Who Pays for 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.
Financially the choices are:
- Self-insure (you or family pays)
- Health Insurance and Medicare pays for a short period
- Medicaid state welfare
- Long-term care insurance & Partnership
- Life insurance with LTC benefits
- Annuity with LTC benefits
Doesn't The Government Pay?
Many people think the state or federal government pays for long term care expenses. Medicare provides for care expenses for a limited amount of time, not to exceed 100 days.
Medicaid provides for care expenses once your bank account is $2,000 and in some states $3,000. Then Medicaid can use estate recovery to have your estate repay for your nursing home expenses. (Son hit with mother's $93,000 nursing home bill. - Forbes)
Nationally, about 36% of all nursing home expenses are paid out-of-pocket by individuals and their families. A high percentage of nursing home residents are paid by Medicaid, for some it was after they spent down their assets before they could qualify for Medicaid. (See Partnership)
The long term care burden on a family can be a heavy emotional and financial 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 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 advocates 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 most other states a long term care insurance policy is available called the 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.
Nationally, 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. About 18% receiving Medicare will only be getting that for a maximum of 100 days, then they switch to either Medicaid or out-of-pocket. Insurance is one way to leverage yourself against the high cost of care. Most people buy a policy that covers a percentage of the cost with the plan to pay the difference out-of-pocket, at least they are not paying the full cost.
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.
Medicaid and Long Term Care
Medicaid is the welfare health care system. Some of the money to fund your state's 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 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 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.What about the spouse that's not receiving Medicaid?
The spouse of a Medicaid recipient is referred to as the Community Spouse and is allowed to keep a level of income and certain assets in order to avoid poverty, but must pay amounts above these levels for the institutionalized spouses care.
The Community Resource Allowance means the at-home spouse can keep 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 (MMMNA-Minimum monthly maintenance needs allowance). Check with your local Medicaid/welfare office for the current information. Click here for Medicaid information.State Medicaid program websites list
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. A Partnership qualified policy will have a limited estate recovery exemption along with a cash exemption.
* These figures may not be current or reflect your state limits, check with Medicaid (local welfare office) for current figures.
Long Term Care is a family affair.
The majority of caregivers are family members.