Cutting future expenses of elder care with the
Minnesota Long-Term Care Partnership

BY STAFF WRITER —
The cost of long-term care is already financially devastating to Minnesotans with modest incomes. And as costs rise for home care and nursing homes, even middle income Minnesotans will be forced to rely on government resources, already stretched, to be able to afford these services. Faced with this prospect, Minnesota's Legislature has taken measures it hopes will avert a fiscal disaster in the future.

Private long-term care insurance could provide care for those with the means to afford it. There are currently about 180,000 long-term care insurance policies in force in Minnesota, according to the state Department of Health Services. However, the cost of this coverage and the uncertainty over premium increases have been major deterrents for middle income people to purchasing this insurance in greater numbers.

Typically, people without coverage who need long-term care end up calling on the state's Medical Assistance program to cover it. And, until recently, to qualify for Medical Assistance, Minnesotans had to "spend down" their cash assets (all property except their primary home, one car and personal items) until they have only $3,000 remaining.

People with modest incomes will probably still have to rely on Medical Assistance to provide long-term care as they become elderly. However, private long-term care insurance could become a more attractive option for people closer to the median income level in the future due to recent legislation.

Last year, Minnesota joined a growing list of states trying to narrow the gap between the need for long-term care services and the cost of long-term care insurance. The idea behind the Minnesota Long Term Care Partnership is to encourage Minnesotans to purchase long-term care insurance in exchange for providing that individuals no longer have to reach the poverty level to qualify for Medical Assistance coverage. The goal is to make long-term care insurance more affordable to moderate-income people.

Under the provisions of the Partnership, you can shelter an amount of your assets from the Medical Assistance "spend down" requirement equal to the value of a long-term care insurance policy. So, if you purchase a policy with $100,000 of benefits, you could keep that much in assets and still qualify for Medical Assistance help if you need it later.

If more people are covered by long-term care insurance, the burden on state Medical Assistance resources will be lessened. In the long run, proponents of the Partnership expect to lower Medical Assistance spending growth, because fewer seniors will need state coverage for nursing home stays, particularly in their younger years. Nursing home costs under the state Medical Assistance program have already reached about $1 billion a year.

To qualify for the provisions of the Partnership, your long-term care insurance policy must meet minimum national standards, which includes (for those under age 75) inflation coverage. (See "Inflation and long-term care insurance benefits.")

And if you want to take your benefits with you when you retire to the Sunbelt, you'll have to find another Partnership state that accepts a Minnesota Partnership policy, unless you return to Minnesota to claim your benefits. That's something you'll want to consider when you plan a retirement location. So far, states such as Florida, Georgia and Hawaii all have Partnership legislation, and this list is likely to expand.

The Minnesota Department of Human Services (www.dhs.state.mn.us) anticipates that the Partnership will help make insurance more affordable by encouraging insurers to develop policies that are less costly by offering lower benefit packages, since the legislation does not have a minimum benefit requirement. So, instead of purchasing a three- or five-year policy, you may in the future be able to purchase coverage for just one or two years, which would provide at least some coverage, while protecting your assets and still keeping you eligible for Medical Assistance when the coverage expires.

The Long Term Care Partnership is not going to make long term care insurance a good option for everyone. However, it could make it a more attractive option to some who previously could not afford it. And, that will help Minnesota reserve Medical Assistance resources for more people who will need it in the future.

One consequence of the legislation is that it further complicates the issue of asset transfer under Medical Assistance. So if you want to take advantage of some of its provisions, you would be wise to consult with an attorney who understands the Long Term Care Partnership.

(Search for Minnesota companies providing long term care insurance in the GrayTimes directory of senior services.)

(Posted April 12, 2008)