Texas Adopts Medicaid Life Settlement Legislation
The Texas legislature recently passed the nation’s first Medicaid Life Settlement law. The legislation provides seniors, who are about to apply for Medicaid, with the ability to sell their life insurance policies for 10 times higher than the cash surrender value. The proceeds of the sale would be applied to their long-term care.
The law is a huge opportunity for everyone including the State of Texas because of the substantial savings in Medicaid costs. Seniors will be able to gain access to their money at a higher rate and access the care they need while long-term care providers will be able to serve more seniors at privatized rates.
The legislation was passed by an overwhelming majority and was signed by Texas Governor Rick Perry on June 14th.
Previously, individuals applying for Medicaid must surrender their policies in order to become eligible and spend the proceeds. Under the new law, life settlement proceeds would not affect seniors’ eligibility. To keep policy owners from spending their life settlements frivolously, the legislation would require that the money go straight into an account used solely to pay for long-term care.
Similar legislation is being introduced in New York, California, Florida, Kentucky, Louisiana, Maine and New Jersey.
According to Michael Freedman, a lobbyist for life settlement company Coventry First LLC, “In Texas, about 27,000 people a year apply for Medicaid coverage of long-term-care bills. If 10% of the estimated 10,000 applicants with life insurance worth $75,000 used settlements to pay for long-term care, Medicaid could save $20 million a year.”
“If life settlements and their potential for cost savings are any indicator, many states may adopt similar legislation for seniors with structured settlements and annuities applying for Medicaid,” said James Goodman, Co-Founder of CBC Settlement Funding.
It is currently unknown of any additional states are considering similar legislation or if states will consider introducing legislation for seniors with annuities.