Long-Term Care Partnership Policies – Watch Out for Expanded Medicaid Estate Recovery
The Raleigh News & Observer recently commented on the surging insurance rates for long-term care insurance (LTCI) policies in North Carolina, the article for which can be read here. Yet it seems that an increased prevalence of premium hikes isn’t the biggest concern that LTCI policyholders in North Carolina might face.
LTCI partnership policies provide asset protection for policyholders who use up their plan benefits, increasing the amount of non-countable resources that the insured can retain and still receive Medicaid by the amount of LTCI benefits he or she uses. Thus, if the insured requires care beyond the benefits period provided by the LTCI plan, the state will disregard the insured’s assets dollar for dollar by the amount the LTCI policy spent during the benefits period. This feature makes partnership policies seem like an attractive option for many people as it allows them to become eligible to receive Medicaid benefits without first having to spend down their assets to the minimum amount permitted by North Carolina’s Medicaid program.
However, while many might be tempted to seek out an LTCI plan to take advantage of this treatment of assets for Medicaid, potential policyholders should be aware of North Carolina’s distinct treatment of LTCI plans for Medicaid estate recovery purposes. North Carolina statute defines “estate” for decedents who have LTCI partnership policies as “including assets conveyed to a survivor, heir, or assign of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement” (N.C.G.S. § 108A-70.4). Thus, unlike Medicaid recipients who did not hold LTCI partnership policies during life, the estate subject to recovery includes interests transferred to third parties during the decedent’s life as well as real and personal property passing to heirs through state probate law, either under a will or through intestacy. North Carolina residents contemplating purchasing an LTCI policy might want to consider the risk to lifetime property transfers that the policy could pose before committing to an LTCI plan.