An important part of planning for long term care is deciding how to pay for services. This is because long term care is very expensive, and contrary to what many people believe, their Medicare coverage will not pay for most of the long term care services they need. While some people may qualify for Medicaid – the major payer of long term care services, most people won’t. There are other federal public programs, such as the Older Americans Act, or state funded programs, that pay some long term care services, but like Medicaid they target those people with the most functional and financial need. Consequently, if you are one of the 70% of people over the age of 65 who will need long-term care services – there’s a very good chance you will have to pay for some or all of your long-term care services out of your personal income and resources.
Paying for long term care out of your personal income and resources can be challenging. Even if you have a modest need for assistance at home with personal care, say a visit from a home health aide 3 times a week, based on 2008 average costs, you would have to pay about $18,000 a year for those services.
To make the best decisions about how to pay for long-term care you need to understand what services cost, what public programs you are eligible for and what they cover, what private financing options are available, and which ones work best for you.
Long term insurance is the most efficient means of protecting your assets from this threat. When you purchase a long term care insurance policy, you not only help safeguard your assets from the cost of long term care, but you increase your independence and control over future needs.
Paying For Long Term Insurance
One third of all nursing home expenses are paid out-of-pocket by individuals and their families, and about half are paid by state Medicaid programs. Medicare, Medicare Supplement Plans, Medicare HMO’s and traditional health insurance plans are designed to pay for hospital and doctor costs, not to pay for long term care services. In fact, Medicare pays only about 10% of all long term care costs (including only 5% of all nursing facility expenses). Additionally the US deficit may wipe out all future payments.
Who Pays for Long-Term Care?
If you have sufficient income and assets, you are likely to pay for your long-term care needs on your own, out of those private resources. If you meet functional eligibility criteria and have limited financial resources, or deplete them paying for care, Medicaid may pay for your care. If you require primarily skilled or recuperative care for a short time, Medicare may pay. The Older Americans Act is another Federal program that helps pay for long-term care services. Some people use a variety of payment sources as their care needs and financial circumstances change.
| Long-Term Care Service | Medicare | Private Medigap Insurance | Medicaid | You Pay on Your Own* |
| Nursing Home Care | Pays in full for days 0-20 if you are in a Skilled Nursing Facility following a recent hospital stay. If your need for skilled care continues, may pay for the difference between your co-payment of $133.50/day for days 21-100. After day 100 does not pay. | May cover the $133.50/day co-payment if your nursing home stay meets all other Medicare requirements. | May pay for care in a Medicaid-certified nursing home if you meet functional and financial eligibility criteria. | If you need only personal or supervisory care in a nursing home and/or have not had a prior hospital stay, or if you choose a nursing home that does not participate in Medicaid or is not Medicare-certified. |
| Assisted Living Facility (and similar facility options) | Does not pay | Does not pay | In some states, may pay care-related costs, but not room and board | You pay on your own except as noted under Medicaid if eligible. |
| Continuing Care Retirement Community | Does not pay | Does not pay | Does not pay | You pay on your own |
| Adult Day Services | Not covered | Not Covered | Varies by state, financial and functional eligibility required | You pay on your own [except as noted under Medicaid if eligible.] |
| Home Health Care | Limited to reasonable, necessary part-time or intermittent skilled nursing care and home health aide services, and some therapies that are ordered by your doctor and provided by Medicare-certified home health agency. Does not pay for on-going personal care or custodial care needs only (help with activities of daily living). | Not covered | Pay for, but states have option to limit some services, such as therapy | You pay on your own for personal or custodial care, except as noted under Medicaid, if you are eligible. |
National Spending on Long-Term Care
The total amount spent on long-term care services in the United States (in 2005) was $206.6 billion. This does not include care provided by family or friends on an unpaid basis (often called “informal care.”) It only includes the costs of care from a paid provider.
While most information on “who pays for long-term care” presents these national figures, it is important to remember that each person’s individual experience will differ. These figures combine the experiences of everyone receiving paid care, but there are significant variations from person to person.
On an aggregate basis, the biggest share, 49 percent, is paid for by Medicaid. On an individual basis, however, “who pays for long-term care” can look very different. This is because people with their own personal financial resources do not qualify for Medicaid unless they use up their resources first paying for care, so-called “spending down”. If you have reasonable income and assets, most likely you will be paying for care on your own.
Also, while Medicare overall pays for 20 percent of long-term care, it only pays under specific circumstances. If the type of care you need does not meet Medicare’s rules, Medicare will not pay and you are likely to pay for your care on your own.
Learning more about the “rules” for when Medicare, Medicaid, other public programs or private insurance might pay for long-term care is an important part of understanding “who will pay” if and when you need care.
