Many Americans are surprised when they learn that Medicare generally does not cover long term care (LTC). They often learn this right after finding out that their regular health care insurance does not cover LTC either. (There are exceptions under certain policies in some states; consult your financial advisor or insurance agent to find out about coverage in your case.)
Medicare is like major health insurance where the primary benefits are for things like doctor visits, diagnosis, treatment and prescriptions; NOT for ongoing help that may be needed at home. Medicare does have a provision for ongoing care, but it was designed to cover specific kinds of care and for a short period of time (up to 100 days). It was not designed for a general decline in health, or the need for assistance in everyday living. It does not cover caregivers beyond an immediate and predetermined rehabilitation period. For many, Medicare will not cover the care that they need.
Medicaid, however, is different. Medicaid is a government welfare program that is a state\federal partnership. It is intended to help people with little to no income and savings (no more than $2,000 in assets). Medicaid can be used for long term care for those who qualify and for caregivers and facilities that accept Medicaid patients (not all do). Medicaid benefits and restrictions vary from state to state, so it is important to work with a local agency or ombudsman who can help explain the options. For those who have assets above the Medicaid threshold, they are required to pay for their own long term care until their money runs out. Once their money is gone, then Medicaid kicks in to cover the ongoing costs. This is an unfortunate situation, to say the least, as most Americans do not ever see themselves as being part of government welfare, but it can and does happen.*
Medicaid also has a feature called estate recovery. This allows the state to go back and collect what was paid in Medicaid benefits from the person’s estate once they pass on. Most people are unaware that if they have assets, like a family farm and other personal belongings, the state has the first position to collect back what was paid in benefits once the estate is liquidated. In fact, this very thing happened to the founder of MasterCare Solutions, Inc. (MSI), who saw his family farm auctioned off to pay for his mother’s care after she passed, by the state of Oregon. It was watching this happen that motivated him to start MSI so others would not face the same thing.
This is why nearly every financial planner recommends having something in place for a long term care event. Long term care insurance is a very cost effective way to provide income to pay for general health care needed over an extended time, at home, or in an assisted living or care facility when needed. Having long term care insurance helps maximize retirement savings and provides independence that if something does happen, the retirement nest egg or other assets won’t have to be sold to pay for care.
LTC Consumer is an independent, free online service to help consumers understand what long term care insurance is, how it works, and how to evaluate coverage options. The goal is to provide an educational, no-pressure resource for learning about long term care planning, with the opportunity to speak with specialists who can help. For an Instant Quote, free, click here.
*As a guard against overly-creative financial maneuvers, some applicants for Medicaid may be disqualified if it is within five years of having given a substantial cash gift to, say, their children.