Aaron Jersey, Q: Can you explain how the long anticipated, recently introduced New Jersey Long Term Care Insurance Partnership Program works?
The Problem - Cost of Long Term Health Care
About half the population who will reach the age of 65 are expected Aaron Jersey to enter a nursing home at least once in their lifetime. This compares Aaron Jersey with a 1 in 340 chance of a major auto accident or a 1 in 1,200 chance of a total loss from a fire. A 55 year-old New Jersey (NJ) resident is expected to pay over $300,000 for one year of nursing home care when they are likely to need it at the age of 80. Based on the average nursing home stay, total costs are expected to reach $1.5 million per person - easily wiping out a lifetime of savings for many families. New Jersey\'s long-term care costs are among the highest in the country.
Background of Medicaid and Long Term Care Insurance
The Deficit Reduction Act of 2005 radically changed the Medicaid playing field. The most important change was an extension of the look-back period for asset transfers to establish Medicaid\'s eligibility for nursing home coverage from 3 to 5 years and changes the start of the penalty from the date of the transfer to the date of Medicaid eligibility. The second most important change was the lifting of the moratorium on states introducing new partnership programs to increase the role of private long term care insurance in financing long-term services.
The Solution - NJ Long Term Care Partnership Program (NJLTCPP)
The Aaron Jersey long anticipated and recently introduced NJLTCPP allow individuals to protect assets equal to the insurance benefits received from a Partnership Policy so that the assets will not be taken into account in determining financial eligibility for Medicaid. One of the key aspects of the policies is their requirement for inflation protection (minimum of 3%) in the policy for most individuals.
For example, a NJ resident purchases $102,200 (the average rate of a private room in NJ in 2008) worth of annual care through the policy. When the care is needed, the policy pays for $900,000 of care (due to inflation protection). Under the NJLTCPP, a person would then have $900,000 of assets protected from NJ Medicaid. This type of protection is commonly referred to as \"dollar for dollar\" asset protection.
Although the NJLTCPP does not provide as a high a level of protection as the New York State Partnership for Long Term Care (NYSPLTC) policies, it goes a long way. The NYSPLTC polices allow for unlimited asset protection. One of the key aspects of the policies is their requirement for inflation protection (minimum of 5%) in the policy for most individuals.
Using the same example above for a NY state resident, the person could have 100% of their assets protected. Those assets could include homes, boats, artwork or any other personal assets. This type of protection is commonly referred to as \"total asset\" protection. The NYSPLTC has federal income tax deductibility and NY state tax credit eligibility. Only two states can offer unlimited asset protection, NY and Indiana.
Action Step - Take Advantage of the New Protection Offered with LTC
Establishing LTC insurance immediately reduces the financial and psychological burdens that will ultimately plague most families when the need for long-term care arrives. With many states running large deficits, it is even more critical than ever to take advantage of any programs designed to protect your assets, before they review the legislation and discontinue the issues of new policies. Like most insurance, the earlier you start your policy, the lower your cost of the policy.
