Medicaid and Living Benefits.

[Cornelius]

Yes I know there are different payouts per episode of policies but. If a person has a policy where they can tap into the death benefit if something like a stroke.

If that person had access to funds from the LB option of the policy I guess term or perm could that effect their application for Medicaid? Has anyone ever ran into something like that?

 

[walthamny]

Yes and Medicaid is very state specific program so please post which state you are asking this question for. The proper planning is to have a trust owned the policy before the look back period starts. Or you can also sometimes drop the rider on the life policy before applying for Medicaid

 

[Cornelius]

Yes and Medicaid is very state specific program so please post which state you are asking this question for. The proper planning is to have a trust owned the policy before the look back period starts. Or you can also sometimes drop the rider on the life policy before applying for Medicaid

Just a general question to no particular state. I just ran across a LTC situation with no LTC policy and the potential out of pocket may get real hairy and then the question about LB came to mind.

 

[Allen Trent]

Just a general question to no particular state. I just ran across a LTC situation with no LTC policy and the potential out of pocket may get real hairy and then the question about LB came to mind.

Asset & income test will always be in play for Medicaid eligibility as to what is exempt & non exempt & allowable income. If single & cash value policy owned in their own name, they will have to get the cash value down to $2k or less if they have other non exempt assets.

Luckily, acceleration of death benefit for chronic illness shrinks down both the face amount & death benefit when filing claim. The issue will be that they may only be able to get a small amount of acceleration of death benefit per month depending on size of policy/rider amount.

Let's say they have 100k policy & 2% monthly ADB CIA, that is only $2k per month. If they don't have other assets or income to pay for care, they will have to take withdrawals or loans of the life policy cash value until down to $2k total exempt assets before qualifying for Medicaid. I am sure this has played out already, but will be more common as the boom in hybrid is relatively new based on average age of people traditionally needing care. Will likely see more in next 10 years

I am personally not aware of any law giving a hybrid policy status as exempt of credit like a partnership LTC policy that permits an equal amount of non exempt assets.

Hopefully the Medicaid social worker wouldn't double count the hybrid life as an asset to be used & then also count the claim check coming in as income in the income resource calculation

 

[Cornelius]

[EXTERNAL LINK] - How Life Insurance Policies Impact Medicaid Eligibility

 

[Tahoe Ray]

[EXTERNAL LINK] - How Life Insurance Policies Impact Medicaid Eligibility

I don't see how that link addresses your initial question.

If they receive a lump sum or accelerated payout due to a LB, I'm not sure how they wouldn't fail an asset test. It's no longer life insurance. It's now an asset (the payout).

 

[LostDollar]

Asset & income test will always be in play for Medicaid eligibility as to what is exempt & non exempt & allowable income. If single & cash value policy owned in their own name, they will have to get the cash value down to $2k or less if they have other non exempt assets.

You can't hold a portion of the policy for funeral expenses to the funeral home?

 

[Allen Trent]

You can't hold a portion of the policy for funeral expenses to the funeral home?

Usually not from what I have been told in the past. Usually if you put an irrevocable bene for a policy, it is the entire policy. But maybe carriers will permit a collateral assignment or partial assignment. The question will be if the medicaid application process would allow it to be allowed on larger non burial policies. Many hybrid policies can be hundreds of thousands of death benefit & many times sizeable cash values far exceeding the $2k exempt asset amount or an allowable amount for a pre paid funeral plan, etc

Hopefully someone with more direct experience with recent cases of clients needing to qualify for Medicaid but also having too much life CV in a hybrid policy. I believe only stand alone long term care that have partnership eligibility have any special standing

 

[Cornelius]

I don't see how that link addresses your initial question.

If they receive a lump sum or accelerated payout due to a LB, I'm not sure how they wouldn't fail an asset test. It's no longer life insurance. It's now an asset (the payout).

I just posted the link as I ran across it doing some net research.

 

[Cornelius]

Asset & income test will always be in play for Medicaid eligibility as to what is exempt & non exempt & allowable income. If single & cash value policy owned in their own name, they will have to get the cash value down to $2k or less if they have other non exempt assets.

The thought is what if someone request a payout from the LB rider of a Term policy. The carrier offered 50K but the owner takes 10K. The question is would Medicaid look at the 10K taken with a potential 40K available?

Luckily, acceleration of death benefit for chronic illness shrinks down both the face amount & death benefit when filing claim. The issue will be that they may only be able to get a small amount of acceleration of death benefit per month depending on size of policy/rider amount.

Let's say they have 100k policy & 2% monthly ADB CIA, that is only $2k per month. If they don't have other assets or income to pay for care, they will have to take withdrawals or loans of the life policy cash value until down to $2k total exempt assets before qualifying for Medicaid. I am sure this has played out already, but will be more common as the boom in hybrid is relatively new based on average age of people traditionally needing care. Will likely see more in next 10 years

I am personally not aware of any law giving a hybrid policy status as exempt of credit like a partnership LTC policy that permits an equal amount of non exempt assets.

Hopefully the Medicaid social worker wouldn't double count the hybrid life as an asset to be used & then also count the claim check coming in as income in the income resource calculation