Financing Long Term Care
Dealing with a long term or chronic condition for yourself or a loved one is an emotionally draining experience. Unfortunately, it is also expensive and most people cannot afford to pay for it out of pocket for any length of time.
When people discuss long term care, they are generally referring to care for people who have trouble performing activities of daily living (ADL) such as walking, dressing, bathing, preparing food, and brushing your teeth.
In the case of people who cannot perform ADLs, there are a range of care options with the most common being home health care, assisted living, and nursing home care. These services can get quite expensive but there are a number of ways in which people can pay for part or all of their long term care needs.
Medicare does not pay for long term custodial care but will pay for short term nursing and home health care which results from a previous hospitalization. If you have a hospitalization of three or more days, you can be eligible for nursing home care for services related to the illness treated in the hospital. In this situation, Medicare will cover up to 100 days of care in the facility. The cost to you will be $0 for days 1-20 and $128 per day for days 21-100. You are responsible for all costs after day 100.
Medicare will also cover reasonable and necessary part-time home health care services in the case of a continuing need or chronic condition if they are ordered by a doctor and are provided by a Medicare-certified home health agency. The services covered include physical therapy, occupational therapy, speech-related pathology, medical social services, home health aide services, durable medical equipment (including wheelchairs, hospital beds, oxygen, and walkers), and medical supplies for use at home.
For more information on all Medicare covered services, go to www.medicare.gov.
Medicaid is a partially federally financed, state operated program for lower income individuals that covers many long term care custodial services in 38 states including Washington, DC. Because Medicaid is state operated program what is covered will vary by which state you live in.
In general, Medicaid income limits for long term care services are tied to Supplemental Security Income (SSI) limits which is currently $623. States are allowed to set higher income limits and many do. In fact, 38 states permit people receiving long care coverage through Medicaid to have an income of up to 300% of SSI which is currently $1,869 per month.
States require individuals receiving long term care coverage through Medicaid to have very few assets but those defined as “medically needed” (people with high medical bills) are permitted to “spend down” their assets in order to reach eligibility. The amount of assets people are allowed to keep varies by state but in some cases it is as low as $2,000 for an individual and $3,000 for a family. People who “spend down” their assets are subject to a five year look back to ensure that assets were not transferred to their heirs in order to qualify for the program. Many states permit the spouse of an individual receiving Medicaid long term coverage to keep their home but the home cannot equity of more than $500,000.
To learn more about what your state offers in terms of Medicaid long term care coverage, click here to go to the Henry J. Kaiser Foundation which has a breakdown on Medicaid benefits in all 50 states.
Long Term Care Insurance
An increasing popular way to finance long term care is through a Long Term Care Insurance policy which is a private policy purchased by individuals. There are currently 10 million people who have long term care insurance policies and that number is increasing each year.
This insurance works in a similar manner to life insurance. You purchase a policy before you need to use it and pay premiums until you collect on it. Like life insurance, the earlier you purchase a long term care insurance policy the less you will pay in monthly premiums. In general, premiums will vary based on your age and health status. Some policies require you to undergo a physical exams but not all do. Additionally, many employers are starting to offer long term care policies as an option to their employees.
Most long term care insurance policies cover nursing home, home health and assisted living care and pay out a specific dollar amount for services such as $100 per day for nursing home services. Some policies allow you to purchase an inflation escalator which will increase the amount paid for each service by a certain percentage each year. It should be noted that long term care policies rarely pay for the full cost of services but cover a significant percentage of the bill.
Many long-term care insurance policies are called Tax Qualified (TQ) policies and offer tax benefits. Depending on your age, you can include some or all of the premium for a TQ policy as a medical deduction on your Federal income tax form if you itemize your deductions. Many states also offer tax deductions for the premiums on long term care policies so be sure to check on whether or not you can deduct them in your state. Also, when you receive payments from a Tax-Qualified policy, you generally don’t have to pay Federal tax on them.
Buying a long-term care insurance policy is an important decision and one you should do carefully. Make sure that you do research on all available policies including asking for a sample policy or Outline of Coverage that shows benefits and costs. Compare the costs and benefits of policies from different insurance companies and investigate if any of the policies are Tax-Qualified. Be sure to call the company or talk with the insurance agent about anything you don’t understand.
It is important to buy from a reliable and reputable company. If you are not sure about either the company you are dealing with or the agent selling the policy, call your State Insurance Department and check them out. A list of all state insurance department can be obtained by clicking here.
“Medicaid and Long-Term Care Services and Supports,” Kaiser Commissioner on Medicaid and the Uninsured, December 2007.