Medicare does not pay for Long-Term Care. So
what should you do?
Rusty had paid for a long-term care policy for
many years. Then, one day, his daughter found a cancelation notice for
nonpayment of premiums sitting on his desk.
“Dad, why are you not paying the premiums for
this policy?”
“Because I have Medicare and my pipe trade’s
policy. I don’t need that one.”
“Dad, get out your checkbook. We’re going to
the FedEx office and sending in the payment.”
Three weeks later, Rusty suffered
complications from prostate cancer and could not manage his care. He was
admitted to a long-term care facility where he lived until his death 13 months
later. The long-term care policy paid its share every day, the difference
between Rusty keeping or having to sell his farm.
Rusty (full disclosure: Rusty was my father)
fell for one of the biggest Medicare myths ever: that Medicare covers long-term
care. He wasn’t alone in thinking that. 56% of
middle-income Baby Boomers believe that Medicare will pay for
their ongoing long-term care.
Medicare does not now and never has covered
long-term care.
Problems tend to arise because there’s so much
confusion about long-term care, LTC, for short. This Q&A should help
clarify some of the issues.
What is long-term care?
Long-term care, often called custodial care,
is a range of services and support to meet health or personal care needs over
an extended period of time. This is non-medical care provided by non-licensed
caregivers.
Who needs long-term care and why?
Maybe, eventually, every one of us will need
this care. Consider these statistics.
·
A person turning
65 today has almost a 70% chance of needing some type of
long-term care services and support in their remaining years.
·
20% of those
turning 65 will need care for longer than five years.
·
About 35% of people who
reach age 65 are expected to enter a nursing home at least once in their
lifetime.
The need for long-term care comes into play
when the aging process begins to take effect and one loses the ability to
perform activities of daily living (ADL). The six essential ADL include
the ability to eat independently, dress, walk or transfer from one position to another,
bathe, and toilet, and maintain bowel and bladder continence.
Those needing long-term care have a variety of
physical and mental characteristics. However, arthritis and
Alzheimer’s disease or other dementias top the list of medical conditions
contributing to a need for-long-term care.
Where is long-term care provided?
A variety of settings provide long-term care,
including
·
An adult day-care
center
·
A nursing home
·
An assisted living
facility or residential care community, and
·
The most common
location, the home, with care provided by a family member or friend. In 2017,
over 40 million caregivers provided the equivalent of $470 billion in
unpaid assistance.
Why do so many believe that Medicare pays for
long-term care?
The confusion likely stems from the services
that Medicare Part A,
hospital insurance, will cover. Two of those are inpatient care in a skilled
nursing facility (SNF) and home health care, common settings for long-term
care.
So, you may wonder. If a person moves into a
nursing home because she needs long-term care or a homecare agency sends an
aide to the home to help a patient with bathing, why doesn’t Medicare pay?
Simple answer: Medicare pays for care that is skilled,
meaning that it requires the skills of a registered nurse, physical therapist,
occupational therapist, or speech-language pathologist. If the average
non-medical person can provide the care without additional training, the care
is not skilled and Medicare will not pay for it.
The person is in a nursing home because she is
not safe at home and needs help with ADL. It doesn’t take a nurse to bathe a
person in her home. Contrast that to skilled care. The person who had a stroke
goes to a nursing home for rehabilitation. Once home, a physical therapist
visits to set up a home program, and coordinate equipment.
How can you pay for long-term care?
Let’s be very clear: Medicare does not pay for
long-term care. But this care can be very costly. In 2013, total national
spending on long-term care services was almost $339 billion.
What options are available to help with the cost?
Traditional long-term care policy.
This type of insurance will pay or reimburse
for some or all long-term care costs. Many long-term care insurance
policies have limits on how long or how much they will pay. These policies
can also become costly over time.
Insurance companies can consider health
conditions when determining eligibility for coverage. The older the applicant,
the more likely he won’t qualify. In 2019, almost one-third
of applicants ages 65-69 were denied coverage.
The type of coverage depends on the
individual’s health, financial status, age at application, and other factors. A
professional advisor who knows about these policies and the different options
can guide the application process.
Annuities.
An annuity is
essentially a contract with an insurance company. An individual purchases an
annuity that the insurance company pays back over a defined period of time.
It’s possible to get guaranteed payments for life, even if the amount paid back
exceeds the original investment.
Annuities offer an option for those who want
to plan for long-term care expenses in retirement, which could be many years
into the future. Given the variety (fixed, indexed, immediate, and variable, to
name a few), it’s best to work with a knowledgeable, trustworthy financial
professional.
Combination or hybrid products–life insurance
with a long-term care rider.
Consumers tend to worry that they will lose
the money they spend on long-term care insurance if they don’t use it. In
recent years, insurance companies have taken steps to ease these
concerns.
These relatively new products combine life
insurance with long-term care insurance. The idea is that policy
benefits will always be paid, in life insurance or long-term care. A policy
holder can access some or all of the policy’s death benefit for long-term care
that meets the company’s requirements. These combination products are still
evolving. An agent can help explain the ins and outs.
Health savings account (HSA).
HSA funds can help cover many long-term care
expenses. According to
the IRS, qualified medical expenses “also include amounts paid
for qualified long-term care services and limited amounts paid for any
qualified long-term care insurance contract.” Qualified long-term care services
include maintenance and personal care services that a chronically ill
individual requires.
Reverse mortgage.
A reverse mortgage is
a special type of home equity loan that allows the mortgage holder to receive
cash against the value of a home without selling it. An approved reverse
mortgage counselor can discuss the many considerations, including
how the mortgage will work, the criteria for spending the funds, and what heirs
need to know.
Charitable remainder trust.
A charitable
remainder trust allows one’s assets to pay for long-term care services
while contributing to a charity and reducing the tax burden at the same time.
Payments from the trust can cover long-term care services and, after death, the
balance of the funds in the trust goes to the charity.
Medicare Advantage plans.
Recent policy
changes now allow Medicare Advantage plans to cover
supplemental healthcare benefits for “daily maintenance.” These benefits may
include ADL assistance, transportation to medical appointments, meals after
hospitalization, even chow for a service dog. Some plans offer one benefit,
others may offer more. The offerings are limited, generally to one benefit in a
calendar year and the plan will likely require prior authorization and impose
network limitations.
Not all Medicare Advantage plans offer these
benefits and it is the Medicare Advantage plan, and not Medicare, that pays for
these services.
Medicaid.
This program is funded jointly by individual
states and the federal government. Medicaid benefits are guaranteed to pregnant
women, children, disabled individuals, and the elderly, who meet certain income
limits. One of the benefits is long-term care.
Those who don’t qualify for Medicaid because
their assets are too high have to pay for long-term care. Then, once their
assets are low enough, they can qualify for Medicaid coverage. Every state has
its own enrollment process, qualification criteria and policies. Find
information about a specific state program on Medicaid.gov.
How can you start planning for
long-term care?
Here are some beginning steps.
1. Learn about long-term
care, the different options, and what’s available in your community.
2. Work with a trusted
financial advisor to develop a plan to cover the costs. Consider these two scary
statistics.
·
Fewer than 35% of
Boomers have a plan for how they will receive care in retirement.
·
Almost 80% have no
money set aside specifically for their long-term care needs.
3. Determine who can play a
role in your plan. Do not expect your family to be the sole source of support.
Explore community resources and caregiving options.
4. Incorporate your wishes
into the plan. Do you have an up-to-date will, advance health care directive
and durable power of
attorney for healthcare? Include in your plan important financial
information and your long-term care wishes.
5. Share the plan with family
members, healthcare providers, anyone who you believe will be involved or needs
to know.
Those who believe that Medicare will pay for
long-term care or that this care involves long-term care insurance or living in
a nursing home may be woefully unprepared for the future. It’s never too late
to put together a long-term care plan, your personal strategy for handling
decisions in the future.
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