New York State Partnership for Long-Term Care, Medicaid estate recovery, and the New York LTC tax credit (Reg 144)

Why New York built a partnership

Nursing home care in New York can cost well over a hundred thousand dollars a year. Without coverage, most people pay privately until their savings are gone, and only then qualify for Medicaid. This is called "spending down." The New York State Partnership for Long-Term Care offers a different path. A person who buys an approved long-term care policy, and uses up its benefits, can then apply for Medicaid and, if otherwise eligible, qualify without spending down the assets the Partnership protects.

The program is created by Social Services Law § 367-f. The Department of Financial Services (DFS) approves the policies and sets their minimum benefit standards. Its rules for Partnership policies are known as Regulation 144. The Department of Health runs the Medicaid side.

How a person reaches Medicaid extended coverage

Section 367-f(2) gives "Medicaid extended coverage" to a person receiving long-term care services who meets two conditions:

1. The person is or was covered by a Partnership-approved policy or certificate that meets the Superintendent's minimum benefit standards.
2. The person has exhausted the policy's coverage and benefits as the program requires.

In short, the insurance pays first, and Medicaid extended coverage is available only after the private benefits are used up. Exhausting the policy does not by itself put anyone on Medicaid: the person must still apply and meet Medicaid's other eligibility rules, including the income rules. What the Partnership changes is how assets are counted.

Total asset protection versus dollar-for-dollar

What the person keeps depends on the length of the policy's nursing home benefit, which the statute calls the residential health care facility benefit:

• Total asset protection. For a qualifying policy with a nursing home benefit of two years or more, Medicaid eligibility is decided without regard to the resource test at all. The person may keep every asset, whatever its value.
• Dollar-for-dollar protection. If the nursing home benefit is less than two years, Medicaid disregards resources equal to the benefits the policy actually paid. A policy that paid $180,000 shields $180,000 of assets.

Income is not protected the way assets are. The person's income is still counted, and in practice it is applied toward the cost of care once Medicaid takes over.

Medicaid estate recovery and liens

Federal law, 42 U.S.C. § 1396p, controls when a state can recover Medicaid costs:

• No lien before death, except under a court judgment for benefits incorrectly paid, or on the real property of a person who is permanently in a nursing home and is not expected to return home.
• No lien on the home while a spouse, a child under 21 or a blind or disabled child, or a co-owning sibling who lived there for at least a year before admission is living in it.
• For anyone who was 55 or older when they received care, the state must seek recovery from the estate for nursing facility services, home and community-based services, and related hospital and drug costs.
• Recovery waits until after the surviving spouse dies, and only when there is no surviving child under 21 or blind or disabled. States must waive recovery that would cause undue hardship.

The Partnership's key benefit is that assets it protects are also exempt from estate recovery and liens under Social Services Law § 369. The one exception is Medicaid that was paid incorrectly, which can still be recovered.

New York as an original partnership state

New York is one of the four original partnership states, along with California, Connecticut and Indiana. Their programs were approved before May 14, 1993. Federal law lets them keep their own design, including New York's total asset model, so long as their consumer protections are no less stringent than they were at the end of 2005. Later partnership states must follow the federal Deficit Reduction Act rules. Those rules include age-based inflation protection, which must be compound for buyers under 61.

Section 367-f(3) permits reciprocal agreements with other partnership states, but does not require them. A producer should never promise that New York Partnership protection will follow a client who moves.

The New York long-term care insurance tax credit

New York gives a tax credit equal to 20 percent of the premium paid during the year for long-term care insurance. The policy must qualify under Insurance Law § 1117. The business franchise tax version is Tax Law § 190, and individuals claim the same credit under the personal income tax. Under § 190, a business cannot use the credit to reduce its tax below the fixed minimum tax. Unused credit carries forward to later years.