Elder Law Planning
New York State Partnership for Long-term Care

By George Mandel

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The Costs of Long-term Care

A Metropolitan Life Insurance Company survey issued in September 2004 noted that average daily nursing home costs for semiprivate accommodations in New York State range from $228 in rural areas to $301 in the New York City metropolitan area. Similar outlays for private accommodations range from $232 to $312. Costs for private daily care range from $275 to $440. Costs for home health aides vary. In Syracuse, the average hourly rate is $20, ranging from $16 to $40. In New York City, the average hourly rate is $15, ranging from $13 to $20. The possible impact of these expenditures has resulted in many individuals in their 40s, 50s, and 60s realizing that their retirement planning should include long-term care insurance (LTCI).

For individuals or families with assets in excess of $1 million (excluding the value of their residences), long-term care costs might be resolved by purchasing a LTCI policy, by paying for these costs out of current income, or by a partial divestment of assets. For the less affluent, the possibility that long-term care costs will greatly and directly affect their lives is more immediate. Many individuals and families cannot afford the financial impact. Insurance is a way to protect against the financial impact of a catastrophic event, in this case a catastrophic injury or long-term disability.

Individuals and families in the lower strata of income and assets are compelled to apply for Medicaid in order to pay for medical expenses, including long-term care. The Medicaid burden on the federal government and the states has been enormous. In adopting the current budget, Congress considered cutting Medicaid funding. The states have been obliged to fund their programs from their own resources to supplement federal funding.

Medicaid long-term expenditures for the elderly in New York are projected to exceed $10.5 billion by 2010. In 2002, total long-term care expenditures were more than $14 billion, of which 40%, approximately $5.6 billion, could be allocated for long-term care.

The New York State Partnership for Long Term Care was established by the state legislature in September 1997 in an attempt to manage the increasing cost of the state’s share of Medicaid. The Partnership consisted of an LTCI policy that by its terms obligated the state to consider the policy benefits as full or partial payment for long-term care and for the protection of the insured’s assets. The use of an insurance policy was promoted by a study conducted with funds from the Robert Wood Johnson Foundation of New Brunswick, N.J., and recognized by Congress. Its provisions are incorporated for Medicaid coverage, and it is designated as Medicaid Extended Coverage (MEC). In addition to New York, Connecticut, California, and Indiana hastened to apply before Congress closed the program.

The Partnership policy for New York protects 100% of the insured’s (and spouse’s) assets, whereas the other three states’ programs protect only the amount of assets covered by the policy. For example, the program, which provides for a $180-per-day benefit (the 2005 minimum) with coverage for a minimum three-year period, will protect 100% of a New York participant’s assets. In the other states’ programs, only $197,100 (1,095 days) of assets would be protected.

A number of qualifying tests must be met for Medicaid, one of which (for 2005) is that the applicant cannot have combined assets in excess of $4,000 for an individual, or $5,850 for a couple, plus $1,500 in a burial fund and life insurance. (All Medicaid amounts mentioned in this and following paragraphs are indexed annually for 5% compound inflation.) The value of the principal residence of the applicant is exempt from the computation. Monthly income is limited to a maximum of $687 for an individual or $975 for a couple.

There is also a limit for transfers of property in the period during which the applicant makes the application. Medicaid is permitted to “look back” for transfers of ordinary assets during the 36-month period prior to application. If transfers were made to a trust, the look-back period is 60 months. Ineligible transfers during the look-back period will delay Medicaid eligibility.

The penalty period for transfer of assets is based on a “home rate” for each county. The formula for the delay in eligibility for qualifying for Medicaid is:

Delay (in Months) = Amount of the Transfer/County Rate

In addition, there is a community spouse resource allowance (CSRA) test. The assets of the community spouse (the live-at-home spouse) are considered in the application, with an exception for that spouse’s own retirement assets. The at-home spouse is entitled to retain the greater of $74,820 (2005) or 50% of the couple’s countable resources, up to a maximum of $95,100 (2005).

Another test is a monthly maintenance needs allowance (MMNA), under which the at-home spouse’s income cannot exceed $2,378 (2005). The Department of Social Services can claim 25% of the excess to complete the required formula.

If the Medicaid applicant has acquired a New York State Partnership Insurance Policy, the asset test is waived but the income tests are not. Therefore, the applicant’s income in excess of the cost of care must be used for that purpose, and the applicant would not quality for MEC.

In considering the Medicaid application, a qualified attorney should be consulted, preferably one who is a member of the National Academy of Elder Law Attorneys, Inc. (NAELA), and accredited as a Certified Elder Law Attorney (CELA).

Individuals complying with the act’s provisions for acquiring an LTCI policy will qualify for MEC regardless of the value of their assets and regardless of the type or amount of resources they have. However, all income rules in effect at the time of application will apply in determining MEC eligibility.

The acquisition of the policy will exempt the insured from the transfer of resources penalty regulations, as stated previously.

Determining Income for Medicaid Eligibility

For purposes of determining Medicaid eligibility, income is basically the gross amount received by the individual from the use of that person’s assets. For example:

• Pensions
• Social Security
• Annuities, IRAs, and qualified retirement plans (A single complete withdrawal of an annuity would not be considered income.)
• Net rental income
• Interest on loans and mortgages
• Dividends and interest from securities
• Capital gain distributions from mutual funds, regulated investment trusts, and other trusts (Gains from the sale of capital assets are not considered income but an increase in asset value.)
• Life insurance (Benefits are considered income in the month received; dividends credited in policies are not income; interest on dividends in life insurance policies are considered income).

Policy Provisions

To qualify, the New York Partnership Policy must include the following minimum provisions:

Daily coverage for nursing home care and home care. The minimum coverage provisions increase each year based on a 5%-inflation compounded basis. In addition, home care is considered on the basis of half-days. The minimum daily coverage provisions for the noted years are as follows:

Length of coverage benefit. The policy must cover a minimum of three years of nursing home care and six years of home care. (Each day of home care is counted as a half-day.) Higher coverage is permissible and is recommended because the mandated coverage minimums are much lower than actual costs throughout most of New York.

Level premiums. Premiums must be level and cannot be increased except for an application made by the insurance company for the identical class of insureds and subject to approval by the New York State Insurance Department.

Inflation. All policies must provide for an increase in benefits at a 5%-inflation compounded rate, except for optional inflation coverage for those age 80 and older.

Other provisions. The following services must be covered: nursing home care; home care; assisted-living care; adult day care; personal care; and skilled nursing care.

Each policy must provide for 14 days annually of respite care where an unpaid caregiver at home should be permitted to leave and be compensated. Each policy must provide for the coverage of two days annually for consultation purposes.

There must be a minimum 30-day additional grace period for a person designated in the application to pay the required premium in the event the insured is unable to do so within the normal grace period.

While awaiting placement in a nursing home, or for at-home services, the insured must be reimbursed if in care status in a hospital.

The policy must also provide for an adjustment in premiums or benefits in the event of the passage of a national long-term care program.

The denial of benefits to the insured must be available for review by the Partnership through a benefit authorization review. If denied by the Partnership after review, the policyholder has the right to request binding arbitration. The policyholder has the right to use the Court of Appeals process guaranteed under New York State Insurance Law, as well as a process offered by the insurance company.

Information is strictly confidential and cannot be disclosed without the policyholder’s permission.

Although coverage may be used outside of New York, MEC is valid only for services and service providers under New York’s Medicaid program for New York residents. A policyholder must return to New York in order to benefit from the program’s asset-protection provisions.

Not all Partnership policies are identical. They may vary, as long as the basic minimum requirements are met. A particular policy may have higher dollar amounts of benefits, shorter elimination periods, or provide for a waiver of premiums for home care. All policies, however, provide for waiver of premiums for nursing-home care. A policy may also offer optional benefits, including different nonforfeiture benefits that return some value in the event of termination due to discontinued payment of premiums.

Why Buy Long-term Care Insurance?

One should consider the following benefits when determining whether to purchase an LTCI policy:

• Protection of life savings and control of one’s assets;
• Choice of location of a facility near one’s home or, if necessary, a relative’s home;
• The value placed on one’s own responsibility and interdependence;
• Protecting family from a disruptive requirement for the affected individual’s personal care; and
• In light of all of the above, peace of mind.

Who Should Consider the New York Partnership Policy?

The public is becoming increasingly aware that an LTCI policy is an integral part of the financial planning process. The following types of individuals should especially consider the New York Partnership Policy:

• Middle-aged individuals that are generally healthy;
• Single persons having a total annual income of $30,000 or greater, and assets, not including their home, of at least $60,000;
• Married persons having total income of at least $40,000, and assets, not including their home, of at least $140,000.

Discretionary income should be sufficient to pay for long-term care and can be a guide in determining the amount of insurance coverage. Consider that the average annual premium for an average base Partnership policy in 2004 was as follows:

At age 35:     $ 940
At age 40:     $ 954
At age 45:     $1,074
At age 50:     $1,234
At age 55:     $1,463
At age 60:     $1,884
At age 65:     $2,478
At age 70:     $3,265
At age 75:     $5,269

New York State Partnership policy premiums are deductible as medical expenses for federal tax purposes, although in some instances only on a limited basis because of federal regulations. Beginning with the 2004 tax return, New York has enacted a 20% tax credit in lieu of the limited federal deduction.

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