Florida Partnership Program

The state of Florida and the federal government have a deal for you, and they hope that it is so attractive that you will accept their offer, which will protect your assets while keeping the Medicaid system solvent.

This seemingly grandiose pronouncement about the Partnership Program may actually be an understatement when one considers the following:

  1. Medicaid is on course to become insolvent on a federal basis in 2018
  2. Medicaid has become the #1 state expenditure in Florida, exceeding education
  3. Long term care costs, primarily for the elderly, are the fastest growing portion of the Medicaid budget
  4. Baby Boomers are turning 62 at the rate of 7,900 per day, which will result in a doubling of the over-65 population in the next 20 years

While the majority of long term care takes place in the home, Medicaid recipients are primarily found in nursing homes.

With the average cost of one year in a nursing home currently $72,000 (expected to be $150,000/year in 2023) and the average stay lasting 2.7 years, most families agree with government auditors that this is a budget-buster.

These facts, when combined with the aging of the Boomer population, have created a long term care ‘perfect storm’, and led to a radical proposal from Washington.

A Private Solution for a Public Problem

In order to attempt to deal with this impending disaster, the federal government adopted a ‘stick & carrot’ approach to Medicaid reform.

The stick aspect was the 2005 Deficit Reduction Act’s emphatic tightening of the Medicaid eligibility requirements, which in essence has frozen the formerly robust Medicaid Planning industry in its tracks.

The carrot portion of DRA ’05 came about as Washington instructed state governments to create an incentive that would encourage Americans to develop their own funding plan for their future long term care needs: the Partnership Program.

Because Medicaid is a somewhat convoluted joint federal/state program, the DRA ’05 set a few guidelines and then left it to each state to determine if they would participate, and if so, how the plan would be implemented on a statewide basis.

How does this Partnership work

The core of the solution that is suggested in DRA ‘05 is private long term care insurance (LTCi).

Medicaid is a means-tested program intended to provide healthcare to the poorest Americans. To qualify for long term care benefits, an individual must have no more than $2,000 in assets beyond their primary residence and a few other minor allowances.

Thus, many folks have had to ‘spend-down’ their assets before becoming eligible for Medicaid benefits.

However, under the Partnership Plans proposal, if you own a long term care insurance policy, then you will shelter from the spend-down requirements an amount equal to the benefit dollars available in your plan.

So, for example, if Joe Smith had a policy that paid out $100,000 of benefits for his long term care, Joe would become Medicaid eligible when he had spent down to $102,000 in assets.

Tallahassee weighs in

The Florida Office of Insurance Regulation has released the requirements for qualification as a Partnership Plan. They are:

  1. the policy covers an insured who was a resident of Florida at policy issuance
  2. the policy must be ‘Tax-Qualified’ (95% of all new policies are) and have been issued after January 1, 2007
  3. the policy must meet the following inflation requirements:
    1. - For those under age 61, policy must include compound inflation protection
    2. - For those between 61 & 75, policy must include some annual inflation protection
    3. - For those 76 and older, no inflation coverage is required

Perhaps the best effect of the Partnership Plan agreement is that it makes even very small (and affordable) LTCi policies an effective asset protection planning tool.

Because age and health are the two primary determinates of the value proposition in purchasing a long term care insurance policy, beginning the process of obtaining this coverage today is the most financially prudent move you can make.

Call us at 941-355-9445 or email to Thomas@FLLTC.com to get started today!