866-582-2048 RayLTC@gmail.com

Long-Term Care Facts Column: article originally published by the Redlands Daily Facts February 21, 2013:

My last column explained the government’s role in providing long-term care.

As a general guideline, if your household income is less than $50,000 per year and your net worth, not including your residence, is less than $50,000, then relying on Medicaid for your long-term care needs probably makes sense.

It is not always this clear cut. Suppose a couple wants to own long-term care insur­ance but can’t afford a policy for each of them.

Which spouse should get a policy?

Statistically speaking, women are more likely to need care than men, so it might make sense to buy only a policy on the woman. In reality, it’s the spouse who has the most income in his or her name who should own long-term care insur­ance.

For example, John has a pension of $36,000 per year. He also receives $24,000 of Social Security benefits each year. Mary, his wife, has a pension of $20,000 and she receives $15,000 of Social Security benefits each year.

Without long-term care insurance, if John were to need long-term care and apply for Medicaid to pay for his care, all of his income would have to go to the facility caring for him (minus a small allowance and minus the cost of his health insurance.) In other words, if he were to rely on Medicaid, Mary would no longer be able to use any of his income for her own living expenses. She would be able to keep only her annual income of $35,000.

Conversely, if Mary were to need long-term care and apply for Medicaid to pay for her care, all of her income would have to go to the facility caring for her (minus a small allowance and minus the cost of her health insurance.) In other words, if she were to rely on Medicaid, John would no longer be able to use any of her income for his living expenses. But, John would be able to keep all of his income totaling $70,000 per year.

Without having a policy on John, they risk losing about $70,000 per year in income. Without having a policy on Mary they risk losing about $35,000 per year in income. Therefore, if they can insure only one person, I think it’s wiser to insure John rather than Mary. Even without owning significant assets, it would certainly be wise to protect the primary source of income.

But what if there is mod­est income yet fairly signifi­cant assets that need protec­tion? In order for the gov­ernment pay for someone’s long-term care expenses, the person would have to spend down his or her assets to the poverty level — about $3,000 in most states.

Since 2005, and the pas­sage of the Deficit Reduc­tion Act, most states are allowing their residents to keep more of their assets if they own a government­approved Long-Term Care Partnership policy.

Long-Term Care Partnership policies are similar to tradi­tional long-term care insur­ance policies, except they must include special con­sumer protection features, especially inflation protec­tion. Each dollar that your long-term care partnership policy pays to you in bene­fits entitles you to keep a dollar of your assets, if you ever need to apply for Med­icaid services after using your policy’s benefits.

In the old days, you’d have to spend your assets down to the state-required minimums. Now, the state will allow you to keep the minimum amounts plus an amount equal to whatever your long-term care partner­ship policy paid in benefits.

Your assets are protected from Medicaid spend-down, and your assets can even be protected from estate recov­ery after you die.

Four states have success­fully run long-term care partnership programs since the 1990s — California, Connecticut, Indiana and New York. Since 2005, about 40 other states have established long-term care partnership programs.

To learn more, send your questions or comments to questions@LTCFacts.org.

Carolyn Olson is founder of LTCFacts.org, a website providing short articles about long-term care insurance to help people make decisions about buying long-term care insurance.