Long-term care (LTC) can become a significant issue for you or a loved one, as the cost of care can – and often does – consume a lot of assets. You cannot predict exactly what health care needs you may have in the future, but you can take steps to plan so that you do not become financially crippled by the cost. Long-term care insurance can offset those risks. In Indiana, certain types of long-term care insurance can provide you with asset protection. Here’s more on Indiana’s long-term care program.

Why Do People Buy Long Term Care Policies?

People buy long-term care policies because of concerns over the amount and cost of health care services they will need for a medical condition. Those over sixty-five will have a 60-70 percent chance of needing long-term care. Indiana Long Term Care Insurance Program, known as ILTCIP, is a partnership between Indiana and private long-term care insurance companies. The program aims to protect residents from overburdening costs of long-term care. Participating insurers have offered partnership policies to Hoosiers since 1993.

What Is The Benefit Of Buying A Long Term Care Policy?

As you age, you’ll need health care, but you won’t know in advance how much care you need. You won’t know how much your healthcare will cost. Purchasing long-term care insurance is a way for you to offset the risk of costs such as skilled nursing home care. In Indiana, you can buy long-term care insurance policies, known as either partnership policies or traditional policies.

Doesn’t Medicare Pay For LTC?

Medicare provides benefits for skilled nursing care, which is care meant to improve your health. You must meet specific requirements for this care, including your stay in a Medicare-approved facility and a 3-day prior hospitalization requirement. The most that Medicare Part A covers is all the cost in your first 20 days and 80 percent of the cost for your next 80 days. After 100 days, Medicare does not cover these services. For those who need long-term care for longer than 100 days, Medicare will not foot the bill, but instead, potentially Medicaid.

How Does Indiana’s LTC Insurance Program Work

Rather than Indiana selling insurance policies, its Department of Insurance works with insurance companies offering long-term care insurance. The Department of Insurance oversees the process and makes sure that insurance policies meet state regulations.

How Is A Partnership Policy Different Than A Traditional Long Term Care Policy?

If you purchase either policy, you can receive benefits for long-term care services. Partnership policies must include certain benefits in your policy that might not be included in traditional policies. If you apply for Medicaid, partnership policies provide additional financial protection. Specifically, you would not be required to deplete your assets (spend down your assets) to become eligible. In addition, there is no Medicaid estate recovery against protected assets that fall under a partnership policy.

How Does Asset Protection Work With Partnership Policies?

If you have a traditional or partnership policy, you receive benefits up to your policy limits, at which point the policy is exhausted. At that time, if you still need care, you generally must pay out of pocket. If you cannot afford it, you could become eligible for Medicaid – a needs-based program where the government can cover your long-term care costs. Medicaid eligibility is determined partly by your income and assets. If you have the partnership policy, you won’t be required to spend down your assets.

Total Asset Protection Vs. Dollar For Dollar

The Partnership policy provides two types of asset protection: total asset protection and dollar-for-dollar asset protection. If you are applying for Medicaid, then the total asset policy protects all your assets. However, there are certain requirements for a policy to have total asset protection, including that you purchase a partnership policy with at least the state-set dollar amount and have a five percent compound inflation factor. Your assets are protected once your policy has paid out all the benefits.

Suppose you buy a partnership policy with less than the state-set dollar amount in benefits. In that case, one dollar of assets is protected for each dollar of partnership policy benefits paid out. A dollar-for-dollar partnership policy’s asset protection feature provides asset protection equal to the amount paid in benefits up to the policy maximum.

How Does Asset Protection Kick In?

It is important to note that your assets only receive protection as your insurance policy pays benefits. After accumulating the asset protection, your assets are protected and can be used however you choose, such as gifting those assets to your family.

How Much Do Partnership Policies Cost?

The cost of your long-term care policy is determined by your health status, age at the time of purchasing the policy, the benefits you select, and the insurance company that issues the policy. If you are interested in protecting all your assets through LTC insurance, then at a minimum, you would need to purchase the state-set dollar amount of partnership policy benefits.

How Is My income Affected By The Partnership Policy?

Although a partnership policy can protect your assets can be protected, it doesn’t protect your income. So, you’ll have to consider other Medicaid planning strategies relating to your income (e.g., using a Miller Trust) to get qualified.

Does A Partnership LTC Policy Mean That I Get Medicaid?

Your purchase of a long-term care policy does not automatically entitle you to Medicaid benefits. While you may never need Medicaid if your benefits cover your lifetime of healthcare, you might need Medicaid if you receive maximum benefits under the LTC policy. The beauty of a partnership policy is that you can receive asset protection benefits without spending down your assets to qualify for Medicaid.

What If I Need Help?

Remember that you’ll have to document your health status and finances properly in a Medicaid application. You shouldn’t try to apply for Medicaid without discussing your situation with a Medicaid planning attorney. Critically, an attorney can help you get the benefits you need while preserving and protecting your assets.

Medicaid Lawyer In Indiana

To learn more about Indiana’s long-term care insurance program, get in touch with an elder law lawyer. Click here to learn more about Indiana Medicaid planning strategies.

About The Authors

Jeff R. Hawkins and Jennifer J. Hawkins co-author this blog with Thomas E. Hynes, a lawyer admitted to practice in Pennsylvania, New Jersey and Florida who has a background in estate planning and elder law. Jeff and Jennifer are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers. They are also active members of the Indiana State Bar Association and the Indiana Chapter of the National Academy of Elder Law Attorneys (NAELA). Jeff is also a member of the Illinois NAELA Chapter.

Both Hawkins are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois.

Jeff is a Fellow of the American College of Trust and Estate Counsel and the Indiana Bar Foundation. He is also a member of the Illinois State Bar Association and he served as the 2014-15 President of the Indiana State Bar Association.

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