Long Term Care and the Missouri Partnership Program

In the last few years Long Term Care insurance has become a hot topic with many clients as they weigh the advantages and disadvantages of obtaining the coverage.  Obviously, there are many factors that influence a client’s decision to include this  insurance in their financial plans.  One factor that came into play in 2008 for Missouri residents, but has not garnered much attention, is the state’s Long Term Care Partnership Program.

Missouri’s Long Term Care Partnership is a public/private venture designed to encourage and reward Missourians who take an active role in planning ahead for future long-term care needs.  The program encourages citizens to plan for these future needs and expenses by offering asset protection when and if the person needs to apply for Medicaid.

In normal circumstances, a person must “spend down” their assets to a predetermined level before they become eligible for Medicaid. In other words, a person must exhaust the majority of their assets prior to receiving any help with the cost of medical care from Medicaid.  As a general rule, assets that can be set aside for a spouse before an applicant is eligible for Medicaid are capped at a maximum of $100,000 (adjusts annually).  In addition to these assets, the spouse will be allowed to retain the primary residence, an automobile, and some miscellaneous items.  That cap of $100,000 is, in many cases, a very low number many clients are not comfortable with.

The Missouri Partnership Program provides relief by allowing participants to protect more assets should they need Long Term Care for an extended period of time.  The program accomplishes this is by allowing participants to shelter, dollar for dollar, the amount of Long Term Care insurance coverage that pays for care prior to applying for the Medicaid benefit.  For example, if you own a Long Term Care policy that pays for three years in a nursing home at a cost of $100,000 per year (total Paid out $300,000), it is now possible to retain $400,000 of assets for the spouse without being required to spend the money prior to being eligible for the Medicaid program.  This is obviously an attractive option for ensuring that the spouse who is not sick can maintain their standard of living while the sick spouse needs care.

In order to qualify for the program the Long Term Care policy you purchase must meet certain standards the state has set forth.  The three  basic provisions are:

  1. The policy must have the same provisions as the National Association of Insurance Commissioner’s (NAIC) model law.  Since 2004, all plans sold in Missouri must comply with the model and be approved by the Department of Insurance, Financial Institutions &Professional Registration (DIFP) prior to use.
  2. The policy must be tax-qualified.  This means the Internal Revenue Service (IRS) does not tax the policy’s benefits.
  3. The policy must contain certain inflation protection provisions at the time it is sold:
Age Compound Annual Inflation Protection
Less than 61 Company must offer 5 percent. If rejected by the consumer, a minimum of 3 percent or changes based on the consumer price index must apply.
61 – 75 Some level of inflation protection must apply. No minimum level is established.
Over 75 No inflation protection required for Partnership Plans.

Obviously, this program is attractive if you are on the fence about obtaining a Long Term Care policy.  For most people, purchasing a long term care policy gives both spouses peace of mind in knowing their loved one will be cared for if their health declines.  This program also gives the sick spouse the peace of mind that, should they need long-term care, they won’t be endangering their partner’s standard of living.

If you would like to learn more about this option, contact your Family CFO to discuss your situation and how the  Missouri Partnership Program might be right for you.

Tony Dorn, CFP®, MBA

Tony is the professional consultant for Katie Kearins.

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