An article out of New York State today discusses the current regulations for the Medicaid "look back" period for transferring assets.  Before making any financial decisions regarding taxes or Medicaid, contact an attorney and have them review current law and your particular situation.

In the article, an elder lawyer was talking about how under current interpretations of Medicaid's look back period, and after a clarification memo issued by the Office of Health Insurance Programs to New York's Medicaid directors on Sept. 24, 200, it appears that the look back period is just one month at this point.

About Medicaid 

Medicaid is widely misunderstood by the public.  The long term care component of Medicaid is designed for the impoverished, and virtually all assets must be spent down before people can qualify.  In short, if you have assets and are concerned about keeping them, having long term care insurance rather than relying on Medicaid would be a much better course of action. 

Today's topic: distinguishing between tax qualified and non tax qualified long term care insurance plans.

Tax Qualified vs. Non- Tax Qualified Long Term Care Insurance 

For this illustration, there are different types of long term care insurance policies. First, there are the Non-Tax Qualified (NTQ) policy, plans which used to be called Traditional Long Term Care insurance.  These types of LTC have been sold for over 30 years. So, how do they work?  Well, this policy is triggered by the patient’s doctor or doctor in conjunction with someone from the insurance company. The taxability of these benefits is open for interpretation and is still in question.  At LTCtree, we do not sell "NTQ" LTC.  Enough of the abbreviations, let's continue.

Tax Qualified: Activities of Daily Living 

The more modern policies and the only plans provided by the major carriers we offer are called Tax Qualified (TQ) policies.  They have many features but primarily do not have a Medical Necessity trigger. The ability to collect benefits may be triggered when a person is unable to perform 2 specified activities without assistance for at least 90 days. These activities may include eating, dressing, bathing, transferring, and continence. The doctor, or in some cases the insurance company, may also provide a “Plan of Care”. These payments or benefits are non-taxable.

Disclaimer: There are many complicated tax issues involved in some of the packages, and it is advisable you seek advice before choosing the plan that suits your needs. There may also be some local laws concerning restrictions on benefits in the tax qualified policies.