TAXES AND LONG TERM CARE
INSURANCE
MEDICAID JUST ISN'T WHAT IT USED TO BE
By Lawrence Thaul, CLU, ChFC, CLTC
The Deficit
Reduction Act (DRA) of 2005 and Your LTC Plan
Included in the
all-new federal Deficit Reduction Act of 2005 (DRA
’05), soon to become enabled in NY State back to an
effective date of 2/8/06, are measures making it much more
difficult to have Medicaid pay for your nursing home and
other LTC services. With a “Lookback Period” of 5 years
measured beginning on the date of the application to
Medicaid, NY
is among the states clamping down on their hemorrhaging
budgets with a new major restriction yet to be determined. Many individuals will
not collect at all and many will be delayed in obtaining
benefits under this new law. Note that about three
quarters of all nursing home costs in NY State are borne
by Medicaid (source: NYS Partnership).
DRA ’05 has an
added restriction which hits home for NY Metro area home
owners: home values above $500,000 will become a Medicaid
“countable asset” in determining how much must be “spent
down” before Medicaid eligibility. (Note: states are
permitted to set that level at $750,000 by legislation).
Silver
Lining: Partnership Policies Expected to Grow across the
U.S.
The LTC insurance
policies called Partnership, which exist in NY, CT, IN and
CA are vehicles created over a decade ago which can help
people obtain Medicaid benefits sooner. Originally the
brainchild of a federal/state government-insurance
industry think tank with the purpose of staving off the
governmental LTC cost explosion, the partner-ing of LTC
expenses between government and individuals is a
strategies which will see a boon across the U.S. under DRA
’05. Generally speaking, there are two types of
Partnership policies in NYS:
-
Medicaid’s asset test
(currently $4,150 in NYS) will not be applied at all once
Partnership policy benefits are claimed and used up; and
-
Assets up to the amount of policy benefits paid out
(e.g. Daily Benefit of $190 x 365 x 3years= $208,050) will
not be Medicaid countable upon one’s application
for Medicaid LTC benefits.
The paradigm shift
the country is experiencing stems from the huge dollar
drain LTC services places on government. In Metro NY
expenses for housing and services is upwards of $100,000
per year. Insurers have seen this age wave approaching for
years. Some have turned their surpluses into developing
policies designed to pay benefits at just the time they
are needed. That is, when either mental or physical
infirmity requires human assistance in the performance of
largely custodial care to carry on activities of daily
living. What remains to be seen is whether these policies
have been priced right to be profitable and thus
sustainable.
DRA ’05 is only
one piece of the restricting puzzle. The NY State Assembly
and Senate are currently considering further restrictions
on eligibility of individuals for Medicaid home care.
There is no doubt
that there are limited dollars. The public debate is over
where and how deep to make the cuts.
Never has advance
planning been as important as it is today.
About the Author: Larry Thaul is an independent
Chartered Financial Consultant and co-founding partner of
Millenium Financial in Rye Brook, NY. He is Certified in
Long-Term Care and is an Officer of the National
Association of Insurance and Financial
Advisors-Westchester, as well as a member of The Estate
Planning Council of Westchester, Inc. Mr. Thaul is a
continuing education instructor at various Westchester
County Adult Schools as well as to the CPA Society and the
insurance industry. He resides in Larchmont and can be
reached for consultation at (914) 934-9700, ext. 252. |
