Relates to medicaid life settlements

BILL NUMBER:S5721

Title of bill

An act to amend the public health law, in relation to medicaid life settlements

Purpose

The purpose of the bill is to allow individuals who are about to access Medicaid to sell their life insurance policies pursuant to a life settlement contract and use the proceeds of the life settlement to directly pay for long term care expenses thereby delaying entry into the Medicaid system.

Summary of provisions

This bill would provide for the conversion of a life insurance policy in to a Medicaid Life Settlement Plan, pursuant to a regulated life settlement contract.

An owner of a life insurance policy would be allowed to enter into a life settlement contract for the purposes of using the proceeds of that settlement contract for expenses related to "long-term care services." The proceeds of the life settlement contract would be held in an irrevocable state or federally insured trust and used to pay long term care expenses before an individual qualifies for Medicaid.

The bill would prohibit the proceeds from a life settlement contract from being considered a resource in determining a Medicaid applicant's eligibility and requires the funds to be used for long-term care services only. The bill would also prohibit the expenditure of any federal or state Medicaid funds before the proceeds of the trust are exhausted.

The bill requires licensed life settlement providers to maintain a bond or other form of security in the amount of $500,000. The bill also requires that five percent of the face value of the policy or $5,000, whichever is less, be reserved and payable to the owner's estate for the purposes of funeral expenses.

Justification

Many seniors who currently have in-force life insurance policies never take full advantage of their assets market value and instead let their policies lapse or abandon their policies by ceasing to pay their monthly premiums.

This bill benefits Medicaid applicants with life policies by providing them with a fair market value for their policies, as opposed to the cash surrender value or nothing if they are forced to surrender or otherwise terminate their policies in order to qualify for Medicaid. This permits the individual, using their own funds, to have an expanded choice of care, including such things as the level and type of care that meets their needs, as well as the type and location of the services or facility. Importantly, the individual who sells their policy and applies the proceeds directly to pay for long term care services will be deferred from going onto Medicaid for a considerable period of time, in some cases, permanently.

This bill benefits long term care service providers through an increase in badly needed private pay revenue, paid directly from the trusts to the providers.

This bill will generate significant savings to the state by advising the owners of a life insurance policy to convert their policies into a Medicaid Life Settlement Plan instead of abandoning those policies or letting them lapse. This legislation will substantially extend the spend-down period of the life policy, on Medicaid qualified expenses, delaying the individual's entry onto Medicaid for months or years.

Legislative history

New bill.

Fiscal implications

This bill will result in substantial savings to the Medicaid program.

Effective date

This bill will take effect 90th day after it shall have become a law.