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Who Pays For Long Term Care? Print E-mail

You may think that Long Term Care services are covered by your health insurance, disability insurance or Medicare. Unfortunately, that's usually not the case.

Health insurance is designed to cover acute care medical expenses — illnesses or injuries like cancer, a broken arm or a stroke. It will pay the hospital bills you incur for a stroke, but it won't pay for any long term assistance you may need once you go home, such as help dressing or using the bathroom.

Disability insurance is designed to replace the income you lose if you're unable to work. Disability benefits can help you pay your mortgage or normal household expenses, but it won't provide additional benefits for Long Term Care services.

Many Americans mistakenly believe Medicare will cover their Long Term Care costs. Although Medicare does provide health coverage for those over age 65, it provides limited Long Term Care coverage. The federal Medicare program, which provides health insurance to people age 65 or older and some people with disabilities under age 65, financed 21 percent of national long-term care spending in 2011. (1)

1. JAMA Kaiser Family Foundation - August 2013 http://kff.org/infographic/visualizing-health-policy-a-short-look-at-long-term-care-for-seniors/

The are three main ways in which to pay for Long Term Care: Cash, Medicaid and Insurance.

Paying with cash

If you have a sizable net worth, this may be an option. Keep in mind that the average cost of an average stay in a nursing home is approximately $162,000, (2) and at nursing homes across the country, most people go through their assets and qualify for Medicaid within a year. (3) Wouldn't you rather leave that money for your spouse, family, friends or favorite charity?

2. Genworth 2011 Cost of Care Survey.
3. Kiplingers - November 2004.

Medicaid

Medicaid will cover the cost of some types of Long Term Care, but to qualify one must meet Medicaid's strict income and asset eligibility requirements. (See state guidelines.) Some people have considered simply reducing their assets in order to meet Medicaid's eligibility requirements. However, once a person goes on Medicaid they lose control over what care services they receive and where they receive them. Only certain facilities accept Medicaid patients, and they may not be close to your family or friends. In addition, the facilities that accept Medicaid patients are generally not as nice as private-pay nursing homes. You may want to visit a Medicaid facility and a private-pay facility and compare.

Further, at 78 million strong, the oldest of the Baby Boomers, born between 1946 and 1964, are already making unsustainable demands on the federal entitlement programs, Medicare and Medicaid. (4)

4. CNBC - "How Boomers Will Impact the Health Care Industry" February 2010.

Medicaid was designed as a resource for individuals who could not otherwise pay for their own medical needs. It was not designed to act as a national Long Term Care financing tool.

Long Term Care Insurance

Long Term Care insurance has evolved and typically covers a broad range of services including home health care, adult day care, assisted living facilities and nursing home care. Like any insurance product, Long Term Care insurance allows the insured to pay an affordable premium to protect against an unaffordable catastrophic event.

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