Planning for the future is crucial, especially when considering long-term care. Statistics show that over 70% of individuals aged 65 and above will require some form of long-term care services during their lifetime. It’s a common misconception that Medicare and standard health insurance cover these costs, but in reality, they typically do not cover the extended care services most people will need. Therefore, proactive planning is essential to ensure you can access the necessary care without depleting your life savings.
The Deficit Reduction Act of 2005 marked a significant shift in how the federal government views long-term care funding. It clearly signaled to Americans that funding long-term care is primarily an individual responsibility. This act made qualifying for Medicaid-funded long-term care more stringent and simultaneously broadened the scope and importance of Long-Term Care Partnership Programs.
A Partnership Program, at its core, is a collaborative effort. It’s a “partnership” between a state government, private insurance companies operating within that state’s long-term care insurance market, and the residents of the state who choose to purchase specific long-term care Partnership policies.
The primary goal of the New Jersey Long-Term Care Insurance Partnership program is to incentivize the purchase of more manageable, yet comprehensive, long-term care insurance policies. It achieves this by linking these specialized policies, known as Partnership-qualified policies, with Medicaid benefits for individuals who eventually require extended care beyond their insurance coverage.
Partnership-qualified policies are designed with specific criteria that may vary slightly from state to state. Generally, these policies are required to offer comprehensive benefits, encompassing both institutional and home-based care services. They must also be Tax Qualified, provide particular consumer protections, and incorporate state-specific provisions, most notably for inflation protection.
Often, the key differentiator between a Partnership-qualified policy and a standard long-term care insurance policy lies in the specific requirements for inflation protection mandated by the state. This inflation protection is vital to ensure that your benefits keep pace with the rising costs of long-term care over time.
It’s important to note that the New Jersey Partnership program isn’t managed by a separate state government office. Instead, the state government incorporated the Partnership framework by amending its Medicaid laws to accommodate the program, and the state’s Department of Insurance oversees the regulation of these specialized policies.
If you currently hold a long-term care insurance policy and are uncertain whether it qualifies as a Partnership policy, further resources are available to help you determine its status.
Asset Protection and the NJ Partnership Program
A significant advantage of a New Jersey Partnership for Long-Term Care qualified policy is the unique asset protection it offers. Purchasing such a policy grants you the right to apply for Medicaid under modified eligibility rules. These rules include a crucial provision known as an ‘asset disregard’.
The ‘asset disregard’ feature allows you to retain assets that would typically be factored into Medicaid eligibility calculations. Specifically, Medicaid will disregard assets equivalent to the total amount of benefits you actually receive from your Partnership-qualified long-term care insurance policy.
Because Partnership policies are mandated to include inflation protection, the total benefits you receive over the policy’s lifetime can exceed the initial amount of insurance protection you originally purchased. This inflation adjustment further enhances the asset protection afforded by the program.
For example, if you have a Partnership-qualified policy and ultimately receive $300,000 in benefits, you become eligible to apply for Medicaid while retaining $300,000 in assets that would otherwise exceed the standard Medicaid asset threshold. In many states, the standard asset limit for a single individual is as low as $2,000. Asset thresholds for married couples are typically more generous but still significantly lower than the protection offered by the Partnership program.
In the past, individuals often utilized trusts to protect assets from long-term care costs. However, current regulations stipulate that only irrevocable trusts are exempt, and even these are subject to a 60-month “look-back” period. This means assets must be transferred into the trust at least 60 months before applying for Medicaid to be protected. Planning that far in advance involves considerable uncertainty.
With a qualified partnership policy, personal assets up to the total value of benefits paid are disregarded when Medicaid assesses asset eligibility. For every dollar of insurance benefits paid out, one dollar of your assets is shielded from Medicaid’s eligibility limits. This direct dollar-for-dollar asset protection means you can preserve your savings and investments without having to deplete them before qualifying for Medicaid assistance.
Furthermore, a Partnership policy offers protection against estate recovery. Estate recovery is a process where the state seeks to recoup funds spent on your care through Medicaid by claiming against your estate after your passing. Additionally, some states enforce filial responsibility laws, which could potentially obligate adult children to reimburse Medicaid for their parents’ care expenses. A Partnership policy can help mitigate these risks.
Illustrative Example:
Consider John, who purchases a New Jersey Partnership for Long-Term Care policy with an initial coverage value of $300,000. Years later, due to inflation adjustments and the duration of his care needs, he receives a total of $400,000 in benefits from his policy. Eventually, John requires continued long-term care but has exhausted his insurance benefits and needs to apply for Medicaid.
If John’s policy was not Partnership-qualified, he would be limited to keeping only $2,000 in assets to qualify for Medicaid. He would be required to spend down any assets exceeding this limit. However, because John invested in a Partnership-qualified policy, he can retain $402,000 in assets (the standard $2,000 Medicaid limit plus the $400,000 asset disregard from his policy benefits) and still qualify for Medicaid to cover his ongoing care needs.
Addressing the Unfunded Liability of Long-Term Care
Long-term care represents one of the most substantial unfunded liabilities facing families and governmental bodies today. Recent legislative actions highlight the government’s stance that private insurance must play a leading role in financing Americans’ long-term care needs. Despite this, a significant portion of the 78 million Baby Boomers approaching retirement age have not adequately planned for their future long-term care expenses.
Moreover, many retirees who once believed they could self-fund potential long-term care costs are now facing the challenge of protecting diminished assets in fluctuating economic conditions, making self-insurance a less viable option.
Benefits of New Jersey Partnership for Long-Term Care Policies
New Jersey Partnership for Long-Term Care qualified policies are specifically designed to help you maintain your independence, preserve your quality of life, and safeguard your assets. These Partnership policies offer the same range of benefits and options as non-Partnership long-term care policies and are priced comparably.
Key benefits of a New Jersey Partnership for Long-Term Care policy include:
- Daily or Monthly Benefit Options: Flexibility in choosing benefit payment structures.
- Choice of Elimination Period (Deductible): Options to customize waiting periods before benefits begin.
- Comprehensive Coverage: Encompassing care in various settings, including home care, adult day care, and care facilities.
- Benefit Period (Pool of Money): A designated amount of funds available for long-term care services.
- Discounts: Potential discounts may be available.
A defining feature of Partnership policies is the mandatory inclusion of age-appropriate inflation protection. This crucial element ensures your benefits automatically increase over time to keep pace with the escalating costs of care. Specific inflation protection requirements for Partnership policies are as follows:
- Age 60 and Younger: Automatic compound inflation protection is mandatory.
- Ages 61–75: Any form of inflation protection is required (compound or simple).
- Age 76 and Older: Inflation protection is optional and at the policyholder’s discretion.
It’s important to note that the Guaranteed Purchase Option (GPO) or Future Purchase Option (FPO) inflation benefits, often offered by insurance carriers, typically do not meet the inflation protection requirements for Partnership policies unless you are age 76 or older. This is because these options are considered discretionary, as the insured can choose not to exercise them.
Policy Underwriting and Qualification
To obtain a New Jersey Partnership for Long-Term Care policy, you must undergo medical underwriting, similar to the process for traditional long-term care insurance. Generally, applying at a younger age increases your chances of qualifying at more favorable rates and with lower premiums. Resources are available to help you assess your health qualification, including lists of potentially uninsurable health conditions and medications.
We offer New Jersey Partnership for Long-Term Care Insurance Policies through state-approved insurance companies.
For further information on Medicaid programs, you can visit the official Medicaid website.
To receive a personalized quote for a New Jersey Partnership for Long-Term Care policy from leading insurance providers, please complete our online quote request form.
