Medicaid is a state-government-administered program that pays the medical and long-term care expenses of poor people. If you have more money than your state permits when you need long-term care services, your state’s Medicaid won’t pay for those services. You’ll have to spend your own money–including using up your assets–until you become poor enough to qualify.

But if you live in California, Connecticut, Indiana or New York and you participate in the state’s Partnership for Long-Term Care program, you can qualify for Medicaid without spending yourself into poverty. To participate in the Partnership, you must buy a long-term care insurance policy that contains at least the basic benefits required by the Partnership program.

A 1993 federal law prohibits other states from creating Partnership programs, but 16 states have since enacted laws that will establish Partnership programs as soon as the prohibition is lifted.

Each state’s program is different, so be sure to learn the details of your state’s Partnership program before buying a long-term care policy.

In California, for example, the basic benefits include the following:

Interchangeable benefits that can be switched between nursing home care and home care, or a combination of the two.

A deductible that must be met only once in your lifetime.

Inflation protection to insure that benefits keep pace with the rising cost of care.

Waiver of premiums while you are receiving benefits in a nursing home or residential care facility.

Care coordination to assist you in planning and obtaining the services you want and need.
Under the California Partnership program, two types of policies are available–one that covers only benefits delivered in a nursing home or residential care facility, and one that covers comprehensively (at home, in a community facility, in a residential care facility, or in a nursing home).

What’s the benefit of participating in the Partnership? If you live in California, Connecticut, or Indiana, for example, and you

buy a policy under the program,

live in the state while receiving long-term care services, and

receive and exhaust the benefits under the policy for long-term care services,
you can apply for Medicaid benefits even though you haven’t sold and used your assets. Each dollar paid by the insurance company is a dollar of assets you can keep in addition to the minimums permitted by your state’s Medicaid rules.

For example, suppose the long-term care policy has paid $50,000 in benefits; in that case, you can keep $50,000 in investments or savings and still qualify for Medicaid. Without a Partnership long-term care policy, you’d probably have to spend virtually all of that $50,000 (this is called spending down) before you became eligible for Medicaid to pay your long-term care bills. However, even under the Partnership program, although you get to keep your assets, you might still have to use part of your income to pay long-term care expenses.

Connecticut and Indiana have a reciprocity agreement, so that if you buy a policy under one state’s Partnership program and move to the other state, you can obtain the benefits of the other state’s partnership program.