New Policy undermines LTC Partnership Insurance Benefits

Foolish me. I got excited about the implementation of a long term care insurance partnership program in Michigan, and have written about it here several times.

As previously discussed, the law, which was finally implemented just this spring, provided two benefits to those who purchased and used a LTC partnership policy: (1) an increased asset protection at the time of application, and (2) an equivalent protection of those assets at death from Michigan’s estate recovery program. For a simple example, if a single person purchased a partnership policy which paid out $300,000 in benefits to that individual, that individual could apply for Medicaid and be eligible when they had countable assets of less than $302,000 ($2,000 as the usual asset limit, plus $300,000 as a benefit of having purchased the insurance).  Likewise, at death, this individual would have an “asset disregard” of $300,000 from the estate recovery program.  The concept is to incentivize people to buy LTC insurance and in return the State would provide them with greater asset protections if they exhaust their resources and turn to Medicaid for assistance.

Seemed reasonable and even creative. But apparently state policy-makers thought the deal was too sweet for the consumer.  Hence they are changing in the definition of “estate” as it appears in the State Medicaid Plan so that the asset disregard related to estate recovery is essentially negated.  Specifically the new policy will change the definition of an “estate” to be as follows:

… If a decedent received (or is entitled to receive) benefits under a long-term care insurance policy and had assets or resources disregarded, pursuant to 42 USC 1396p(b)(4)(B) “estate” includes all real and personal property and other assets in which the decedent had any legal tittle or interest immediately before or at the time of death to the extent of that interest, including but not limited to, assets conveyed to a survivor, heir, or assign of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, transfer-on-death deed, payable on death contact, promissory note or other arrangement.

This means that the exempt assets, including one’s house, would be considered as part of the asset disregard for estate recovery, and that the value of the home would be counted even if it passed to others at death by ladybird deed or otherwise in a manner which would avoid estate recovery under current rules.

The long term care Medicaid application now includes matching language. It says:

If you have received an asset disregard due to a long-term care partnership policy, Estate Recovery applies to all assets whether they are subject to probate administration or not.

After all is said and done it looks like the energy that so many put into making the concept of a long term care insurance partnership meaningful in Michigan will not be realized thanks to the efforts of the state bureaucrats who seem obsessed with the perception that the people of Michigan, and especially their planners and counselors, are all part of a conspiracy to rip off their system.

Thanks much to my colleague David Shaltz for ferreting out this development.