State Partnership Offers

Long-Term Care Insurance

“The problem with long-term care insurance is not what it is, but what it isn’t,” – David Guttchen, state OPM.

By Kaaren Valenta

Statistics show that 43 percent of the people who reach the age of 65 will enter a nursing home before they die. Seven out of 10 couples can expect at least one of them to use nursing home care. And many more will need other kinds of long-term care services.

With nursing home costs in Connecticut easily topping $80,000 a year, the impact on the lives of many people is staggering.

“Do you plan on aging without getting older? The longer you live, the more risk there is that you will need some type of assistance with your daily activities,” said David Gutten, director of the Policy Development and Planning Division of the state’s Office of Policy and Management (OPM).

Mr Guttchen came to Newtown recently at the request of Tony Leonardi, a certified financial planner, to talk about the Connecticut Partnership for Long-Term Care. The partnership is a state-backed program through which residents can purchase long-term care insurance that also will enable them to protect part of their assets.

“The problem with long-term care insurance is not what it is, but what it isn’t,” Mr Guttchen said. “It is not medical insurance. Medical insurance, including Medicare, pays for hospitalizations and other immediate medical care. But once the patient is stabilized, the financing system falls apart.”

“You can be any age and have an accident like the one that happened to Christopher Reeves,” he said. “Or you can suddenly be diagnosed with a degenerative disease like Michael J. Foxx. But the irony is that the longer we live, the more likely we will need long-term care both in our own homes and in a nursing home.”

Long-term care insurance can help cover those costs, but like all insurance plans, there are many options.

“The least expensive policy is care in a nursing home, but if you want help in your own home it won’t be covered,” Mr Guttchen said. “There also are plans that pay only for home care, but it may not be possible to stay in your home. The most comprehensive policies pay for both.”

Many people believe that Medicaid will pay their nursing home bills, but Medicaid specifically is a program for poor people, Mr Guttchen said.

“A single person can have no more than $1,600 in countable assets, beyond the house, to qualify for Medicaid,” he said. “A spouse can keep half of the assets, but no more than $82,000

With policies written under the Connecticut Partnership, however, Medicaid says you can keep assets equal to the amount of insurance that the policy paid.

“If you buy $50,000 worth of insurance, and $50,000 is spent on your care, then you can keep $50,000 and still qualify for Medicaid,” Mr Guttchen said. “If you buy $200,000 and $200,000 is spent, you can keep $200,000. For every dollar the insurance company pays, you get to keep a dollar of assets.”

By contrast, persons who are on Medicaid are only allowed to keep $50 a month in income for their own use.

Mr Guttchen said plans that are inside the partnership also feature an inflation provision and have enhanced standards that can provide a guaranteed discount in the cost of medical care. With insurance plans outside the partnership, those provisions are optional.

“If you compare two plans, one inside and one outside the partnership, and they are identical in features, the costs will be comparable,” he said. “But plans outside the partnership are not state certified, and they do not provide Medicaid asset protection or enhanced standards.”

 “With non-partnership insurance, you need to try to figure out how much insurance you will need,” Mr Guttchen said. “With partnership insurance, you are deciding how much [of your] assets you want to protect.”

Connecticut is one of only four states that have state-certified long-term care insurance programs.

Estate Preservation

Tom Murphy, an elder care attorney and partner in Murphy & Murphy in Newtown, said that one of the most frequently asked questions is how to preserve your estate despite the need for long-term care.

Families that don’t have long-term care insurance shouldn’t assume there is nothing they can do to protect assets, even if nursing home administrators, social workers, or other advisers have told them this is the case, he said.

“The driving factor is that those currently or imminently in need of long-term care can protect up to 50 percent of the remaining assets for their family, and for married couples the amount is even more,” he said.

There is a “penalty period” that goes into effect if a person transfers assets before applying for Medicaid, he explained. However, “Many nursing home residents can transfer a large part of their remaining assets to their families and use the remainder to pay for care until the Medicaid penalty expires,” he continued.

“For example, if you have $200,000, you can transfer $100,000, and the remaining $100,000 would cover the nursing home costs for the 16-month penalty period,” he said. “For everyone that percentage varies — it could be 55 percent, or 38 percent — it depends upon your cost of care.  But someone with a modest estate can do it in far shorter time than the three-year Medicaid ‘look-back’ period.”

For married couples, even more can be retained, Mr Murphy said.

“The law allows a spouse to keep the house and one motor vehicle, and …one-half of the couple’s remaining assets up to a maximum of $82,000,” he said. “[An elder care] attorney can show them how to protect some of the remaining assets for the benefit of the healthy spouse. Many times a couple that has a few hundred thousand dollars in assets can qualify for Medicaid immediately without ever paying a nursing home.  It protects the assets for a healthy spouse who doesn’t want to become a pauper or have to move from their home.”

The Connecticut Partnership Program is a way to get long-term care insurance and protect assets from scrutiny, Mr Murphy said.

“But be careful how you use your insurance dollars,” he said. “You can buy insurance that covers a higher daily rate, a shorter term, a longer elimination period. If you want a low deductible, your dollars won’t buy the same amount of insurance. If you accept a higher deductible, you might buy a longer term or a higher daily benefit.”

Estate planning should include advice on long-term care, probate, and estate taxes, Mr Murphy said, because there are other important issues, such as powers of attorney, that are tremendously important for asset protection.

“We have seen people get divorced because they were told that one spouse couldn’t qualify for Medicaid,” he said. “We’ve seen people go into bankruptcy because they’ve been told that otherwise they couldn’t qualify for Medicaid. Before you do anything, you have to explore with an attorney whether there are strategies – and there are many – for asset protection. But most people are never told about those strategies, or they are told the wrong thing, so they wind up paying out much more than the law requires.”