Partnership LTC Insurance: The State Program That Shields Your Assets When Your Policy Runs Out

Most LTC insurance buyers don't know this feature exists. If you have $500K–$2M in assets, it may change how much coverage you need — and whether standard LTC insurance math works for you at all.

How the dollar-for-dollar protection works

Normal Medicaid eligibility for long-term care requires you to spend down assets to roughly $2,000 (single applicant) before Medicaid covers your costs. With a Partnership policy, the math changes fundamentally.

Every dollar your Partnership policy pays in LTC benefits earns you one dollar of "asset disregard" — assets that Medicaid ignores when calculating eligibility.¹

If the same $800K household bought a larger Partnership policy — say, $500,000 in benefits — and exhausted it, they could protect $502,000 in assets from Medicaid. That's nearly the entire estate preserved for a spouse or heirs while Medicaid covers ongoing care costs.

Estate recovery protection: the other half of the benefit

The protection doesn't end at Medicaid eligibility. Under normal Medicaid rules, your state's Medicaid Estate Recovery Program (MERP) can reclaim assets from your estate after death to partially reimburse what Medicaid spent on your care. Partnership-protected assets are shielded from MERP as well.¹

For a surviving spouse or children, this matters enormously. Without a Partnership policy, a family home or investment account that helped fund care could be attached by MERP after the Medicaid recipient dies. With Partnership asset disregard, those dollars are off-limits to recovery — up to the amount the policy paid.

Which states have Partnership programs

As of 2026, approximately 45 states and D.C. have active Partnership LTC programs operating under the framework established by the Deficit Reduction Act of 2005.² Four states — California, Connecticut, Indiana, and New York — launched earlier pilot programs in the early 1990s under a Robert Wood Johnson Foundation demonstration; their programs predate the federal framework and in some cases have more extensive protections.

The few states without Partnership programs are the exception. If you live in most states, Partnership-qualified policies are available through the same carriers selling standard LTC insurance — but the policy must carry explicit Partnership certification from your state's insurance department.

The inflation protection requirement — and why it matters

To qualify as a Partnership policy, your state requires mandatory inflation protection on the coverage.³ The specific rules:

• Under age 61 at time of purchase: Must include compound inflation protection (carriers are required to offer 5% compound as an option)
• Ages 61–75: Must include some form of inflation protection (compound or other approved rider)
• Age 76 and older: Inflation protection not required for Partnership qualification, though carriers may still offer it

This requirement isn't a burden — it's prudent underwriting aligned with reality. If you buy at 60 and claim at 82, nursing home costs that run $350/day today may cost $700+/day by the time you claim at 3% annual inflation. A policy without inflation protection loses its real-world purchasing power; a Partnership policy's dollar-for-dollar protection is only valuable if the benefits are still meaningful when you need them.

The inflation requirement does increase premiums. But it also means Partnership policies are structurally better designed than many non-Partnership products sold purely on price.

Tax advantages: same as standard LTC insurance

Partnership-qualified policies are tax-qualified policies under IRC § 7702B — so they carry the same federal tax benefits as any tax-qualified LTC policy:⁴

Benefits received from a Partnership policy are also tax-free up to the HIPAA per diem limit of $430/day in 2026 (for indemnity-style policies).⁴ Benefits above that limit may be taxable if they exceed actual care costs.

Who Partnership LTC policies are designed for

The program targets a specific asset window. The Medicaid protection is most valuable to households that:

• Have $300K–$1.5M in assets — enough that a full spend-down would be catastrophic to a surviving spouse or heirs, but not enough to fully self-fund a catastrophic LTC event ($1M+)
• Are concerned about the worst-case scenario — a 7–10-year stay that would exhaust even a sizable policy
• Want to preserve something for a spouse or heirs even if they ultimately need Medicaid
• Are in their late 50s to mid-60s — old enough to be planning seriously, young enough to qualify for Partnership-required inflation protection at reasonable premium levels

Who doesn't need a Partnership policy

How to buy a Partnership-qualified policy

Partnership qualification is a state designation, not a product type. The same carriers offering standard LTC insurance — Mutual of Omaha, Thrivent, New York Life, NGL — also offer Partnership-qualified versions of their policies in most states. The policy documents will explicitly state that it is a Partnership policy under your state's program.

Getting this right requires a few steps:

1. Confirm your state participates. Most do, but a few states either lack a Partnership program or have limited participation. Your state insurance department's website lists qualified policies.
2. Size the coverage correctly for your asset level. The protection only matches what the policy actually pays — a $150,000 benefit period protects $150,000 in assets, not $800,000. The goal is to size benefits to cover at least the first 2–4 years of care while the dollar-for-dollar protection handles the Medicaid layer beneath.
3. Verify the inflation rider qualifies. Your policy must include the required inflation protection for your age, or it won't be eligible for Partnership certification.
4. Understand how your state applies asset disregard at Medicaid application. The mechanics are standardized under DRA 2005, but some state Medicaid offices apply them inconsistently. Documentation from the insurance carrier and the state Partnership office is often required.