Answers to the Most Commonly Asked Questions
About Long-Term Care
Q. Who pays for long-term care?
Q. If the risk and cost are so high, why don't more Americans have insurance?
Q. Does Medicare, Medicare supplement or major medical insurance pay for
long-term care?
Q. Will Medicaid cover long-term care?
Q. Can you set up a trust to shelter assets and still take advantage of Medicaid?
Q. What are the options to pay for care - and how do you determine your
best strategy?
Q. What is long-term care?
A. Thanks to advanced medical technology and healthier lifestyles, people are living longer today than at any time in history. However, as people age, they suffer from chronic conditions such as arthritis, heart disease, stroke and memory loss. Long-term care is the help needed to cope — and sometimes survive — when this type of chronic disability impairs your capacity to perform the basic activities of daily living. Today, it includes a broad range of supportive medical, personal and social services which can be provided in a nursing home, in your own home, in an adult day care facility, or in an assisted living/residential care facility. There are three levels of care: skilled (or acute) care; intermediate care; and custodial (or personal) care.<top>
Q. Who pays for long-term care?
A. In 2005, almost $207 billion was spent on services for long-term care. Medicaid, a joint federal-state program for low-income residents, paid 48% of the cost, consumers paid 20% of the cost out-of-pocket, Medicare paid 18% of the cost and private health insurance paid 9% of the cost. The remaining 6% was paid by other private and public sources.
(Sources: U.S. Department of Health & Human Services, Administration on Aging, "Paying for LTC: Overview", 03/04/08)
<top>Q. If the risk and cost are so high, why don't more Americans have long-term care insurance?
A. There are a number of reasons consumers give for not having long-term care insurance. For example, many Americans believe they're already covered, either by Medicare, Medicare supplement insurance or health insurance. Others cling to the hope that the federal government will eventually pay their long-term care bills. Others believe their family, even though they may be geographically dispersed and raising families of their own will take care of them. Others simply believe it will never happen to them. And even if it does, their personal savings will cover the expense. In most cases, these are misconceptions and following them can threaten your retirement security.
<top>Q. Does Medicare, Medicare supplement or major medical insurance pay for long-term care?
A. Unfortunately, most long-term care needs are not covered by Medicare, Medicare-supplement insurance or health insurance. Medicare primarily covers medical expenses, hospital bills and doctor’s fees. Medicare pays for long-term care only when your care follows a hospital stay of at least three days; is given in a skilled-nursing facility approved by Medicare; is given pursuant to a physician’s written plan; and is daily skilled nursing care per benefit period. And, even if you meet all of the above requirements, Medicare will only pay for 100 days of skilled care per benefit period. After that, you’re completely on your own!
<top>Q. Will Medicaid cover long-term care?
A. Medicaid (Medi-Cal in California), the federal/state welfare system that finances health care for the poor, will pay for your long-term care. But to qualify, you must exhaust all your assets to state-required levels. Then, and only then, does Medicaid pay. And there are limits to where care is provided. Generally, care paid for by Medicaid is provided only in nursing care facilities.
<top>Q. Can you set up a trust to shelter assets and still take advantage of Medicaid?
A. Today, that’s very difficult to do. The period you can set up a trust before applying for Medicaid benefits has recently been lengthened from two-and-one-half years to five years. Also, it’s now more difficult to purposely "spend down" to the $2,000* in assets typically necessary to qualify for Medicaid. You have to wait 36 months if you transferred assets for less than their "fair market value." The 1996 Health Insurance Portability and Accountability Act (HIPAA) made the practice of purposely sheltering assets in trusts to qualify for Medicaid illegal.
*Medicaid eligibility requirements vary by state.
<top>Q. What are the options to pay for care — and how do you determine your best strategy?
A. When it comes to paying for long-term care, you can: (1) Do nothing and hope for the best; (2) Spend down to poverty and let the government pay your bills through welfare; (3) Self insure through personal savings; or (4) Transfer some of the risk to an insurance company. Which alternative is best for you? That depends on the status of your health and your net worth. Here’s a rule of thumb: If you’re relatively healthy and have a net worth of between $100,000 and $2 million, you should seriously consider private long-term care insurance. For most, long-term care coverage is one of the most important insurance purchases you can make to ensure a secure retirement.
Next: About Long-Term Care Insurance
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