Long-Term Care Partnership Policies

A long-term care partnership policy is a private long-term care insurance policy that has a special link to a state’s Medicaid program. If the owner later uses up the policy’s benefits and needs Long-Term Care Medicaid, they can keep extra assets, one dollar for every dollar the policy paid out, above the normal asset limit. In most cases those protected assets are also shielded from Medicaid estate recovery. This guide explains how partnership policies work, the federal rules behind them and who they tend to fit.

Figures change periodically. Double-check current amounts before relying on them.

The short version

Partnership programs are partnerships between a state’s Medicaid program and private insurers, authorized nationwide by the Deficit Reduction Act of 2005 (section 6021), after four states (California, Connecticut, Indiana and New York) ran early programs starting in the late 1980s and early 1990s.
A partnership policy provides an asset disregard: if the policy paid $150,000 in benefits, the owner can keep $150,000 more than the usual asset limit and still qualify for Long-Term Care Medicaid.
The disregarded assets are generally protected from estate recovery as well.
Policies must meet federal standards, including being tax-qualified and including inflation protection that depends on the buyer’s age.
Most states participate, and most participating states honor policies bought in other participating states (reciprocity).
Partnership status does not change the income rules, the look-back or the medical rules.

How the asset disregard works

Normally, a single applicant must have countable assets at or below the state’s limit, often $2,000. With a partnership policy, the limit is raised by the total benefits the policy has paid.

Example. Grace buys a partnership policy at age 60. At 82 she enters a nursing home. Over three years, her policy pays $210,000 in benefits and then runs out. She still has $215,000 in savings. In a state with a $2,000 asset limit:

Without a partnership policy, she would have to spend down to $2,000 before Medicaid would pay.
With the partnership policy, she can keep $2,000 plus $210,000, or $212,000. She spends down only $3,000 and then qualifies, if she meets the income and medical rules.

When Grace dies, the state’s estate recovery program generally cannot claim the $210,000 that was protected by the disregard. It may still seek recovery from other assets in her estate, under the usual estate recovery rules.

Federal requirements for partnership policies

Under the Deficit Reduction Act, a qualified partnership policy generally must:

be a tax-qualified long-term care insurance policy under section 7702B of the Internal Revenue Code;
meet consumer protection standards based on the National Association of Insurance Commissioners model act and regulation;
be issued when the buyer lives in a state with an approved partnership program;
include inflation protection that depends on age at purchase:
under age 61: compound annual inflation protection;
ages 61 to 75: some level of inflation protection;
age 76 and older: inflation protection may be offered but is not required.

Agents who sell partnership policies must complete training required by the state.

Reciprocity between states

Most participating states have agreed to honor partnership policies bought in other participating states. That matters for retirees who move closer to family. If a policy was bought in one partnership state and the owner applies for Medicaid in another state that participates in reciprocity, the new state generally gives the same dollar-for-dollar disregard. A few states and territories do not participate in the partnership program at all, and a state can withdraw from reciprocity, so it is worth checking the status of the state where the owner expects to live.

What a partnership policy does not change

Income rules. The owner must still meet the state’s income rules for Long-Term Care Medicaid, and most income still goes toward the cost of care.
Medical need. The owner must still meet the state’s level-of-care requirement.
Look-back. Gifts within the look-back are still reviewed and can still cause a penalty.
Home equity limits. The home equity limit still applies in most states. A few states allow partnership protection to cover home equity above the limit; this varies.
Exempt assets. The disregard is in addition to normal exemptions, such as the home and a car.

Who partnership policies tend to fit

People in their 50s and 60s who are healthy enough to pass medical underwriting.
People with moderate assets, roughly in the range where a few years of care would wipe them out but a policy is affordable.
People who want to leave something to their family without using trusts or gifting.
People who prefer to keep control of their savings, rather than giving them away.

They tend not to fit people who cannot afford the premiums for the long term, or who already have health conditions that prevent them from qualifying.

Costs and practical points

Premiums. Long-term care insurance premiums can be significant, and insurers can raise premiums on a class of policies with state approval. A policy that lapses because premiums become unaffordable provides little protection.
Benefit design. The daily or monthly benefit, the benefit period, the waiting (elimination) period and the inflation protection all affect both cost and the size of the eventual disregard.
Hybrid policies. Many people now buy “hybrid” life insurance or annuity policies with long-term care riders. Some hybrid products qualify as partnership policies in some states, but many do not.
Converting existing policies. Some states let older, non-partnership policies be exchanged or updated to partnership status. Rules vary.
Proof. The owner should keep the policy’s partnership certification and statements of benefits paid. The Medicaid agency will need them.

Comparing a partnership policy with other planning tools

	Partnership policy	Asset protection trust	Spend-down
Timing	Bought years before care	Funded 5+ years before care	At the time of care
Control of savings	Owner keeps control	Owner gives up control of principal	Money is spent
Cost	Premiums	Legal fees, loss of access	The assets themselves
Estate recovery protection	Generally yes, for disregarded amount	Generally yes	Not applicable

Getting help

Insurance agents sell partnership policies, and state insurance departments regulate them. Because the policy is one part of a long-term care plan, many families also talk with a Certified Medicaid Planner about how a policy fits with their other assets, their spouse’s needs and their estate plan. Be cautious of sales pitches that promise Medicaid results. See Medicaid planning scams and red flags.

Frequently asked questions

How do I know if my policy is a partnership policy? The policy or its outline of coverage usually says so, and the insurer can confirm. Keep any partnership certification with the policy.

Does a partnership policy pay for home care? Most long-term care policies cover home care, assisted living and nursing home care, depending on the policy terms.

What if I never need care? As with most insurance, the premiums are not returned, unless the policy includes a return-of-premium or death benefit feature.

Can my spouse use my partnership disregard? The disregard belongs to the policy owner. A married couple’s assets are counted together under the spousal rules, and how the disregard applies to a couple can depend on the state.

Does the disregard grow with inflation? The disregard equals the benefits paid, so a policy with inflation protection that pays more over time produces a larger disregard.

Key terms

Asset disregard: the extra amount of assets a partnership policyholder can keep, equal to the benefits the policy paid.
Tax-qualified policy: a long-term care policy that meets section 7702B of the Internal Revenue Code.
Reciprocity: an agreement among states to honor partnership policies bought elsewhere.
Elimination period: the waiting period before benefits start.
Benefit pool: the total dollars the policy can pay.

Questions to ask an agent

Is this policy certified as a partnership policy in my state?
What inflation protection does it include, and does that meet the partnership rules for my age?
How much has this insurer raised premiums on similar policies?
What happens to the partnership protection if I move to another state?
Does the policy cover home care and assisted living as well as nursing homes?
What options will I have if premiums rise?

When to look at a partnership policy

The best time to compare partnership policies is usually in a person’s 50s or early 60s, while premiums are lower and health is good. Couples often look at shared-care options. Anyone with a policy bought years ago should check whether it was certified as a partnership policy, because that status affects what can be protected later. Keep the certification letter, the policy and yearly statements together, so the agent under a power of attorney can find them if a claim or Medicaid application is ever needed.

If a policy’s benefits are still being paid when the owner applies, the disregard is generally figured on the benefits paid up to the date of application, and some states recalculate it later as more benefits are paid. Ask the caseworker how the state handles this.

Last updated for 2026. General information only, not legal or financial advice. Medicaid Answers is a free educational resource published by Medicaid Answers Foundation.