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Archive for January 23rd, 2012

The Long Term Care Insurance Partnership Program was established in 1980s and piloted in four key cities — California, Connecticut, Indiana, and New York. Its goal is to promote affordable and marketable LTC policies to the masses that will eventually lessen the burden of Medicaid in paying long term care and help people finance their own care without worrying about Medicaid eligibility rules. Those who have depleted their insurance benefits may still turn to Medicaid for assistance. Currently, the partnership program has been reinforced in almost all states in America.

Consumer Demographics

The partnership program was designed for low to middle income Americans since they are the ones who most likely deplete assets for Medicaid. However, some surveys indicate that most consumers of partnership policies are those with substantial assets. In California, Connecticut, and Indiana, the majority of policyholders own assets beyond $350,000. In New York the partnership program has fascinated higher income groups because the benefits can increase their savings.

Expansion through DRA

The Deficit Reduction Act (DRA) of 2005 mandated all states to adopt the partnership policies. Although the states may alter some provisions, all state policies must meet asset protection, tax qualifications, inflation protection, and other consumer protection. The DRA also mandated the Department of Health and Human Services to impose reciprocity agreement, allowing the policyholders to use their benefits when they move to other supporting states.

How Partnership Programs Affect Medicaid Spending

Proponents and opponents of Partnership program have their own say as to whether the policy has helped Medicaid with its budgetary problem. Opponents said that helping people finance their own care will lessen their dependence on Medicaid; thus, Medicaid spending for long term care will be reduced as well.

Others argue that partnership policies won’t take in effect to cut down Medicaid expenditure if they qualify people who can actually handle their own care. There’s a probability for Medicaid to save dollars if the policies are bought by consumers who have not bought other policies. Without asset protection, this could even lead to greater Medicaid expenditures. However, it is not easy to conclude whether partnership program benefits Medicaid or not because the program is relatively new and few policyholders have used the benefits.

Issues and Concerns

Educating the public about the Partnership program seems hard for the state government. The expansion of Partnership program only adds confusion to consumers as to deciding whether to buy policy or not and, if so, which type of policy.

Many consumers do not understand that they cannot automatically qualify for Medicaid. They must meet the state income and other eligibility criteria before they can qualify for the benefits. To qualify for partnership policy, you should be impaired or need assistance with two or more activities from daily living. The requirements for functional eligibility vary in every state, with restrictive rules applied. This can pose problems to purchasers who exhaust their partnership policies and then cannot qualify for Medicaid. Home care is not possible with Medicaid. Medicaid normally pays the stay in none other than nursing homes.

A loan on secured by Miami real estate collateral is typically known as a mortgage. This is the most popular form of real estate investment loan used by investors. Miami real estate investments provide an opportunity to generate cash flow. Apart from commercial banks, savings banks, savings and loan associations, credit unions, real estate investment loans can also be obtained from insurance companies, mortgage bankers, mortgage trusts, investment trusts, pension funds and finance lenders. Private individuals sometimes offer real estate investment loans as well.

There are two types of Miami real estate investment loans, namely, residential loans and commercial loans. Property that is solely used for business purposes like malls or industrial parks would be termed as commercial real estate. Commercial loans include buildings, warehouses, and stores. These properties are generally five or more units. Property that is solely used for single unit housing purposes is termed as residential real estate. Residential loans include those properties that are bought for rental income and future appreciation. The borrower initially receives a lump sum from the lender, which has to be paid back in installments. Purchasing a Miami real estate residential property involves having significant funds. Before qualifying for an investment loan, three main factors are considered: investor’s income, credit scores and reserves. In order to qualify for a loan, there are five basic essentials: interest rate, terms, payment, final value and principal. Loans can carry a fixed interest rate or rates that vary with market conditions. Some loans have negative amortization periods; investors should be cautious of such loans.

Miami real estate investment loans comprise of interim loans, short-term loans and long-term loans. Apart from commercial and residential loans, the other types of loans that are offered are construction debt, permanent debt, equity financing, structured financing, interim financing, mezzanine financing, foreclosure investor money, hard money loans and residential repair funding.

Investors may not need perfect credit scores to qualify for real estate investment loans. Bad credit real estate loans are designed for those individuals who have a less than perfect credit report. It is a type of sub prime mortgage and is a higher risk to the mortgage lender because of the past credit history of the borrower. Bad credit loans allow individuals to obtain a mortgage for buying real estate when other more conventional mortgage lenders or banks may have turned them down.

The longer the tenure of a loan, the higher the interest rate will be. A 30-year fixed loan will have a higher interest rate than a 2-year fixed loan. But people generally opt for a loan with a shorter-term fixed option, as the rate of interest is lower and hence the monthly payment is lower. To get a loan there are no pre-determined limits set for the real estate investor.

Some Miami real estate investors tend to prefer in marketable real estate assets. Buying shares in a real investment trust or REIT is one way to do this. Investment loans can be used to partially fund such investments and the REIT shares are used as collateral to secure such loans.