200 a day for three years rather than $100 a day for six years.

This strategy protects you against most long-term-care expenses, with fewer out-of-pocket costs, and helps you qualify for the partnership benefits sooner.

Most people who need long-term-care benefits will not need them beyond three years. A study by actuarial consulting firm Milliman found that only 8% of claimants who had policies with a three-year benefit period exhausted their benefits. Of those with a five-year benefit period, only 1.5% used all their benefits.

But if you need care for longer than that and you live in a state with a partnership program, then you can get help from Medicaid after you use up your insurance policy’s benefits. If you bought the short-and-fat policy, you can get help from Medicaid after just three years; you’d have to wait for six years if you had the long-and-lean policy with the longer benefit period and the lower daily benefit.

For more information about long-term-care insurance, including some new strategies to lower the cost and still get solid coverage, see Long-Term Care You Can Afford. Also see our Long-Term Care special report for additional resources to help you pick the right policy and coverage for your needs. See Make Sure Your Insurer Pays Up for advice that can help you get your long-term- care claim paid smoothly. The National Clearinghouse for Long-Term Care Information includes links to several resources to help with your long-term-care decision.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.