By Indy Senior Advisor Care Team · August 28, 2026
Indiana adds Medicaid asset protection to qualifying long-term care policies at no extra cost. One boxed paragraph on page one tells you whether your parent has it, and the purchase year decides how much it is worth.
Find the Policy. Read the First Page. That Is the Whole Test.
Somewhere in most parents' filing cabinets there is a long-term care insurance policy bought fifteen or twenty years ago and never looked at since. Families usually file it mentally under we will deal with that later. In Indiana, one paragraph on the first page decides whether that document is worth tens of thousands of dollars more than it appears to be.
Indiana requires every Partnership policy to carry boxed, bold language on the first page of the policy, on the Outline of Coverage, and on the application. It reads: THIS POLICY {CERTIFICATE} QUALIFIES UNDER THE INDIANA LONG TERM CARE INSURANCE PROGRAM FOR MEDICAID ASSET PROTECTION. If the policy is not a Partnership policy, the state requires a box saying so just as plainly. Either way, page one answers the question in under a minute.
This is worth doing before anything else, because it is a fact you are discovering rather than a decision you are making. Indiana is explicit that a policy is either a traditional policy or a Partnership policy from the day it is issued. You cannot add asset protection to a traditional policy later, and no rider will convert one into the other.
So the answer does not change what you can do next. It changes what the rest of the financial plan should look like, and families who skip this step often spend months planning around a constraint that does not apply to them.
What Indiana Bolted Onto These Policies, and Why It Costs Nothing
Two kinds of long-term care policies are sold in Indiana: traditional policies and Partnership policies. Both pay benefits for care up to their limits. The Partnership version adds a feature the state calls Medicaid Asset Protection, which comes into play only if the policyholder later has to apply for Medicaid.
The state does not sell insurance. The Indiana Long Term Care Insurance Program sits inside the Department of Insurance, which reviews and approves the policies; private carriers and their agents sell them. Families sometimes assume the program is a government product with a waiting list. It is not.
The part most families do not believe on first hearing is the price. Indiana's own FAQ states that a Partnership policy does not cost more than an identical traditional policy. Premium depends on age at purchase, benefits selected, health status, and carrier. Asset protection is added by the state at no charge and is not a carrier benefit you paid extra for.
Indiana also acknowledges why so many older policies are not Partnership policies. Selling one requires eight hours of long-term care training plus seven additional Partnership-specific hours. The state says directly that if your parent's agent never raised the option, nothing improper happened -- the agent may not have completed that training, or may have represented a company that did not offer Partnership policies at all.
Indiana sold its first Partnership policies in May 1993, more than a decade before the federal Deficit Reduction Act of 2005 opened this model to most other states. A policy written in Indiana in the 1990s can carry protection that simply did not exist in most of the country at the time.
Total Asset or Dollar-for-Dollar: the Purchase Year Decides
There are two grades of protection. Dollar-for-dollar protects one dollar of assets for every dollar of benefits the policy pays out, up to the policy maximum. Total asset protects all of the policyholder's assets, regardless of value, once the policy benefits are exhausted.
Total asset protection is not something you elect. Indiana requires four conditions, all of them: the policy must carry 5% compound inflation; the initial total benefit must equal or exceed the state-set dollar amount for the year the policy took effect; the benefits must be fully exhausted; and the total benefit must never have been reduced below the state-set minimum for the year of that reduction.
That second condition is why the purchase year matters more than the policy's current size. The state-set amount climbs roughly 5% per year and Indiana publishes the whole chart. A policy effective in 1998 or earlier needed $140,000. In 2005 the figure was $196,994; in 2015, $320,883; in 2024, $497,796. For a policy taking effect in 2026 the state-set amount is $548,820, and the chart already runs out to $635,331 for 2029.
The fourth condition is the one that quietly destroys protection. When premiums rise, carriers often offer to trim the benefit amount to hold the payment down, and it looks like an easy yes. If that reduction drops the total benefit below the state-set minimum for the year the reduction happens, total asset protection can be lost. Ask the carrier in writing what a proposed reduction does to Partnership status before agreeing to anything.
Assets Are Protected. Income Is Not. That Distinction Does the Most Work.
Medicaid separates resources from income, and the Partnership disregard applies only to resources. This single line resolves most of the confusion families have about what the policy actually buys them.
Indiana's program lists what generally counts as a resource: bank accounts and certificates of deposit, valued at the balance on the first day of the month; IRAs, at the account balance minus any early-withdrawal penalty for someone under 59 1/2; mutual funds, stocks and bonds; the cash value of life insurance; annuities before they are annuitized; and real property. Those are the dollars a Partnership policy can shield.
Income is a different category and it is not protected. Social Security, pensions, annuity payments once annuitized, rental income, and interest and dividends all remain countable. A parent whose assets are fully protected can still be required to contribute nearly all monthly income toward the cost of care.
The practical translation is worth saying plainly, because the marketing rarely does: a Partnership policy protects the nest egg and what is left to heirs. It does not make care free, and it does not preserve your parent's monthly cash flow.
The Part That Reaches Past Death: Estate Recovery
Indiana's FAQ includes a sentence that families almost never encounter anywhere else: assets protected under a Partnership policy are also exempt from Medicaid estate recovery.
That matters because estate recovery is the part of this system that surprises families long after the care decisions are over. Indiana's Medicaid Estate Recovery Program pursues what Medicaid paid on someone's behalf after age 55, and as of July 1, 2025 the state has nine months after the date of death to file a claim. We walked through how that works, and what the state can and cannot reach, in our guide to Indiana Medicaid estate recovery and the family home.
Most of the levers families reach for once a parent is already in care are weak or unavailable. A Partnership policy bought years earlier is one of the few things that genuinely works in advance -- but only if someone finds it and understands what it does.
If you are going through paperwork right now, this is the reason to look for the policy before you look for anything else.
What This Does, and Does Not Do, for an Assisted Living Bill
Asset protection is a disregard applied when someone applies for Indiana Medicaid for long-term care. It is not a rent subsidy, and it does not pay a community directly.
Indiana splits assisted living funding in a way that trips up nearly everyone. The PathWays Waiver covers care services for Hoosiers 60 and older but does not cover room and board; room-and-board help in a licensed residential care facility runs through the separate Residential Care Assistance Program. A community can hold a PathWays agreement, an RCAP agreement, both, or neither. We covered that split in detail in our explainer on PathWays, RCAP and the waitlist.
Here is a limit we would rather name than paper over. The state's consumer materials describe Partnership asset protection in terms of Medicaid long-term-care eligibility generally. On the pages we reviewed, they do not spell out precisely how the asset disregard interacts with an RCAP room-and-board determination in a residential care facility. We could not find a primary source that answers that specific question, so we are not going to assert an answer. Ask FSSA and the community's business office directly, and get the response in writing.
There is a second question that belongs to the policy rather than to Medicaid: whether it pays for assisted living at all. Older long-term care policies are often written around nursing home care, with narrow or absent assisted living and home care benefits. Read the benefit triggers and the definitions of covered settings before assuming the policy will pay for the building you are touring.
If your parent may need waiver services, the eligibility assessment is now handled through a different door than it used to be -- see who actually performs the level of care assessment in Indiana now.
The Indiana Tax Deduction That Goes Unclaimed
If your parent is still paying premiums on a Partnership policy, there is an Indiana deduction that is easy to miss. Beginning with tax year 2000, premiums paid on an Indiana Partnership long-term care policy can be taken as a deduction -- not a credit -- on Form IT-40, listed on Schedule 1 and 2 under Other Deductions using code 608.
The federal treatment is separate and age-based. For tax year 2026 the maximum long-term care premium that can be counted runs $500 at age 40 or under, $930 for ages 41 to 50, $1,860 for 51 to 60, $4,960 for 61 to 70, and $6,200 above 70.
This is not a reason to buy a policy. It is a reason to check the last few years of your parent's Indiana returns if a Partnership policy exists and premiums are being paid. In our experience families who never knew the policy was a Partnership policy also never knew about code 608.
A Realistic Hour of Work This Week
Find the policy and read the first page for the boxed Medicaid asset protection language. Write down the original effective date, the total benefit amount, and whether the inflation rider is 5% compound.
Compare that effective date against Indiana's published state-set dollar amount chart to see which grade of protection is in play. Then call the carrier and ask, in writing, whether the policy currently qualifies for total asset or dollar-for-dollar protection as issued today. Do not agree to any benefit reduction until you have that answer.
Indiana publishes the state-set chart and its annual figures at the Indiana Long Term Care Insurance Program website. We are deliberately not printing a program phone number here, because the number listed in the site's footer is the general IN.gov information line rather than a direct line to the program; use the program's own contact page instead.
If care is close rather than hypothetical, CICOA Aging & In-Home Solutions is the Area Agency on Aging for Marion, Hamilton, Hendricks, Johnson, Boone and Hancock counties, and its Resource Center number is 317-803-6131. For how the money side fits together more broadly, see how Indianapolis families actually pay for senior care.
One last note, and we mean it as a real one rather than a disclaimer: this is a summary of a public insurance program, not legal or financial advice. Partnership rules interact with Medicaid eligibility, trusts, and transfer penalties in ways that get specific to one family's facts very quickly. If meaningful assets are involved, an Indiana elder law attorney is worth the consultation fee.
