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Long-Term Care Insurance & Medicaid

Long-term care insurance is a form of health coverage that helps to cover potential medical costs once a person reaches retirement age. When long-term care coverage runs out, any remaining expenses become out-of-pocket costs. In some states, Medicaid will pick up where long-term care insurance leaves off without draining a person's remaining assets.

  1. Medicaid Coverage

    • Established in 1965, the Medicaid health insurance program provides health coverage for low-income households, disabled people and people with extremely large medical bills. In effect, Medicaid insurance acts as a safety net in cases where people can no longer afford the costs associated with long-term care. As a result, long-term care costs have taken a considerable toll on state and federal budget money. This continuing drain on revenues prompted the federal government to create the Long-Term Care Partnership model. The Long-Term Care Partnership model enables individual states to develop programs that combine their long-term care insurance industries with their state Medicaid programs.

    State Partnership Programs

    • Although Medicaid is a federally sponsored program, each state determines how benefits will be administered within their region. In most states, income level acts as a determining factor for Medicaid eligibility so individuals with moderate to high incomes don't qualify for coverage. People who outspend their long-term care insurance coverage can qualify once they meet certain income and resource requirements that ultimately drain any existing assets before Medicaid coverage begins. State partnership programs allow people who hold long-term care insurance to protect their remaining assets and still have Medicaid cover their existing medical costs.

    Income and Resource Rules

    • States that don't have a partnership model in place follow a series of income and resource guidelines to determine a person's eligibility for long-term care assistance. These criteria come into play in cases where a person's long-term insurance coverage has run out or a person falls within a certain income-level range. As long-term care can take place in nursing homes, assisted living facilities or at home, different eligibility criteria may apply for different circumstances. According to the National Care Planning Council, eligible applicants must have less than $2,000 to $3,000 in resources, which include any assets that produce an income such as stocks and investments. Most states administer Medically Needy Programs, which allow participants to "spend-down" any assets or money that exceed eligibility requirements.

    Policy Eligibility

    • Long-Term Care Insurance Partnership Policies, or LTCI policies are sold in states that participate in the partnership program. Initially, only four states -- Connecticut, Indiana, California and New York -- offered LTCI policies. The Deficit Reduction Act of 2005 made provisions for all 50 states to participate in the program on a voluntary basis. A long-term care insurance policy is eligible for the program if it meets the state's minimum benefit requirements. Eligible policies also have a provision known as Medicaid Asset Protection. This provision protects a person's assets up to a certain point in cases where long-term care insurance benefits run out and Medicaid assistance is needed.

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