Thursday, May 08, 2008

Howdy, Pardner!

Ohio is in the vanguard of states offering the new "LTCi Partnership Program." Enabled by the Deficit Reduction Act of 2005, PP's are the latest signal from the gummint that it wants out of the long term care financing business. Briefly, the Ohio Partnership Program (OPP) allows one to "shelter" more money if and/or when one "spends down" to become Medicaid-eligible.

Many folks believe, erroneously, that Medicare will pay for their long term care needs. It doesn't: Medicare pays for medical expenses, which may sometimes include brief stints at a skilled nursing facility. But this is limited to a total of 100 days, which isn't exactly "long term." So, we turn to our long term care policies (if we have them) to foot a chunk of the bill. Often though, it isn't enough, so one turns to the state for assistance. The mechanism for this is called Medicaid, which is a federal program administered by the states. In order to qualify for this assistance, though, one must "spend down" one's assets. There are some allowances made for a spouse that's still well, and some personal belongings. But in general, one is allowed to keep only $1,500 in assets (Ohio's the lowballer here: most other states allow one to keep $2,000).

The Ohio Partnership Program changes that by allowing one to keep more assets if one buys a qualifying Long Term Care policy (PQ). Let's say you buy a plan that pays $100 a day for 3 years. That's a maximum benefit (or "pool of money") of about $110,000. If it's a PQ policy (more on that in a moment), then you're allowed to take $110,000 (plus the original $1,500) "off the table" when spending down. It's a way to preserve some, perhaps most, of your assets. Not a bad deal.

PQ plans are pretty simple, too, and most LTCi policies currently being sold would probably qualify. There are really only three criteria:
1) The plan must be federally Tax Qualified (most are)
2) Generally, the plan must include some cost-of-living or inflation protection
3) The carrier must be "approved" to participate
I'd daresay most plans sold these days fit at least the first two, and more carriers are signing on to participate. Still, it pays to ask your agent about your own plan.

If there's any downside to the program, it's this: since most plans sold prior to February of 2006 (when the DRA took effect) aren't Partnership Qualified, I suspect that there will be a rash of folks replacing their older, non-PQ plans with the newer model. This may or may not be a good idea, but I would be very suspect of any agent who suggests this course without a thorough fact-finding about one's current physical and financial health.

Oh, and the Law of Unintended Consequences comes into play on the agent's side, as well: we now have a new Continuing Education requirement. Effective September 1, we can't sell any LTCi plans (PQ or no) unless we're "certified;" the certification requires us to take a special 8 hour class on long term care in general, and the Partnership Plan in particular (and also requires us to have 4 hour "refresher" courses every two years after that). Nothing inherently wrong with that, but the class I took crammed 3 hours of material into 8 hours of instruction. Not the instructor's fault, of course, but completely unnecessary.

Long Term Care insurance is among the most complicated of the products we sell, so intensive training is not necessarily a bad thing. But I just don't think that it's 8 hours worth of material.

Still, it was worthwhile, if only because I'm now certified [ed: don't you mean "certifiable?"] to sell LTCi and the Ohio Partnership Program.
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