Proposed Rule Addresses Problems that May Arise When A Medicaid Applicant Purchases A Long-Term Care Insurance Partnership Policy in One State and Then Applies for Medicaid In Another State

The U.S. Department of Health and Human Services has issued a new notice addressing the problems that occur when a Medicaid applicant purchases a long-term care insurance “partnership” policy in one state and then applies for Medicaid in another state. See, 73 Fed. Reg. 51302-51305 (2 Sept 2008), available here.

The Deficit Reduction Act of 2005 provides that when a state calculates an applicant’s assets for purposes of Medicaid eligibility, the state may disregard an amount equal to benefits paid to the applicant under a qualifying long-term care insurance policy. The statute also allows states to exempt benefits paid under the policy from Medicaid estate recovery. The proposed rules set the standards for states that choose to enter into a reciprocity agreement to provide the same disregards and offsets for partnership policies that a Medicaid applicant purchased in another state.

All states will be deemed to be participating in the reciprocity standards unless they elect to be exempt by notifying the department in writing. States that already had partnership programs approved prior to May 14, 1993, may also elect to adopt the reciprocity standards.

According to the notice, the asset disregard procedure and calculation will be the same for every individual with a partnership policy that applies for Medicaid in a participating state without regard to whether the policy was purchased in another state. But to be eligible for the asset disregard, both the state in which the individual applies for Medicaid and the state in which the individual purchased the partnership policy must currently be participating in the reciprocity standards.

The notice also provides that if someone is determined eligible for Medicaid using a partnership asset disregard, eligibility will not be revoked if the state decides to become exempt from the reciprocity agreement. However, once a state elects exemption, the exemption applies even if the Medicaid applicant purchased the policy before the state elected exemption.

The reciprocity standards become effective January 1, 2009. The Department is accepting comments until November 3, 2008.