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About the Deficit Reduction Act of 2005

In February of 2006 President Bush signed the Deficit Reduction Omnibus Act of 2005 (DRA). This new law allows for nationwide expansion of Long-Term Care Partnership programs and tightens the eligibility rules for Medicaid. Ultimately this is great news for the LTC Insurance industry.

Long-Term Care Insurance Partnership policies allow consumers to protect some of their assets that they would most likely have to spend down to qualify for Medicaid when needing Long-Term Care. Until the DRA came into effect there were only 4 states that participated in the Partnership Programs which include Indiana, California, Connecticut, and New York. Now there are over 20 states that are authorizing legislation1.

The changes made to Medicaid eligibility will make it more difficult for individuals to qualify for coverage. These changes are the look-back period is now changed from 3 to 5 years and one must meet the required spend down limits prior to the penalty period. Individuals will be ineligible for Medicaid coverage if they have home equity more than $500,000-$75,000 (depending on the state).

1. http://www.aarp.org/research/longtermcare/insurance/fs124_ltc_06.html
Source: http://www.michigan.gov/documents/meetingnotes_04242006_Documents_171879_7.pdf

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