After age 65, 70% of people will need long term care at some point. The costs are potentially staggering. Financial advisors recommend long term care insurance to protect oneself against the excessive costs of nursing home care or home services.
Medicare pays for doctors, hospital costs, drugs, and some other health care needs, but not for long term care – longtermcare.gov
Long term care is the care needed by someone who has difficulty with two or more activities of daily living (ADLs) over a period of 90 days or more. Over 12 million people in the United States need long term care now, with almost half of them under 65 years old.
One of the incentives for people to get long term care insurance is state Partnership plans, which allow insureds to protect their assets if they use up their insurance and need to apply for Medicaid (called Medi-Cal in California).
In the 1990s, California, New York, Indiana, and Connecticut were pioneer states in creating Partnership programs, where insurance payouts for long term care can be deducted from the insured’s assets if the plan runs out and Medicaid is needed. Partnership programs save states money by encouraging people to buy long term care insurance.
To encourage more Americans to plan for the risk of needing long term care Congress passed the Deficit Reduction Act of 2005 (DRA). The new law permits the creation of beneficial public/private partnerships; a joint-effort between states and insurance companies who offer Qualified Long Term Care Insurance Partnership Policies. States would then amended their Mediciad law(s) to allow for the Partnership.
Insurance companies have agreed to offer high-quality, affordable long term care insurance protection that meets the stringent requirements set by the federal legislation and states.
Not all policies sold in your state are Partnership qualified. The most common non-Partnership policies are sold through employers, unions, associations – these are group policies and only individual policies are Partnership. Not all insurance companies policies qualify for Partnership in every state, check with us about your state or a specific company.
Partnership policies not only offer benefits to pay for long-term care costs. They offer the special additional benefit of Asset Protection should you ever need to apply for Medicaid assistance.
Now most states have Partnership programs, but California’s program needs to be updated.
To qualify for the state Partnership, California requires a long term care insurance policy to have a minimum of $190* a day in coverage and a 5% compound interest inflation protection for someone under age 70. But these requirements may make the premiums out of reach for average Californians.
In Partnership states created after 2005, inflation protection is the only requirement for a plan to qualify for Partnership and 3% compound is about half the cost of 5% compound, making a comparable California Partnership policy about twice the cost.
The requirements can change from year to year. But another problem is that California long term care insurance Partnership policies do not have reciprocity; that is, if the insured moves to another state, although the insurance policy moves with the insured, the Partnership asset protection no longer applies. You would have to move back to California to use the Partnership asset protection part of the policy.
All the other Partnership states have reciprocity – even the other Partnership pioneer states New York, Indiana, and Connecticut.
California spends over $14 billion annually on long term care through its Medicaid program (called Medi-Cal). The only state that spends more is New York at over $15 billion. Total long term care Medicaid spending for the United States is over $118 billion.
In 2005, about 1.5 million Californians used long term care services. That number is expected to skyrocket: 6.5 million Californians will be 65 and older by 2025. Nearly a million will be 85 and older, and many of them will need long term care.
It is obviously in the interest of states to encourage people to get long term care insurance. However, the policies have to be affordable or people will not insure. Also, since people move around, reciprocity between states is essential. California needs to make these changes to its Partnership program so it can include more people.
To find out more about Partnership plans nationwide, click here.
*2016 minimum daily requirement
Long Term Care Insurance Quote