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LTC - NYS Partnership

This is the final series of articles related to Long-Term Care.  This week we will go over some basics of a special program available to NY State residents called The New York State Partnership for Long-Term Care.  It is designed to make long-term care coverage more affordable and offer protection of assets from Medicaid.

The partnership program was enacted into law back in 1997.  It is essentially a “partnership” between New York State and NY State approved Private Insurance Companies.  The program consists of two major components; the insurance component and the Medicaid Extended Coverage component.

Insurance Component - Here are some important minimum requirements that Partnership Policies share:
1) Time Period - Coverage for at least three years in a Nursing Home or six years of home care, where two days of home care equal one nursing home day.
2) Daily Benefit Amount - As of January 1, 2005, the minimum daily benefit is $180 per day for nursing home care and $90 per day for home health care.
3) Inflation protection - Any participant under the age of 80 must have their daily benefit increase by 5% compounded annually.  Participants 80 or older have the option of this additional protection.
4) Elimination Period - The minimum waiting period for basic coverage is 100 days.  Some companies offer even lower waiting periods for an additional premium.
5) Level premiums - Premiums will not increase as you get older.
6) Extended Grace Period - The participant has the option of designating some other person to be notified if the policy is about to lapse due to non-payment of premium beyond the traditional 31 days usually allowed.  Selecting this option will protect you in case you are not able to manage your affairs, ensuring that you will not lose your coverage at the time you may need it most.
7) Portability - A participant will be covered under their policy even outside of New York State.  However, as I will explain later, if the participant still needs care after the policy's benefits are exhausted, he or she would have to move back to NY State to be eligible for the Medicaid Extended Coverage.

These are some of the minimum requirements.  A participant can choose to have more lucrative benefits (for example a higher daily benefit amount) if desired.

Medicaid Extended Coverage Component - If participants still require care after policy benefits run out, you can apply for Medicaid extended coverage without regard to the type and amount of assets you have.  This means that you can go on the Medicaid program without having to “spend down” your assets to become eligible.  Eligible participants however, would be required to contribute income (over certain limits) to the cost of their care.

Space does not permit me to discuss all the benefits of the Partnership Program.  If you would like more information, please stop by my office for a free Consumer Booklet or log on to

LTC - Types of Coverage and Terminology    Back to top

Last week, we went over some important factors to consider before purchasing Long-Term Care (LTC) insurance.  This week we'll go over the basic types of LTC coverage and some related terminology.  This will help you see the mechanics of how LTC protection works.

There are basically three types of LTC policies:  Facility policies pay only for care in assisted living, residential care, and nursing home facilities.  Home Care policies pay only for care in your own home and adult daycare.  Comprehensive policies combine the benefits of the facility AND home care.  Obviously, this type of policy offers more flexibility.

In any Long-Term Care policy, there are terms you should be familiar with:

Maximum Daily Benefit - This is the maximum amount per day that a policy will pay when you are receiving care.  Some policies use a weekly or monthly benefit for home care and will reimburse actual expenses incurred up to these limits.  Other policies are designed to pay benefits on a per diem basis, regardless of actual expenses incurred. It is important to choose a benefit amount that will suit your needs.  The larger the daily maximum benefit is, the more expensive your yearly premium would be.

Benefit Period - This is the length of time you want your policy to pay benefits.  This can range anywhere between 2 years to an unlimited time-frame.  The longer the benefit period, the more expensive your premium will be.

Inflation Option - Various options are available to increase the value of the policy over time.  This could be an automatic 5% simple or 5% compound annual increase in the daily benefit or a future purchase option based on the CPI (Consumer Price Index).  People need to think about the effects that inflation has on future health care costs and take this into consideration when choosing which inflation option to use.

Elimination Period - This is the number of days of care that you are required to pay before the policy provides benefits.  The most commonly available choices are 0, 30, 60, 90, or 100 days.  The larger your elimination period, the less expensive your policy premium is.

Premiums for Long-Term Care vary widely and depend on the choices you make when designing your policy.  Obviously, other factors such as your health, family history, and age play a role in what your premium will be or whether or not the insurance company will insure you.

LTC Tax Advantages    Back to top

Last week we went over the basic “lingo” of Long-Term Care (LTC) insurance policies.  This week we'll discuss some tax-advantages related to Long-Term Care.

The IRS allows preferential tax treatment for many LTC policies.  This includes deductions for premiums paid and exclusion from income for benefits received.

Premiums - For NY State income tax purposes, residents are allowed a credit equal to 20% of LTC premiums paid for qualified policies.  This is a great benefit as credits reduce your tax liability dollar for dollar.  This credit can only be used to the extent of your NY State income tax liability.  Any excess credit however can be carried over into future years to reduce future tax liability. 

For federal income tax purposes, a deduction (not a credit) is allowed in certain circumstances.  The criterion is stricter but many people can still benefit.  Here are the rules for a federal deduction:
1) LTC Policy must be Federally Qualified - This means that the LTC Policy “qualifies” for special tax treatment.  There are unqualified policies out there that would NOT be eligible to receive favorable tax treatment; however most of today's policies are qualified.
2) You must itemize deductions.  Only taxpayers who itemize can deduct LTC premiums on their tax return.
3) There are limits on how much of your LTC premium is eligible for the deduction.  This is based on your age.  For 2004 the limits range from a low of $260 (for someone 40 or younger) to a high of $3,250 (for someone over 70).
4) The last hurdle is the 7.5% income test.  Eligible LTC premiums along with all other eligible medical expenses when added together must be over 7.5% of a taxpayers' adjusted gross income.  Only that which is over the 7.5% floor is deductible.

Tax treatment of benefits received - Most policy benefits received under long-term care are excludible from taxable income.  The amount of tax-free benefit depends on if the policy is a “Reimbursement” or “Per Diem” qualified LTC Insurance policy.

Reimbursement Policy - These policies reimburse care expenses incurred and are payable up to the daily benefit limit of the policy.  This policy type is similar to a regular medical policy where you have to submit expenses to the insurance company and they subsequently “reimburse” you for expenses incurred.  Reimbursed expenses are excludible from taxable income.

Per Diem Policy - Some policies are designed to pay a daily or “per diem” amount.  Under these circumstances, policy benefits are excludible from taxable income up to $230 per day (for tax year 2004).  If the per diem benefit exceeds the $230 benefit, the excess amount is includible in taxable income to the extent it exceeds the actual expense incurred for long-term care.  For example, if an individual received benefits of $240 per day but actual expenses were less than $230 per day, an amount equal to $10 per day ($240 less $230) would be taxable income.  On the other hand, if actual expenses incurred exceeded $230 per day, the entire benefit would be excluded from taxable income.

Next week, in our final article on Long-Term Care Insurance, we will discuss the NY State Partnership for Long-Term Care.  This program, available to NYS residents, is designed to make Long-Term Care coverage more affordable and has many unique features not available in most other States.

Long-Term Care (LTC) Update    Back to top

In the past, I have written several articles relating to long-term care insurance.  I strongly believe this protection is crucial for anyone with significant assets they wish to protect and/or leave to their heirs.  Here are just some of the reasons why:
1) People are living longer - We all know this.  Unfortunately sometimes this equates into people suffering for longer periods of time.  Many of these people will require long-term care.
2) Significant increased health care costs - This has been happening for quite some time and unfortunately it appears that this trend will continue.  Health care costs have greatly outpaced the overall general inflation rate.
3) Already strained government financial resources.  Government is already struggling to meet the financial needs of its Medicaid recipients!
4) The Baby Boomers! - There is no question that we have a huge portion of our population entering into their retirement years.  This will continue for at least a generation and even under ideal conditions, this demographic change would be financially challenging.  When we take this into consideration with the other factors, it looks downright scary.

As time goes on, it will become necessary for some of the burden to be shifted from Government to individuals.  This is starting to occur.  As recent as February of this year, President Bush signed the Deficit Reduction Omnibus Reconciliation Act of 2005.  In this act, there is new Long-term care legislation which makes it more difficult to qualify for Medicaid coverage.  Here are some key changes to Medicaid Eligibility:
1) The “Look-Back” period for the transfer of assets will now be five years instead of three years.  The look-back period is the amount of time Medicaid looks back to see if you tried to transfer your assets into someone else's name to obtain Medicaid eligibility.
2) Medicaid applicants will need to meet the required spend-down limits prior to the penalty period beginning. 
3) Medicaid coverage for nursing home care will be denied to any applicant with home equity valued above $500,000.

In addition, the recent Act includes an expansion and availability of long-term care insurance partnership policies on the national level.  Fortunately, we have had a partnership policy in New York since 1993 and are only one of four states that currently have such policies.

I have written extensively on the New York State Partnership for Long-Term Care in the past.  In a nutshell, partnership policies help to protect state Medicaid budgets by requiring that the benefits of those qualifying insurance policies be paid before Medicaid benefits can begin.  Our partnership policy also helps to protect the insured's assets should they need to go on Medicaid when policy benefits are exhausted.  There are currently four types of partnership policies in New York State and each offer a different level of protection.  I will go into the four different plans in more detail in a future article.

I think the main point of this legislation is the fact that the Government is finally beginning to make the Medicaid program more restrictive and place more financial responsibility on individuals.  This trend will continue in the future, especially as we are challenged to meet the long-term financial needs of our aging population.

Long-Term Care Insurance-An Overview    Back to top

This will be the first in a series of articles related to Long-Term Care (LTC) insurance.  During this series we'll discuss the basics of LTC including the purpose of LTC, available coverage, protecting your assets from Medicaid, tax treatment of LTC policies, and much more.  This week we'll go over some basic terminology related to LTC and problems we as a country are facing due to its high expense.

Long-Term Care is a kind of care needed by persons requiring assistance or supervision with the everyday activities of daily living.  This can be due to physical or cognitive impairments or for persons needing medically necessary care for an acute or chronic condition.  LTC can be provided in a person's own home, an adult day care center, an assisted living facility, or a nursing home.

The cost of long-term care is staggering.  For example as of January, 2008 the average daily stay in our area for a nursing home was $239 per day.  This translates to $87,168 per year!  By comparison, New York City and Long Island areas average around $338 and $369 per day respectively.  Home health care expenses can run just as high, even higher than the cost of a nursing home; especially if someone needs round-the-clock care.

When talking about LTC costs, it is very important to mention the “inflation factor”.  In New York State, LTC costs (like most other health care related costs) continue to increase greater than the general rate of inflation.  On average nursing home costs have increased annually at a rate of 5%.  If this trend persists, nursing home costs would double in about 14 years.

Despite the belief that Medicare covers LTC, Medicare pays for very little of such expenses.  This is because Medicare and Medigap policies protect against acute care costs, such as hospital and physicians' charges and were not designed to pay for longer term services.

The Medicaid program, on the other hand, has become the primary source for funding these expenses.  In fact, more than 80% of nursing home days in NY State are paid by Medicaid.  This translates into BILLIONS of dollars.  As the population continues to age and older Americans need assistance, the Medicaid crisis will only get worse.  The stress on our Nation's entitlement programs is enormous.

It's also important to note that people with ASSETS usually end up paying for long-term care out of their own pockets.  We will go over this in more detail in future articles.  Next week we'll talk about the basic types of LTC coverage and other important terminology that is necessary to gain a basic understanding of how Long-Term Care insurance works.

Source: (NYS Partnership for Long-Term Care).

LTC - Things to Consider    Back to top

Last week, we discussed what Long-Term Care is and the challenges that we as a country are facing due to its increasing cost.  This week we'll go over some items you should consider before making your own decision on whether LTC coverage is appropriate for you.

First, let me start off by saying that Long-Term Care coverage is NOT for everyone.  The three main reasons people purchase LTC protection is to maintain their independence, avoid total dependence on family and friends and protect their assets.

If maintaining your independence is important to you, then LTC protection may be a good choice.  Many people simply do not have family members or friends who would be available to help them should a LTC need arise.  For such people, LTC protection may be a good idea if they are able to afford the coverage.

Another important factor to take into account is the cost of LTC coverage.  Premiums you will pay for a LTC policy will depend on your age, health, amount of coverage you desire, benefit periods, and several other factors.  We will discuss this in more detail next week.  However if you simply cannot afford the premium for LTC coverage, then a LTC policy is not an option.  Like other forms of insurance, you must weigh the risks of not having coverage against the premiums you must pay for such coverage.

The amount of financial assets you own is another important consideration to take into account.  Quite simply, if you don't have significant assets to protect, long-term care coverage may not make sense for you.  Likewise, if you have sizable assets (including non-liquid assets), the purchase of a LTC policy is worth serious consideration.  This is because people with higher assets pay for most costs out of their own pocket.  With the high costs of care, depletion of assets may not take very long, especially if your condition is chronic and ends up being for an extended period of time.  This is especially tragic when a couple's assets are essentially depleted and there is a healthy spouse who has many years of life (and regular living expenses) ahead.

I should also note that there are other ways to protect assets from Long-Term Care expenses other than the purchase of insurance.  Examples include the use of certain trusts and transfer of your property to someone else.  The main drawback to these scenarios is that you lose control of what you once owned. 

As always, I urge anyone who is considering a purchase of long-term care insurance to consult their Financial or Insurance Advisor so that he can review your personal and financial circumstances.

Next week, we'll discuss the mechanics of how LTC policies work, including some basic terminology you should be familiar with.

Medicaid Extended Coverage & NYS Partnership Program    Back to top

A couple weeks ago, I updated you on some changes regarding Long-Term Care (LTC).
This week, I will go into more detail on some recent changes New York State has made for its partnership polices; specifically as they related to the amount of asset protection and Medicaid extended coverage.

As discussed in prior articles, we have a special program in New York State known as the NYS partnership for long-term care.  Under the program, individuals can purchase long-term care coverage for a certain period of time.  There are minimum requirements that partnership policies must have (benefit periods, home health care options, etc.).  This program is considered a “win-win” for both New York State AND individual policy owners.  It's good for the State because for the initial benefit period of the long-term care policy, the insurance company will pay for LTC costs, not the State.  It's good for individual policyholders because should they need continuing coverage after the policy's benefit period, they will be covered under a special program known as Medicaid Extended Coverage.  This coverage allows the patient to go on Medicaid and still have asset protection.  Only a portion of yearly income can go toward the cost of Long-Term care.

Up until recently, there was only one “base” type partnership policy to choose from and this policy offered lifetime asset protection.

However, in order to make LTC insurance more affordable, the partnership recently developed other options.  Note that this is the minimum requirement.  There are enhanced benefits available through policy riders, etc.

Total Asset Protection - Under these policies, all your assets are protected under Medicaid extended coverage should you still require long-term care once your policy's benefit period is exhausted.  Obviously, these policies offer the most asset protection.
1) 3/6/50 - This stands for a nursing home benefit period of three years with a home health care benefit period of 6 years with a home health care benefit of 50% of the nursing home benefit.
2) 4/4/100 - This is the same as the one above, except that the benefit period is 4 years for BOTH nursing home care and home health care.  The home health care benefit is the same as the nursing home benefit. (100% of the nursing home benefit).

Dollar for Dollar Protection - Under these policies, your assets are protected under Medicaid extended coverage ONLY to the extent of the cumulative benefits paid out under the partnership policy.     The advantage of these policies is that they are less expensive than their total asset protection counterparts.  The obvious disadvantage is that a limited amount of assets are protected.  Still, these policies might be very appropriate for those individuals with more modest estates, especially if they wish to ensure that there might be money to “leave to the children”.
1) 1.5/3/50 - This stands for a nursing home benefit period of 1.5 years with a home health care benefit of three years with the home health care benefit being 50 % of the nursing home benefit.  This is exactly the same as number 1 above, except that benefit periods are cut in half and asset protection is limited.
2) 2/2/100 - This stands for a nursing home benefit period of 2 years and a home health care benefit of 2 years with the home health care benefit the same as the nursing home benefit (100% of the nursing home benefit).  Again, this is the same as number 2 above, except that the benefit periods are one-half and asset protection is limited to the cumulative benefits paid under the policy.

Finally, I should note that all NYS partnership policies contain the following benefits:  Nursing home and home health care, personal care, assisted living care, skilled nursing care, adult day care, respite care, care management (2 days of long-term care planning services by a professional), alternate level of care, nursing home bed reservation (20 days per year), hospice care, and last but CERTAINLY not least, inflation protection equal to 5% compounded annually.  The inflation protection rider is crucial to help keep up with rising health care costs.

In summary, we are fortunate in NY State to have the NYS partnership program.  This has been around since 1997 and at the present time there are only three other States that have it.  As discussed a couple weeks ago, a new Federal law will tighten Medicaid eligibility and allow for a nationwide expansion of long-term care policies.  (The partnership policies however in NY will be grandfathered).
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