Who pays for long term care?
One of the most common misconceptions about long term care (LTC) is a belief that health insurance or a government program will pay for LTC.
Health insurance is designed to reimburse expenses associated with medical costs, including tests, medicines, doctor visits, and other specific services. In the case of accident or illness, it only covers the costs to help you get well. Once you have recovered as much as possible, it will not pay the ongoing cost of any chroninc, custodial care which is the most common type of LTC.
As shown in the chart below,1 government programs that help pay for LTC are both restrictive and very limited:
Medicare fully covers only 20 days in a skilled nursing facility, and only if the nursing facility stay is immediately preceded by a three-day hospital stay. From the 21st day through the 100th day, a daily co-payment of $137 is required. Considering that the average daily cost for care in a skilled nursing facility was $2192 in 2009, Medicare coverage doesn’t go very far!
After 100 days, Medicare does not cover skilled nursing care – regardless of your health status.
In addition, Medicare only covers skilled nursing care – not chronic or maintenance care. Thus, as soon as your doctor decides that you no longer need skilled nursing care, Medicare payments for the skilled nursing facility are terminated – potentially before even the end of the 20 days that are theoretically “fully covered.” This is true regardless of whether you are able to return to your own home and live independently at that time.
Medicaid programs pay 41% of long term care skilled nursing facility expenses. However, to become eligible for Medicaid benefits, recipients must first spend their assets down to the poverty level. Furthermore, once qualified for Medicaid, recipients have little or no choice in determining where care will be provided.
The new Community Living Assistance Services and Supports provisions of the Health Care Reform bill of 2010 create a government plan intended to help individuals pay for LTC. However, this plan is expected to cost substantially more than private LTC insurance and to provide lesser quality benefits when it is implemented in 2012.
Accordingly, the best means of planning for and affording your likely costs of LTC is by purchasing private LTC insurance, either through your employer or in the individual LTC market.