Both state and federal governments have begun to realize that long-term care costs have the potential to become a major budgetary problem in the not-too-distant future. One significant contributing factor is the large pool of baby boomers nearing or entering retirement, many of whom will require long-term care very soon.
As a result, lawmakers have begun taking steps to encourage consumers to take responsibility for their own long-term care needs and purchase LTCI (long-term care insurance). One of the most promising initiatives thus far is the state partnership program.
Four states originally pioneered this concept several years ago: California, Connecticut, Indiana and New York. The federal government permitted the expansion of this program and laid out the basic guidelines in the Deficit Reduction Act of 2005. Now each state can decide, individually, whether to participate.
The basic premise of the partnership program is that it allows the purchaser of a LTCI policy to shelter an amount of funds equal to the amount the policy pays out in benefits and still qualify for state assistance through Medicaid, as long as he or she has exhausted all of the benefits and still needs care. This ensures that LTCI partnership policyholders will never have to be impoverished to receive state assistance, even if their need for care outlasts the benefits of their LTCI policy.
This is a clear benefit to consumers, because they no longer have to buy policies that contain lifetime benefits to ensure that long-term care costs won’t wipe out their life savings. They can choose a lower benefit period instead, perhaps three to five years, which is very adequate coverage for the vast majority of consumers.
The partnership program is also a win for state Medicaid programs, as they will no longer be the first resort for paying for long-term care costs when consumers purchase LTCI.
There are several states that are in the process of adopting partnership guidelines of their own. These states include: Colorado, Florida, Idaho, Maryland, Maine, Minnesota, North Dakota, Nebraska, Ohio and South Dakota. There are about a dozen other states that have introduced legislation aimed at considering a partnership program for their residents as well.
Of course, other solutions are also needed to help ward off the looming financial crisis that long-term care costs may soon bring. But the partnership program is at least a positive first step in the right direction.
Until next time…Duane
Duane Lipham is a Certified Long-Term Care (CLTC) consultant. You can get more free information, news and articles regarding long-term care and aging at The Long Term Care Consumer Guide Web site and The Long Term Care Review Blog.
Read more about long-term care insurance (LTCI).