New State LTCi Partnership Plans

1. New State LTCi Partnership Plans How State Partnership Plans work under the Deficit Reduction Act of 2005 - Updated Prepared by Mark Randall, GoldenCare USA, January, 2007

2. Important Notice – Please Read • This presentation contains information about the new Medicaid State Partnership plans allowed in the Deficit Reduction Act of 2005. • As this is only an overview of the law, you should not consider this information as legal advice. Consult with your own legal advisor for information about how this law may affect you.

3. Important Update • As of January, 2007, while 27 states have passed or are in the process of passing Qualified Partnership legislation, only Idaho has actually started a Partnership program • While it is expected that most states will utilize the Partnership program, there is no guarantee that your state will do so. Your agent should be able to give you the status of the Qualified Partnership in your state.

4. Deficit Reduction Act of 2005 • States* are authorized to adopt “qualified State long-term care insurance” (QSLTCI) partnerships by amending their Medicaid plans • Partnership Programs are designed to help individual state’s Medicaid programs by encouraging consumers to purchase Long Term Care Insurance • The incentive to purchase coverage is that Medicaid will allow you to protect an amount of assets equal to the benefits you receive from a Long Term Care insurance policy *Four states have had Partnership Plans prior to DRA2005. The states were New York, Connecticut, Indiana and California.

5. How Partnership Plans Work • You buy a Long Term Care insurance policy that meets your state’s Partnership Plan guidelines • When you need long term care, your Long Term Care insurance policy pays for your care needs • If your policy benefits run out, you apply for Medicaid benefits • Medicaid will allow you to keep an amount of personal assets equal to the benefits paid by your Long Term Care insurance policy

6. Your Incentive To Buy Long Term Care If you need Long Term Care in your lifetime: • And you don’t have a Long Term Care policy • To become eligible for Medicaid Long Term Care benefits, you will have to “spend-down” your assets to your state’s eligibility level, normally $2,000* • With a Partnership Long Term Care policy • You will be allowed to protect some, or all, of your personal assets from a Medicaid spend-down *If married, their spouse will be entitled to keep additional assets including the home, exempt personal property and one half of their remaining assets (up to a maximum of $101,640)

7. An Example: Mary’s Story • Mary purchased a Long Term Care insurance policy with a $100,000 Maximum Benefit when she was 65 years old. At age 70, Mary had a stroke and needed rehabilitation and help with normal activities of daily living. Her Long Term Care insurance policy had excellent Home Health Care benefits and allowed her to receive her care at home instead of going into a facility • When her rehabilitation finished, Mary still needed some help with her normal activities of daily living including her bathing and dressing. Her daughter lived nearby and helped her so she could continue to stay home. Although her daughter would have gladly done this for free, Mary had bought an insurance policy that had a clause that paid her a monthly cash benefit that allowed her to pay her daughter for providing that care. • Mary’s policy paid for another five years of care before the Maximum Benefit was finally exhausted. Mary then applied for Medicaid benefits. Besides the personal property in her apartment, Mary had a CD at the local bank and her pension plan. The CD and Pension plan had a little over $90,000 when she applied. • Since Mary’s Long Term Care policy had paid $100,000 of benefits, Mary was allowed to keep all of her assets and Medicaid began paying for her care immediately.

8. You Can Choose The Protection Amount John, age 71, sold his home and moved into an apartment three years ago. He has investments in CD’s and a mutual fund that total $120,000. John has an accident and needs Long Term Care during his rehabilitation. Without Long Term Care insurance: John will have to spend-down to his state’s eligibility level of $2,000 Total Assets: $120,000 Partnership Set-Aside - 0 State Eligibility: - 2,000 Spend-down $118,000 If John had a Long Term Care insurance that paid $70,000 of benefits prior to applying for Medicaid: Total Assets: $120,000 Partnership Set-aside - 70,000 State Eligibility: - 2,000 Spend-down $ 48,000 If John’s insurance policy had a Maximum Benefit of $120,000 or more, he would be exempt from a Medicaid spend-down. Medicaid would begin paying for his care immediately.

9. The Incentive Is Here • The dollar for dollar asset protection is a great incentive for people to purchase LTC insurance – even a small plan can protect assets • To qualify for LTC insurance, you must pass a company’s underwriting guidelines – in other words, healthy enough for a company to accept you • So, even though your state may not have a Partnership program in place, you may want to purchase coverage now to make sure you can qualify for coverage • Make sure that you meet the requirements on the next slide

10. Requirements For Partnership Policies • Policy must be Tax-Qualified • Inflation Coverage must meet the following guidelines based on the individual’s age when the policy was purchased:1 • Age 60 and under: • Must have compound inflation coverage • Age 61-75: • Must have some level of inflation coverage • Age 76 and above: • No inflation coverage is required 1. If a policy is re-issued, this requirement is based on the age of original sale.

11. A Personal Note From Mark Randall My personal opinion is that most, if not all, states will pass this new legislation to help solve their Medicaid budget problems. However, this may take some time for some states and it’s possible your state may not do this immediately, or it’s possible they won’t pass it at all. At this time, my personal advice to people is to act now! There are a lot of good reasons to purchase Long Term Care coverage, asset protection is just icing on the cake. Act now to protect your insurability. I think you’ll be glad you did. After a successful career as an agent, Mark Randall began researching and training insurance agents in 1985. Focusing on Long Term Care insurance since it’s inception, he is recognized as one of the nation’s leading experts in this field. With over 30 years of experience in the insurance industry, his experience gives him a unique insight into the market. Mark travels extensively giving agent and consumer seminars on Long Term Care. He has authored many Long Term Care training programs, articles, presentations and essays on Long Term Care including the presentation you are viewing now.