Helping Seniors & Families
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Here’s a New Idea for Buying Long-Term Care Insurance

Many middle-income people have too much money to qualify for Medicaid, but can’t afford a pricey long-term care insurance policy. In an effort to encourage more people to buy long-term care insurance, Congress created something called the “Qualified State Long-Term Care Partnership” program. In states that offer the program, you can buy special long-term care policies that allow you to protect your assets and still qualify for Medicaid when the long-term care policy runs out.

Here’s how it works: You buy a long-term care policy that is sold by a private company but that has been approved by the state under the program. The policy will cover at least some of your long-term care needs. If the policy runs out and you need to go on Medicaid, you can keep more of your assets than the $2,000 that Medicaid normally allows.

In most states, it’s a dollar-for-dollar benefit – for every dollar of coverage that the long-term care policy provides, you can keep a dollar in assets that normally would have to be spent down to qualify for Medicaid.

So if you buy a long-term care policy that provides $150,000 in benefits, you would be allowed to keep $152,000 in assets and still qualify for Medicaid. (Keep in mind that the exact details vary from state to state.)

Some states go even further. In New York, for instance, if you buy a policy that covers three years of nursing home care or six years of home care, then once you’ve exhausted the policy benefits, you can qualify for Medicaid with no limit whatsoever on the amount of your assets.

Keep in mind, though, that in order to obtain the Medicaid protection, you have to receive your long-term care in the same state where you bought the policy, or in another state that has a reciprocal agreement with the state where you bought the policy.

More information on this program (and on long-term care insurance in general) can be found at the National Clearinghouse for Long-Term Care Information at www.longtermcare.gov.

IRS increases long-term care insurance deductions for 2014

The amount you can deduct on your taxes as a result of buying long-term care insurance has been increased by the IRS for 2014.

If you itemize your deductions, you can generally claim a deduction if your premiums, together with your other unreimbursed medical expenses, amount to more than 10% of your adjusted gross income (or 7.5% if you’re 65 or older).

The maximum amount of the premiums you can deduct each year depends on your age at the end of the year:

Age Maximum deduction
40 or younger $370
41-50 $700
51-60 $1,400
61-70 $3,720
70 or older $4,660

For policies issued in 1997 or later, the premiums are deductible so long as the policies meet certain requirements, such as that they offer “inflation protection” and “non-forfeiture protection.” (You don’t have to actually choose these options, but the policy has to offer them.)

For policies issued before 1997, the premiums are deductible if the policies were approved by the state insurance commissioner.