California Partnership for Long Term Care

Thang Truong
Thang Truong
Updated on:

Long-term care is something no one likes to think about, but that almost two-thirds of those 65 and over will need. A common misconception is that Medicaid will pay for long-term health care costs, but this is not true, unless you earn very little and have no assets to fall back on. Some people try to bankrupt themselves, just to cover their long-term care costs under Medicare. A few states offer partnership programs to try and address this issue. Let’s look at what a partnership program is, California’s in particular, and the state of the program today. 

Partnership Programs to Support Long-Term Care Expenses

California, New York, Connecticut and Indiana recognized that middle-class people who don’t have either traditional long-term care insurance or hybrid long-term care insurance occupied the awkward position of having too much money to qualify for Medicare but not enough to pay for long-term care out-of-pocket. They created Partnership program—a partnership between the state governments, private insurance companies, and consumers. 

The premise was you would be allowed to keep more of your assets and still qualify for Medicare. The amount of assets you could keep was equal to the amount of benefits you purchased under the partnership program. So, for example, if you bought a $100,000 Partnership long-term care policy, you could keep $100,000 of your assets and still apply for Medicare (which, in California is called Medi-Cal). Usually, to qualify for Medicare you must earn less than $2,000 (roughly) a month and have less than $2,000 in assets. Your $100,000 worth of long-term care insurance would cover your care, but if you had a long-term illness and ran out of insurance, you would not have to bankrupt yourself to qualify for Medi-Cal. 

[elementor-template id=”4922″]

What is California’s Partnership Program for Long-Term Care Rider?

California started the program in 1994, which is when traditional long-term care insurance was really taking off. The program was met with enthusiasm and sales were strong. Unfortunately, like all long-term care insurance, costs and premiums have risen so dramatically that few people can now afford it, especially with the mandatory 5% inflation protection included. A Partnership policy for two 55-year old adults with the 5% inflation protection might be as much as $15,000 a year. Obviously, not many people can afford that, and sales were pretty much non-existent. 

California, to its credit, realized this was ridiculous and lawmakers met to discuss how to save the program. They first cut the inflation protection from 5% to 3%, which cut premiums almost in half, although that’s still expensive at about $7,500 a year. 

They also discussed what would be helpful for the average middle-class Californian when it came to long-term care. This is still ongoing, but hopefully they will come to some kind of decision that will benefit most middle-class consumers. 

With long-term health insurance so expensive, what is a middle-class Californian (or really, any other state) to do?

Hybrid Long-Term Care Insurance Policy (Linked with Life Insurance)

Hybrid long-term care insurance are life insurance policies linked with long-term care insurance. They used to be single-pay policies, but now you can find 10-year pay policies. For a single payment of $100,000, you’ll get something like $400,000 worth of long-term care insurance. If it turns out you don’t need long-term care, your death benefit will be worth at least what you paid for it, but probably more. That’s a nice tax-free lump sum for your heirs. There’s even a return of premium rider you can add, so you can get your money back if you change your mind. 

>>MORE: The Best Hybrid Long-Term Care Insurance Companies

Traditional Long-Term Care Insurance Policy

Although all but a dozen companies such as John Hancock and CalPERS have fled the long-term care market, you might still be able to find a policy. This way, you’ll get at least some coverage if you need it. Even if you go with a small policy so you can afford the premiums, it will be better than nothing. If you never need long-term care, you’ll have wasted that money (or spent a lot of money for peace of mind, depending on how you look at it). The odds are you, or your spouse, will need some form of care. 

>>MORE: The Best Traditional Long-Term Care Insurance Companies

Permanent Life Insurance Policy with Long-Term Care or Chronic Illness Rider

If you have a permanent life insurance policy or are thinking of buying a permanent policy, you can add a long-term care or chronic illness rider to the policy. With either rider, the policy will pay for your long-term care expenses as an accelerated death benefit. There are some differences between long-term care rider and chronic illness rider. They both have pros and cons, so you might want to look discuss with an advisor before deciding on the rider and the best policy for you.

[elementor-template id=”5010″]

Annuities With Long-Term Care Benefits

You can get either a fixed-rate annuity or a indexed annuity, and both will pay you more if you need long-term care. Annuities normally pay a certain fixed amount per month, but with the long-term care feature, you’ll get more than you paid in premiums to fund your long-term care needs. 

One disadvantage of annuities is that you’ll need a fairly hefty premium up front. Also, annuity payments are taxable. However, if you have a serious health condition, you’ll probably find it easier to get approved for an annuity. 

Health Savings Accounts to Pay for Long-Term Care

If you have a qualified, high deductible health insurance plan, you can sock away money in a savings account to pay for future health care costs. Withdrawals are tax-free if you use them for health care. 

Medicaid to Pay for Long-Term Care

This is a last resort option. You’ll have to get rid of most of your assets to qualify, and not every nursing home accepts Medicaid. Also, if you unload your assets just to qualify for Medicaid, you could be disqualified from the program and incur penalties. 

Personal savings to Pay for Long-Term Care

A sad reality is that many people are forced to pay for their own long-term care out of their own pockets. It’s better than not having care, of course, but it’s expensive. And if you or your spouse needs care for a long time, you can easily bankrupt yourself. Although then you can qualify for Medicaid. 

Last Thoughts

Long-term care insurance and long-term care in general could use an overhaul. Until that comes, prepare for this possibility as best you can, but don’t put it off and hope for the best.

[elementor-template id=”4922″]

Thang Truong
Thang Truong

Thang Truong covers small business insurance and small business success at BravoPolicy. He is a licensed P&C insurance agent. Previously, he held product leadership positions at realtor.com, Capital One, NerdWallet, and Mulberry Technology. He holds a MBA degree from UC Berkeley - Haas School of Business.

More Stories

The 5 Best Hybrid Long-Term Care Insurance Companies for 2023

If you’ve decided to plan for every eventuality, you’d be smart to include a plan to cover long-term care. Someone turning 65 this year has an almost 70% chance of needing some type of long-term care, and about 13% of those will need it for five years or more. Long-term care is expensive and can […]

Thang Truong
Thang Truong

The 3 Best Traditional Long-Term Care Insurance Companies for 2023

Long term care is something that no one likes to think about, but unfortunately, many people will eventually need. Health care costs are skyrocketing, and a lengthy stay at a long-term care facility can easily bankrupt most people’s nest eggs. Long-term care insurance is one way to protect both yourself and your retirement savings. Out […]

Thang Truong
Thang Truong

The Best Long-Term Care Insurance Companies in California for 2023

California residents who are keen to protect themselves and their families against the worst events in life may be considering long-term care insurance. However, you might not know much about LTC insurance or how it is handled in California. Let’s take a look: What is Long-Term Care Insurance? Long-term care insurance helps pay for long-term […]

Thang Truong
Thang Truong

The Best Long-Term Care Insurance Companies in Arizona for 2023

Arizona is a great place to retire. It’s warm, there’s no snow to shovel, and Arizona improves the quality of life for anyone with allergies or asthma. When you pack your bags and retire to Arizona, you’re probably not thinking about long-term care. But the sad reality is that 47% of men and 58% of […]

Thang Truong
Thang Truong

The Best Long-Term Care Insurance Companies in Florida for 2023

There’s a lot of good reasons to retire in Florida. The weather is warm, the beaches are beautiful, and there are lots of other retirees to socialize with. Also, Florida has no state income taxes, no inheritance taxes, and no estate taxes. When you pack up your things and move to Florida, you’re probably not […]

Thang Truong
Thang Truong

Mutual of Omaha Long-Term Care Insurance: Customizable & Flexible Policy – 2022 Review

Shopping around for a long-term care policy can be confusing. Mutual of Omaha offers Secure Solution for a long-term care insurance option. They also offer a Custom Solution option. Both policies offer a fair amount of flexibility, since you are able to choose how long you want your elimination period to be and you can […]

Thang Truong
Thang Truong

Transamerica Long-Term Care Insurance: A Solid Choice with Great Rates: 2022 Review

Many companies have left the long-term care insurance market. Rising health care costs, plus the invention of the hybrid long-term care/life insurance policy has resulted in many companies bailing out of long-term care insurance. If you still want a long-term care policy, Transamerica offers a fairly affordable policy with some nice features. It’s a solid […]

Thang Truong
Thang Truong

Lincoln Long-Term Care Insurance: Solid Choice with Zero Elimination Period – 2022 Review

The Lincoln long-term care insurance product is called Lincoln MoneyGuard III. It is a hybrid long-term care insurance policy, one that combines permanent life insurance with long-term care insurance. These are sometimes called linked policies. The beauty of these policies is that if you require long-term care the money is there for that, but if […]

Thang Truong
Thang Truong

Nationwide Long-Term Care Insurance: Good Rates & Indemnity Benefits – 2022 Review

You have a lot of options if you’re interested in a linked policy—a hybrid life insurance and long-term care policy. A lot of people like these types of policies because they provide long-term care benefits if you need them and a tax-free death benefit to your beneficiaries if you don’t. Nationwide offers such a hybrid product […]

Thang Truong
Thang Truong

Securian Long-Term Care Insurance: Great Price & Guaranteed Premiums – 2022 Review

The Securian long-term care insurance product is called SecureCare. It is a hybrid long-term care and life insurance policy (also called linked policies). It is a good product in the hybrid long-term care insurance market and worth of your consideration. A hybrid policy may be ideal because if you need long-term care, the money is […]

Thang Truong
Thang Truong