Do some long-term care insurance policies protect assets when you're applying for Medicaid?

Yes, there are special "state partnership" long-term care insurance policies in a few states that allow someone to qualify for Medicaid coverage of long-term care while keeping much more in assets than Medicaid rules would normally permit. Those states are California (Medicaid is called Medi-Cal in California), Connecticut, Florida, Idaho, Indiana, Kansas, Nebraska, and New York.

To qualify for Medicaid, a person must have low income and few assets other than the home they live in. If someone qualifies, Medicaid can pay for extensive home care and the full cost of nursing home care in a participating facility.

The cost of this care to the federal government (which funds Medicaid) is enormous, so Medicaid began a program to encourage people to buy private long-term care insurance to help pay for their own long-term care costs.

The deal the Medicaid program made is that if someone buys a special "state partnership" long-term care insurance policy, that person is allowed to keep a much larger amount of assets than normal Medicaid rules would permit while still qualifying for Medicaid long-term care coverage. In most of these state partnership programs, a person who has one of these policies may keep, over and above the normal amount of assets allowed by Medicaid, an amount equal to whatever the long-term care insurance policy has paid out in benefits before the person applies for Medicaid. This could amount to tens of thousands of dollars.

A state partnership program does not necessarily make buying long-term care insurance a good financial risk. That still depends on the cost of premiums, the policy buyer's likelihood of needing considerable long-term care, and that person's ability to afford the premiums for the many years that will probably elapse between buying the policy and claiming its benefits. But anyone who decides to buy long-term care insurance and who lives in one of the states listed above should definitely make sure that any policy they buy is part of the state partnership program.

To find out more about the state partnership long-term care insurance program in your state, use any Internet search engine and enter Medicaid and the name of the state, which will take you to the official website of your state's Medicaid program. Or go to the Benefits.gov website and click on the name of your state. Once you get to the Medicaid website, enter state partnership long-term care insurance in the search field. You can also call the Eldercare Locator toll-free at (800) 677-1116 and ask for the number of the Medicaid program in your state, then call and ask for information about state partnership policies.