Understanding Long-Term Care Insurance & Partnership Programs With Eileen Dunn: Long-Term Care Series, Part #2
Understanding Long-Term Care Insurance & Partnership Programs
In this episode, I’m joined by Long-Term Care expert, Hospital Discharge Planner, and Geriatric Care Manager Eileen Dunn where we discuss the basics of long-term care insurance and the Long-Term Care Partnership Program.
More specifically, Eileen and I discuss:
- Why should you consider long-term care insurance?
- What does long-term care insurance pay for?
- Common types of long-term care insurance policies
- Cost and benefit considerations of long-term care insurance
- Long-Term Care Partnership Programs
- Taxation of long-term care benefits
Resources From This Episode:
LPL Financial and Planable Wealth are not affiliated with or endorsed by Eileen Dunn or Mutual of Omaha.
00:00:27 - Cameron Valadez
Hello and welcome to Retired-ish. I'm your host, Cameron Valadez, and today we are continuing our multi-episode series on long-term care with care manager and long-term care expert Eileen Dunn. Last episode, we discussed a general overview of long-term care and what it really is, and essentially how it works. Today, however, we turn our focus to the ins and outs of long-term care insurance. And as mentioned, I have long-term care expert Eileen Dunn joining me for this entire series on long-term care because we believe it is that important, and people need to understand more about it. Eileen is an absolute wealth of knowledge in this space if you weren't aware already. Eileen, how are you? Good to have you back.
00:01:17 - Eileen Dunn
Thank you very much, Cameron. It's good to be back.
00:01:20 - Cameron Valadez
Today, Eileen and I will discuss when you might expect to actually need long-term care services. Or, in other words, what might trigger long-term care insurance to kick in? What some of your options are for coverage? Typical benefits and cost considerations, as well as a bit about the long-term care partnership programs that may be offered in certain states that most people just don't know about. So let's dive in. I have a couple of stats I want to share first that I think listeners may find a bit interesting. According to the US. Department of Health and Human Services, most people turning age 65 will need long-term care services at some point in their lives. And claims data from Mutual of Omaha show that women receive more care than men. Women have a near 64% chance of needing care, men have a near 36% chance of needing care, and the average age when a claim actually begins is around age 81. Now, the first thing that probably strikes most people is that women are nearly twice as likely to need care versus men. Eileen, why is that? Is there a rational explanation for this?
00:02:42 - Eileen Dunn
I don't know if it's rational, but they also say that women are often younger than men when they marry. There's usually a couple of years of age difference between it. So some said that's probably whether women take better care of themselves or whether we just have a naturally longer life expectancy. But what I find especially, mostly with my care management clients, is women usually are one or two to three years. I'm three years younger than my husband. A lot of times, women are just a little younger. When it comes to the 36% chance for men, I think that that seems very very low. And remember, statistics are only part of the picture because remember that these statistics come from some sort of documented data, whether it's from nursing homes, assisted living home care agencies, but much of caregiving, especially for the first spouse needing care, which is often the man, it's undocumented. So there's a lot of statistics that we really can't get a hold of because it's just not documented anywhere, at least from my experience as a care manager. Men require just as much care as women do.
00:03:52 - Cameron Valadez
That's very interesting. And I think a lot of people, they might be confused about why they actually might need care. And it's not always the case where you need to have a whole lot of issues going on. I mean, the most common conditions that we see for which an insurance company actually pays claims for are for things like dementia or neurological conditions, maybe some sort of advanced arthritis, or even cardiac reasons. Does that seem accurate from your point of view in the trenches as well?
00:04:24 - Eileen Dunn
Yes, it does, and I think that you're right. People seem to equate long-term care with end-of-life care. And it's not. End-of-life care is usually short-term, in other words, within six months. But long-term care is just that. Things like dementia require continual supervision and can go on for years. Advanced arthritis and other conditions, such as the cardiac conditions that you mentioned, they often cause severe shortness of breath, and that might require someone to come in and help them with those activities of daily living for a couple of hours in the morning and a couple of hours in the evening. But long-term care is really just that. And it's not again, people equate it with end-of-life care. And that's kind of been one of my biggest battles, is helping people understand that that is not end-of-life care, it's long-term care.
00:05:15 - Cameron Valadez
Yeah, and I think that points to kind of the discussion today on just how important long-term care insurance is. Because, again, it's kind of like another form of disability, right? Or can be. So that's why this stuff's really important. So now that we understand why we may need long-term care services and when that might happen, when it does, how do we pay for it? Specifically, what about long-term care insurance? How does that work? When the need for care first arises, you will probably turn to family members or friends. However, your needs may go beyond their ability to actually help you, whether physically or financially. And that's where a long-term care insurance policy can come in. Long-term care insurance essentially can allow you to get the care you need in the setting that's right for you. So if you prefer to be at home, you can get care to an extent at home. Then if more care is needed that can't necessarily be fully provided in the home, your policy can help with care you might receive in a residential care facility or nursing facility. And that being said, I personally think that probably the primary reasons for why you would even consider long-term care insurance would be to, one, balance the help that you receive from possible family members with professional caregiving services. Two, and this is a major one, stay at home as long as possible while getting the care that you need, and three, to help protect your retirement nest egg from the cost of long-term care services. And this reason is likely the biggest of all. And I know, Eileen, you'll definitely agree with me on this since the cost of long-term care is often everything that you own.
00:07:05 - Eileen Dunn
Yeah. No, I absolutely agree. And you just said something a minute ago that I'd like to touch on. When it comes to disability, people have sometimes a misconception. Disability insurance is intended as income replacement, but it was never intended to pay for the care that you need because of the disability. And that's where long-term care can piggyback on that. The other thing is people have a long-term disability policy that ends at age 65. So that's all the more reason why the long-term care is important. But to your other points, yes, it definitely is very important to balance. We talked about this a little bit at our last podcast, and that was the importance of the work-life balance. Families are going to be there, and this does not replace what your family does for you. It just helps them do it better, longer, and safer. I know the idea that kids can help, but you got to remember your kids are going to be aging right along with you, so they might not be able, to your point earlier, physically be able to manage some of the duties of the caregiving. So it really helps the families and the family caregivers.
In fact, I had a client several years ago where the mom lived with her daughter. She had a little mother-in-law's apartment, and she was fairly independent. But when the daughter had to go to work, she had a long-term care policy, just a small one, because they just wanted it to provide some home care because mom didn't have a tremendous amount of assets. But this allowed for someone to come into the house between ten and two while the daughter was working to help mom with her bath, get her some lunch, that kind of thing. But it also allowed her to participate when her daughter was one of the star basketball players, and she wanted to go to her basketball tournaments on the weekend. This gave them the funds available to have someone come in and stay with mom on the weekends so that the daughter could still continue to go with the woman's granddaughter to watch her basketball tournaments. So again, it's all about that work-life balance. It doesn't replace what your families do for you. It just adds to it.
00:09:15 - Cameron Valadez
00:09:16 - Eileen Dunn
Yeah. And people do want to stay home or in a home-like environment. A lot of people are choosing to move to assisted living facilities when they're still independent, and it's because they don't want to have to deal with the household chores anymore, but they want to be able to stay there surrounded by all of their things, all of their own furniture and that kind of thing. And sometimes, the long-term care insurance can be the difference between being able to stay in that assisted living or running out of funds. I had a woman who was a retired teacher, and she bought her long-term care insurance several years ago. We were very careful because it was the first major decision that she had to make after her husband had died and was buying this long-term care insurance. And she did, and she wound up developing Parkinson's disease, stayed home for a couple of years but then wound up having to go to an assisted living facility. And even though she was a retired teacher and had some fairly good income, it was because of the long-term care insurance that she was able to stay in the assisted living facility. And then, she actually had the option to move to a facility in Florida to be closer to her daughter. So this gave her choices, but without the long-term care insurance, she would have had to been digging into her savings to pay those additional costs. But because she had that, it allowed her the ability to stay there and retain her assets. So that was huge.
00:10:45 - Cameron Valadez
Yeah, that is absolutely huge. And like we mentioned before, saving that retirement nest egg is very important for a lot of people as well. So that's kind of a nice case study to go along with that.
00:10:58 - Eileen Dunn
Yeah. And the saddest calls that I get sometimes are from an assisted living facility where they need me to help place somebody in a nursing home because they've run out of money because Medicaid doesn't cover most of those calls. I can remember a husband and wife once, and the guy just stood there, and he looked at me goes, “It just never dawned on me we'd lived this long.”
00:11:18 - Cameron Valadez
Oh gosh, yeah.
00:11:20 - Eileen Dunn
Just never dawned on them. They felt very blessed, but he was like, holy smokes, we're still here. But it is sad if they have to run out of money and then you don't have a choice. And to me, that's what long-term care planning is all about. It's all about choice.
00:11:35 - Cameron Valadez
Right. I think this whole thing about the home care and the facilities, these are definitely common misconceptions that the general public and even many professionals have out there, which is that long-term care means that you need to go into some kind of assisted living facility or have a really expensive private room somewhere, when in reality, about 48% to 50% or so of those who need care do so in the comfort of their own home, at least for the majority of the time. And that kind of lines up with what you've just shared with us.
Let's dive into what types of policies and different options that are out there for coverage. I know that over the last decade or so, there's been a lot of change in terms of the long-term care insurance space. Can you educate our audience a bit more about the most common types of policies you see with patients and some of the details about those policy types?
00:12:34 - Eileen Dunn
Yes. So we have this standalone, which was really the original long-term care policies. At first, most of them were just nursing home coverage. But over the last 20 to 30 years, they all include home care, of course, which is a big one. That's your basic insurance, where you pay your premium, and then you're insured for the next year. That's how those what we call the standalone or sometimes we call it traditional long-term care. There is one thing that I like to put on. I'm not usually a big fan of riders, but this one particular rider that I like on standalone policies it's called the joint policy. It's a spousal joint policy. It means each one of you has your own separate policy with your own pool of money in it. But let's say theoretically if one spouse needs care, the well spouse is going to be there to help. And like we said, this long-term care insurance helps take some of that heavy lifting off of the well spouse. So let's say that person had a pool of money of $250,000. They start needing care, and the spouse helps. They also use the long-term care insurance, and they only use $100,000 out of that pool of money. And then the person passes away. The remainder of that pool is now going to be transferred to the surviving spouse's pool. So now, instead of having $250,000, that person has $400,000 in their pool. And that's a good thing because, at some point between spouses, one of you is going to need it. We just don't know which one. And their surviving spouse is going to need it even more because they won't have the benefit of having a spouse there to help. The other thing is that if that one spouse exhausts their whole pool of money, they can now start using some of the benefits of the well spouse. So to me, that just gives you more options on how you can use the benefits. So I think that's very worthwhile. The other option that we have is what we call asset-based, and we're just going to talk about this at a kind of high level, but it's basically like a one lump sum payment. Some people say, well, I have this $150,000 in CDs that I've had for several years, and it's kind of like my safe money, and I just keep rolling them over. Well, it can be just as safe if you were to put that into an asset base. Let's say you put $100,000 into an asset-based policy that now provides you with maybe a $130,000 death benefit if you died and never needed it. But there's also a long-term care rider on that. So those are also options to look into.
Another one that's been very popular is a life insurance policy that has a long-term care rider. I think those are great. I actually own one. However, there's also always caution with all of these things, and this is where the education is so important because when you have a life insurance policy with a long-term care rider, and you start needing care, the first thing you're going to be spending down is that death benefit. So I think it's very important that people understand there's a life insurance need and a long-term care need. They are two separate needs. And the reason I say that is because I had met with a woman a few years ago, and her husband had stage four pancreatic cancer. And I was called in to see what else we could try to help her with. And one of the first questions I will always ask my clients is, do you have a long-term care policy? Now, I assumed that she didn't because if she did, she should have been using it for at least the last year, year and a half. But I still asked the question, and she said, well, I do, but I can't use it. And I said, well, what do you mean I can't use it? And I think it's just kind of human nature too. Here her husband has this terminal condition, and if she uses the long-term care, she's going to be spending down the life insurance benefit. And she didn't want to do that. And I had another case where the kids, when mom needed care, they didn't want to use it because they felt, well, if we don't use this, then that's just more money that'll be in our pocket. I know that sounds terrible, but that's just sometimes the reality of life. So I just think that as long as people are truly educated about that, that can be a very good option. So I think that that's good. Now with all of these policies, you do have to have show some sort of insurability. Some of them will have a cash benefit. Some of them will have what we call a waiver premium. Most of the standalone or traditional policies say that once you go on claim, you don't have to pay your premiums anymore while you are on claim. Almost all of these policies pay for respite. Sometimes people don't understand what respite means, and it's usually just when the caregiver needs a break. I've used the respite benefit before when I've had the caregiver that's had to go into the hospital for surgery. I had a case where a woman's husband had ALS or Lou Gehrig's disease, but she wanted to go out to Colorado to watch her granddaughter graduate from college. So we were able to use the respite benefit on her policy, and that paid for someone to come in the house and stay with the husband.
Most of these policies have care coordination, which means they'll have someone. And most of the time, they have agencies, like a care scout. There's a living strategy, different things like that, that nurses and social workers can be a member of. And if someone goes on a claim, they'd say, okay, this is area code 12345. Who do we have in our network? And they will call that nurse or social worker and say, can you help this person coordinate their benefits? So that can be really very helpful at the time of claim for folks. Most of them also are going to cover adult daycare, which I think is a very underutilized service. And I think we're going to see more of them, especially as mom and dad are aging and the adult kids are still working. And there's two different types. There's a social model and a medical model. So I think that we're going to see more of that. And then there's also the whole thing about reimbursement versus indemnity. Now, reimbursement means that you submit your bills to the home health agency that you used, and then you get reimbursed. Now, a lot of those agencies will bill the insurance directly, but that's what reimbursement means versus indemnity. And indemnity is basically just a cash benefit. And many policies have gotten away from the cash benefits.
00:19:20 - Eileen Dunn
It's kind of, to me, a double-edged sword. Some people like the idea that, yes, we're just going to get that cash is going to come in. You've got this $ 5,000-a-month benefit, and that's great. But remember, when you go on claim something's happened, you're in a vulnerable position. How do we know that that $5,000 is actually being used to pay for that person's care? There's really no oversight, and it also can help them get through that pool of money. And the other thing, this is probably about eight or ten years ago, I met with a family. Mom needed some care. They did have a long-term care policy, and it was an indemnity benefit. And they thought that that was great because their sister Susie hadn't worked in the last two years. So they thought, Susie is going to move in, and we'll just pay Susie to take care of Mom. Well, when I get up there for the family meeting, there was a reason Susie hadn't had a job for the last two years, and Susie just did not have the critical thinking skills necessary to be an appropriate caregiver for the mom. So the indemnities I like in some ways because in rural areas, sometimes it's good, but you got to be really careful about those.
That's why I like we do have one carrier that allows you to use, let's say you have a $5,000 a month benefit. They say you can choose to take 35% of this in cash and pay anybody you want. It wouldn't be the full monthly benefit, but it would be so if you did want to pay a family member or something like that. So that gives it a little bit more oversight. Kind of a happy medium, I guess.
00:20:56 - Cameron Valadez
Right? That's pretty nice. And so I think it's important to mention that all of these different types of policies that Eileen has mentioned, they can all have kind of a mix-match set of these different benefits. There are certain carriers out there that just might not offer something or offer something at a different level as another carrier. Or some of these are just extra benefits that you can get as long as you pay extra for. So there's definitely a lot of planning that goes along with this, not just with your finances, but your situation. Right? Do you have kids around that are going to take part in this or not? Is your spouse healthy, and are they planning on helping out or not? There's just all kinds of different decisions, just like Eileen mentioned. Where do you live? Are you in a rural area or not? So there's a lot that goes into what to decide when building your long-term care policy.
00:21:54 - Eileen Dunn
Exactly. And you hit on something significant when you were talking about planning. What we're planning is for the unexpected in some ways. So when we look at are the kids around and going to be able to help and the spouse, you'd answer that question based on your reality now, but what's the reality going to be in ten years? The fact is, we don't know.
That spouse could take a turn, that spouse could be hit in a car accident, as we talked about in the last podcast with my family that had five kids that were going to help, and then two of the adult kids died first. So we just don't know. So it's these unknown variables that we have to take into account. The way I always look at it is make your long-term care plan based on maybe the fact that nobody's going to be around to help, that it's just you.
00:22:40 - Cameron Valadez
Right. Kind of take the worst-case scenario approach to make sure that you've got your bases covered.
00:22:45 - Eileen Dunn
Right. Expect the worst and hope for the best.
00:22:48 - Cameron Valadez
Absolutely. I would agree. Now, something else I want to quickly mention is that long-term care policies, they may not cover all of the costs associated with long-term care incurred by the insured. So don't just think that, hey, I've got this long-term care insurance policy, and anything and everything will be covered no matter what. You should always carefully review all of the policy limitations of whatever you consider purchasing on your own. And also with your agent or financial advisor as well. Now, that being said, Eileen, is there anything in particular that most long-term care policies likely won't cover that people might expect them to cover?
00:23:31 - Eileen Dunn
Well, basically, the way that it works is these policies will cover the per diem rate for the cost of the person that's providing the care. Some of them will also cover home modifications. Some might be able to cover some equipment. I had a woman several years ago, and she was only in her 60s, but she had developed some rare virus and wound up paralyzed from the waist down. But she did have long-term care insurance, and we were able to use the home modification benefit so that she could stay in her home. But she had to have countertops lowered, we had to have a ramp put in, those kinds of things. And her policy did help pay for that. But she was independent with everything else, so she didn't require the two ADL triggers. We were able to just use that one home modification benefit. But I think a lot of times, people don't understand that there are many ancillary costs that go into not just care but just aging in general. For example, Ensure, the supplements, we often have to have bed pans, the cost of the Depends, the adult diapers, the gloves. There's a lot of costs, especially as we were going through the pandemic, we all had to be masked up and everything else. But a lot of times, in-home care, we always have to take what we call universal precautions. So they're going to have to wear the rubber gloves and that kind of thing. Obviously, when they're doing personal care, they're going to need that. The biggest thing that I have found is that people think that, well, it's going to cover if Mom just we have to run under the store or help with some laundry and meal prep. Those are like we talked about the last time, the homemaker services. That's not going to trigger a long-term care event. It's when you start needing the standby assistance with the two activities of daily living, or you have a cognitive impairment that requires continuous supervision.
00:25:30 - Cameron Valadez
Yeah, that makes sense. I want to take a turn for just a second here and mention a couple of things regarding taxes and long-term care insurance. One of the things is that when you receive actual benefits from a long-term care insurance policy, you typically won't owe taxes on those benefits. There are, however, limitations on the amount of qualified long-term care benefits that may be excluded from your income. And number two is that you can possibly deduct some of the premiums that you pay for the long-term care insurance policies if you what is called itemize deductions on your tax return. Not everyone does this because sometimes it doesn't make sense to in any given year, but only if you itemize are you potentially able to deduct part of your medical expenses, which may include long-term care insurance premiums you paid for out of pocket. And in general, and currently, you can deduct only the amount of medical expenses that exceed seven and a half percent of your adjusted gross income, or AGI for short. And that is just a line item that can be found on Form 1040 of your tax return. The 1040 is basically that summary form that most of the other tax forms feed into right there toward the top of your tax return. That kind of explains everything to you. And as always, consult your tax professional first to determine whether or not you'll be able to benefit from these types of deductions or whether or not your benefits will be taxable to you when you actually start receiving them.
Now, turning back the benefits of some of these policies, they sound great, but obviously, there's a cost. And while Eileen or I cannot tell you exactly what it will cost you, since there are so many factors that go into what you will pay depending on how you choose to “build your policy,” such as benefit length, type of policy, et cetera. Eileen, can you at least give us an idea of some general cost guidelines with long-term care insurance?
00:27:48 - Eileen Dunn
Sure. What I often think is the best thing to do is to take a look at what would a reasonable premium be for you. I mean, I'd love to see everybody with $10,000 a month for a ten-year benefit, but that's not going to fit the bill for everybody. So I think sometimes it's best to talk with your advisor and say, okay, based on and what I see a lot of people have done is they look at their investments, and they say, okay, this is how much my investments are accruing every year, and we just keep reinvesting it. But wouldn't it make some sense for us to take some of the interest from those investments? Because right now, those investments are all exposed. Wouldn't it make sense to take some of the interest from those investments and buy the long-term care insurance that now protects the whole thing? I kind of look at the long-term care insurance as being the safety deposit box that you put all your other assets in, and a lot of people will ask, what's the typical age or what's the best age to be purchasing long-term care insurance? I know I got mine on my 50th birthday. Don't get any ideas, Cameron, and ask me how long I've been paying premiums because I'm not going to tell you. But I will tell you. I did buy it on my 50th birthday.
00:28:59 - Cameron Valadez
Don't worry, I won't ask.
00:29:01 - Eileen Dunn
But I did buy that on my 50th birthday, and it just felt good and secure to have it done. But I've also had people that have been in their late 40s that have accumulated some significant wealth, and they wanted to ensure that. The other benefit of buying younger is that most of the time, you can lock in at preferred health rates. You're going to be buying at a younger age. Yes, you might be paying longer, but in the long run, that makes sense. So that's a good thing because there's so many factors that go into the cost. It obviously depends on the monthly benefit, how long an elimination period you want, if you want to add the inflation rider, which I strongly suggest that anyone under the age of 65 do, and then how long a term you want them to pay out that benefit.
Trying to find the best comfortable premium, an affordable premium for you, is a really good way to go about it because then we can just build the best plan around that. And other people will say, well, does it make sense for only one person to have it? It really doesn't because, again, we don't have a crystal ball, and we don't have any way of knowing who's going to need care, when, and for how long. So both really do need to be protected. And you do save some money, at least with the standalone, when you have both spouses buying a policy because they have spousal discounts. And obviously, there are going to be different levels. Most all the companies have a preferred rate, a standard health rate, and some of them will even give a class one and class two so that if someone does have some more serious hiccups in their health history, they can still get covered, but they might have to do it at a rated premium.
00:30:53 - Cameron Valadez
Got you. Yeah, that makes sense. So sort of similar to life insurance, but not exactly the same as far as underwriting goes.
00:30:59 - Eileen Dunn
Right. And it's actually kind of interesting because things that life insurance wouldn't consider long-term care would, and some of the things that life would consider long-term care wouldn't. And the only reason I can look at that and try to figure that out is that with life insurance, they're afraid of you dying. Right? They're more concerned about you dying. With long-term care, they're more concerned with you living. If you had serious cardiac conditions, life insurance is going to be like, oh, I don't know about that, whereas long-term care might not be quite as concerned about that.
00:31:34 - Cameron Valadez
Right, okay, so let's say you've made the decision to pursue purchasing some kind of long-term care policy. Is there a way you can narrow down your options further and maybe screen yourself ahead of time so that you know what you might be able to get?
00:31:47 - Eileen Dunn
Well, this is why I think it's very important to work with what we call a broker. And a broker is someone that doesn't work for just one particular company or even just one or two. You want someone that works with several different companies. And I know I've worked with some advisors before that even though they have access to several companies, they really just focus on one or two. I think it's really good to have a broader reach to cast a wider net because there are so many variables. So I do think that it's important to pick an advisor that either works with a broker or is comfortable working across the board with all the different companies.
00:32:25 - Cameron Valadez
Yeah, absolutely. I would definitely agree. That's something that we see day to day in practice. Another thing is that there are sort of health prescreening questionnaires out there from some of the different either brokers or the actual insurance companies themselves that you can go through before you even apply. And so you can see, hey, do I have any of those things that would be an automatic no or that might rate me higher, in which case I'd have to pay a higher premium? You can kind of go through these questionnaires and check the boxes ahead of time. Be sure to check with those insurance companies or those brokers to see if they can help you do that before you actually get set on a specific type of policy because you don't know whether or not you'll be able to get that one or at the price that you're expecting.
00:33:14 - Eileen Dunn
And that's another point why it's important to work with a broker. Because if people are just out doing a search and they go to one particular company and answer their prescreen, they might say no, or they might rate. But in other companies, it might be more acceptable to another company. You see what I'm saying?
00:33:33 - Cameron Valadez
00:33:34 - Eileen Dunn
So there's different companies that have different risk tolerance.
00:33:38 - Cameron Valadez
00:33:38 - Eileen Dunn
So if they're going to do that, I would go to a couple of different places to do that.
00:33:42 - Cameron Valadez
Other than going the traditional long-term care insurance route, listeners might be wondering what is this long-term care partnership program thing that we mentioned earlier. Can you take some time to educate us on this and how this might coordinate with somebody's own coverage? Because I think a lot of people have never heard of the partnership program or just have no idea how it works.
00:34:06 - Eileen Dunn
The partnership programs are only available with the traditional or what we call standalone. The asset base that we talked about and the life insurance policies with a long-term care rider are not partnership qualified. But first, let's see what the partnership was. It was a pilot program through the Robert Wood Johnson Foundation, and it was with four states, New York, Indiana, Connecticut, and California, because they realized that there was this age wave coming, and they said the system certainly can't deal with this. How can we encourage people to look at the private long-term care insurance? So they came up with these partnership plans, and what they said is we're going to offer dollar-for-dollar asset protection. And what that means is that if somebody has a long-term care policy that qualifies as a partnership in their state, and if they exhaust the benefits of the policy and they need to apply for Medicaid, as we talked about last time, Medicaid is going to go back five years and look at all of your financials. Because Medicaid is the payer of last resort. And they say we don't mind helping you, but if you have the ability to pay for your care, you need to spend your own money first. So if we have somebody that has maybe $300,000 in accountable assets and they had a long-term care policy that qualifies for the partnership that paid out $250,000, but then they outlived the benefits of that policy, but they're still requiring care. They can apply for their state Medicaid assistance. And when they look back, and they say, okay, you have $300,000 of countable assets, but wait a second, I see you had a long-term care policy that qualifies for the state partnership. So you know what? You did your part. You tried to provide for your care, and you beat the odds. You outlived the benefits of the policy. So for every dollar that policy paid out, you can protect a dollar of available resources. So for that person does not now, let's just assume that they're a single person, and in most states, they would have to spend down that $300,000 until they have $2,000 left. They would be able to protect not only their $2,000 but $250,000. So they would only have to spend down $48,000, and that $250 that the policy paid out is guaranteed asset protection. And I think that that's really important and very valuable.
00:36:46 - Cameron Valadez
Yeah, that's awesome.
00:36:48 - Eileen Dunn
But to your point, a lot of people just don't know about it.
00:36:52 - Cameron Valadez
Right. And like you mentioned, there's only so many states that provide it. So, for example, somewhere like California, they don't have that partnership program. Correct?
00:36:52 - Eileen Dunn
Correct. In New York and California. Neither one have partnerships anymore. Yet we were the two original partnership states. So that's unfortunate, but most states do. What happened is in 2006, when they passed the Deficit Reduction Act, they realized that these partnership programs were working. So they allowed all states to become partnership states. Most states, there are a handful of states that don't have the partnership, but most of them do. And most of them are also part of what we call the reciprocity program. So that if you are in Tennessee and you have a Tennessee partnership policy, but then you retire to Florida, Florida has a partnership program, so does Tennessee, and there's reciprocity between those two. So you would still be able to access Florida Medicaid and have that partnership protection.
00:37:54 - Cameron Valadez
Awesome. Thank you for sharing that. I really appreciate that. I definitely think that this partnership program is probably something new for most listeners. Are there any resources you can point listeners to in order to learn more about the partnership program and their specific state?
00:38:10 - Eileen Dunn
What I would recommend that they do is go to their state insurance department or their state health department website or just go in and do a Google search and say Kentucky Long Term Care Partnership Program or whatever your state long-term care insurance program. And usually, that will give you a whole host of things. Some are general ones or people advertising but just look specifically for your state because it should be near the top of your search. But that's usually the best way to do it, and then you can get it directly from your state site. Some states are more inclusive than others. Some have just a general overview. Some are very descriptive and give examples and the whole thing. So I would definitely recommend that.
00:38:56 - Cameron Valadez
Awesome. So yeah, if you're not in California or New York, make sure you go online and check that out and make that part of your long-term care planning. We've covered a lot today on the insurance aspect of long-term care. Eileen, thank you again for educating our listeners and providing your unique insights. We really appreciate it. This was part two of our multi-episode series on long-term care. Stay tuned into this series because, in a couple of weeks, we will return with part three, where we will discuss how to determine how much long-term care insurance that you may need. So be sure not to miss it because this all plays together.
If you have a minute and find this information actionable and insightful, and you want to stay up to date on the latest and useful retirement planning content, please subscribe to or follow the show on your podcast app. If you'd like to learn more about the rules and strategies discussed in today's show, you can find the links to the resources we have provided in the show notes on your podcast app, or you can visit us at retiredishpodcast.com/19. There you can also sign up for our monthly Retired-ish newsletter, where each month, we discuss money and emotions, investing, tax, estate tips, Medicare, Social Security, long-term care, and even a brief discussion about the current markets in layman's terms. We always include something actionable and insightful in our newsletters so that you can implement right away, such as how-to guides and other simplified strategies. Again, this can all be found at retiredishpodcast.com/19. Thank you for tuning in and following along. See you next time on Retired-ish.
00:41:00 - DISCLOSURE
Eileen Dunn is not affiliated with or endorsed by Planable Wealth.
Securities and advisory services are offered through LPL Financial, a registered investment advisor, member FINRA, SIPC. The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA.
In addition, if you are required to take a required minimum distribution, RMD, in the year you convert, you must do so before converting to a Roth IRA. Investing involves risk, including the potential loss of principle. No investment strategy can guarantee a profit or protect against loss. Past performance is not a guarantee of future results.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise, and bonds are subject to availability and change in price. Government bonds and treasury bills are guaranteed by the US government as to the timely payment of principal and interest, and if held to maturity, offer a fixed rate of return and fixed principal value.
Treasury inflation-protected securities, or TIPS, are subject to market risk and significant interest rate risk as their longer duration makes a more sensitive to price declines associated with higher interest rates. Municipal bonds are subject to availability and change in price. They are subject to market and interest rate risk if sold prior to maturity. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free, but other state and local taxes may apply. If sold prior to maturity, capital gain tax could apply.
Neither LPL Financial nor its registered representatives offer tax or legal advice. Always consult a qualified tax advisor for information as to how taxes may affect your particular situation.
Asset allocation does not ensure a profit or protect against a loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.