Who Pays for Long Term Care?

Who wants to get off cheap and die before needing care?

There are two costs to long term care: financial and emotional. The question to ask yourself is: "What would be the financial and emotional consequences to my family and friends if I needed long term care."

Using personal savings is equivalent to self-insuring in that personal funds are put at risk in order to cover the potential cost of care. This is the position that most people are in, though few would choose to see it this way.

Financially the choices are:

Self-insure (you or family pays)
Health Insurance and Medicare pays for a short period (see below)
Medicaid state welfare
Long-term care insurance

Given how rarely people self-insure against the risk of medical, auto or property loss, it's curious how many seem willing to accept the long term care risk. It is because we are yet unaccustomed to paying long term care bills, but that is about to change.

If the need for long term care never arises then the (self-insured) bet pays off, but the same could be said of health, auto, and home insurance, which have a lower chance of occurrence than long term care. See the risk chart on the next page "Protecting Assets."

If you don't want to get stuck with the entire long term care bill you can consider long term care insurance (long term care insurance quote). There is a Cost of Care Survey (pdf) that will show you what care costs in your area.

Counting on the government to pay for your care is hardly more encouraging. You will read later how little the federal Medicare will pay and how little you can own before state Medicaid will pay.

Doesn't The Government Pay For Long Term Care?

While many people think the state or federal government pays for long term care expenses. Nationally, about 36% of all nursing home expenses are paid out-of-pocket by individuals and their families.

The long term care financial burden on a family can be as heavy as the emotional toll. Some will end up spending a lifetime of savings only to be on state welfare at the very end of their lives.

Regardless of what some attorney may say, Medicaid Planning is really Poverty Planning. You must be living at the poverty level to qualify for Medicaid and it is doubtful that those attorneys will be living in poverty on Medicaid when they are in long term care. It is a federal crime to attempt to defraud Medicaid by hiding assets.

In California a long term care insurance policy is available called the California Partnership for Long Term Care which provides some asset protection from the Medicaid spend-down rule.

Medicare, Medicaid, Medicare Supplemental Insurance (Medigap), or standard medical insurance plans (HMO, PPO, Kaiser, Blue Cross, etc.) are not designed to pay for long term care expenses.

As you can see from the National chart above 69% of the people receiving long term care are either in poverty (Medicaid) or heading that way paying $70,000+ a year out-of-pocket. As you'll read below the 18% receiving Medicare will only be getting that for a maximum of 100 days, then they switch to either Medicaid or out-of-pocket.

Medicare vs Medicaid

Medicare	Medicaid
Government health insurance program for people over 65 and for those who are on Social Security disability.	Funded jointly by the Federal Government and the individual states. Individuals must meet specific financial and “need for care” requirements in order to receive benefits.
Qualification based on age and/or disability. Participation not subject to income, asset or “needs” test.	Qualification based on “need for care” and financial need. Single (unmarried) individuals must be essentially broke (below $2,000 in most states). Rules allow certain strategies to protect assets.
Provides coverage for hospitalization, doctors and other types of medical expenses. Medicare is a medical insurance program, and except for a limited short-term nursing home benefit, is not coverage for nursing home or other long-term care.	Provides benefits for long-term nursing home care, and, in many states, benefits for other types of long-term care.
In order to get Medicare coverage for a nursing home stay, you must be in an approved skilled nursing facility, have been in the hospital for at least three days prior to entering the facility, and to be deemed by Medicare to be medically benefiting from that skilled nursing. Custodial care is not covered. Technically, there is a maximum of 100 days of nursing home benefit. In actuality, the requirement about medically benefiting usually limits the benefit to a period of 10-20 days for rehabilitation.	Those individuals who meet the definition of “need for care,” as well as the financial requirements, can qualify for nursing home care (including custodial care). There is no maximum limit on the period of time that care can be provided.
Under no conditions does Medicare pay for assisted living, residential care facilities, and adult foster care.	In many states, Medicaid will provide care in assisted living, residential care and/or adult foster care facilities.
Except during the time you're in the hospital, Medicare does not cover medications.	Medications are covered.
Medicare does have some benefit for home health but this is purely for medical reasons, not for caregivers to come in and attend to someone who needs help with personal needs on a long-term basis.	In many states, in-home care is provided to allow for caregivers to come into the home to provide care and help with personal needs and activities of daily living.

Medicare and Long Term Care

Medicare (65+ or disabled) is an entitlement program with eligibility requirements. It's purpose is to get you back on your feet and home. First, a physician must determine that you need acute restorative/rehabilitative care. You can only receive this rehabilitative care in a Medicare certified facility. Medicare covers skilled care only, not custodial care and over 95% of long term care is custodial care.

* While Medicare helps provide up to 100 days of skilled nursing facility care, it doesn't cover custodial care for personal needs or care that doesn't require professional medical skills or training.
* Admission to a skilled nursing facility must be within 30 days of a three-day hospital stay, and admission can only be for the condition that was treated during that hospital stay.
* A physician must certify the need for daily skilled care.

Medicare Part A - Skilled Nursing Home Care

Coverage for skilled nursing home care requires you to:

be hospitalized for at least 3 days.
enter a Medicare approved skilled nursing facility within 30 days after hospital discharge.
be receiving skilled nursing care.

Medicare Covers

You Pay

Skilled nursing
confinement
for 1-20 days

All eligible expenses

Nothing

Skilled nursing
confinement
for 21-100 days

All eligible
expenses after
you pay a per-day
co-payment

$119.00 a day
co-payment
as much as
$9,520.00

Skilled nursing
confinement
over 100 days

Nothing

YOU PAY
ALL COSTS *

* You would need a Long Term Care policy to cover this risk.

Medicare Supplemental Insurance and Long Term Care

Medicare supplemental insurance is also called MedSup or Medigap. These policies cover some or all of Medicare's deductible, co-payments, and coinsurance, which can be substantial. It follows the Medicare guidelines and does not pay for custodial care. It is not a long term care policy.

Medicare Supplmental Brochure (pdf)

"Medigap plans are not intended to meet long term care needs and
provide no coverage for the vast majority of long term care expenses."
Health Insurance Assn. of America

Medicaid and Long Term Care

Medicaid is the welfare health care system.

Most of the money to fund the state Medicaid program comes from the Federal government. Each state is responsible for managing it's own Medicaid system and each state has it's own rules in addition to the rules set by the Federal government.

Each state may have their own names for the program. Examples include "Medi-Cal" in California, "MassHealth" in Massachusetts, and "TennCare" in Tennessee.

The Medicaid welfare program requires individuals to spend down most of their savings and income before becoming eligible for benefits. Medicaid is not an entitlement program like Medicare, but is a means-tested program.

Medicaid Gets Tough
Prepare to pay for your own long term care.
William Zatlin, of North Babylon, N.Y., may not realize it, but his bed in a Long Island nursing home costs about $11,000 a month and wiped out his cash savings in less than a year. Kiplinger Financial Articles

Medicaid looks at your income and assets to see if you have the means to pay. If you have more income and assets then Medicaid allows, you pay for your own care until you deplete your income and assets until they are at or below your states poverty level. For some people Medicaid is a zero interest loan that you must qualify for and repay (estate recovery).

Medicaid also imposes many restrictions, and your choice of facilities and locales is limited to those that accept Medicaid eligible patients. The facility you end up in may not be close to your family.

Medicaid Planning is really Poverty Planning

Medicaid is spending much more than it is taking in. The result of this is that Medicaid through "estate recovery" could be looking more diligently for any assets of yours that they can claim to pay for the long term care expenses you've incurred. They also may change what are allowable exemptions (non-countable assets).

Estate Recovery was implemented in 1981, in 1993 a Federal and State law was amended to expand the definition of the term "estate." The 1993 amendment greatly increased what the State could seek to recover from the estate (including trusts). There are fewer and fewer ways to reduce the risk of losing your assets to long term care expenses.

Medicaid Income Limits
Living in the community	Living in a nursing home
Single elder (over 65) or disabled is $637 per month; for an elder/disabled couple it is $956 per month	With any outside income you can keep $35 per month for personal needs. If no income then you can apply for SSI and receive $42 per month.
* Different states have different requirements, check with a local Medicaid office.

Medicaid Asset Limits
Exempt Property (what you are allowed to keep)	Nonexempt Countable Property (what you cannot keep)
A home A car Household goods Business Property & Real Estate Term Life Insurance Mortuary Trust & Burial Plot (up to $1500) If you have any more than this you must spend it on your long term care before Medicaid will begin to cover your costs.	(basically anything with cash value) Cash over $2,000 Stocks/Bonds IRA's, Keoghs CDs Single premium deferred annuities T-Bills/Notes Savings Bonds Investment Property Whole Life Insurance Vacation Homes Second Vehicles

What about the spouse? (not receiving Medicaid)

The spouse of a Medicaid recipient is allowed to keep a low level of income and certain assets in order to avoid poverty, but must pay amounts above these levels for the institutionalized spouses care.

For 2008 the Spousal Impoverishment Limits were increased. The Community Resource Allowance allows for the at-home spouse to keep up to $104,400.00 in assets and the institutionalized spouse can keep up to a maximum of $2,000.00 in a separate account. The at-home (community) spouse can receive a maximum monthly income of $2,610.00 (MMMNA-Minimum monthly maintenance needs allowance). (Spousal Impoverishment)

Medicaid can put a lien on the house occupied by the at-home spouse for the purpose of recovering money spent on the spouse that is receiving Medicaid, this is called "estate recovery." Once both spouses are out of the house the state will want to be repaid. The best way to protect your assets is to purchase long term care insurance.

* These figures may not be current, check with Medicare and Medicaid (local welfare office) for current figures.

Medicare

Medicaid Eligibility Overview

Medicaid Local Offices Contact Information

NOTE: As of Feb 8, 2006 new rules regarding Medicaid became law. These laws may change some of the information here regarding Medicaid. More on this law

(See: Asset protection from the Medicaid spend-down rule with the Partnership for Long Term Care)

Next: Protecting Income and Assets

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