“Medicare does not pay for long-term care, so you may want to consider options for private insurance.” This is stated on every person’s Social Security Earnings Report (as seen in the photo), yet many people still have not planned how they will cover this cost. Since Medicare does not pay for long-term care, what other options are out there?
What does Medicare pay for?
Medicare is health insurance for people 65 and older and the disabled. It is made up of four parts, A, B, C, and D, which all cover different aspects of health insurance. A is hospital insurance, B is doctor and outpatient, D is Prescription Drugs, and C combines A, B and D and takes it from Medicare to a private insurance company. While all these letters can seem like alphabet soup, you can learn a little more about them here.
Confusion about Medicare paying for long-term care comes from the fact that Medicare Part A will pay for a Skilled Nursing Facility for 100 days. This comes with certain requirements though, including having been in a hospital for at least 3 days and entering a Medicare-approved facility within 30 days after leaving the hospital. They will pay the full amount for the Skilled Nursing Facility for 20 days, all but $154.50/day for days 21-100, and then nothing after the 100th day. Due to the face that the average stay in an assisted living facility is 2 years, 100 days of coverage is not adequate long-term care coverage.
What options do I have to pay for long-term care?
As the Social Security Administration mentions, there are a few private options to pay for long-term care. The average cost of a nursing home in 2017 is $7,148/month, while the average cost of home health care is $4,099/month. Our basic strategy is to create $6,000 monthly income for you that you start to receive in the future when you need it to pay this bill. Cardinal has four solutions:
- Self-Insurance: If you are financially able or cannot meet the health requirements for insurance, arranging your own money and assets can make the most sense. Even though you are choosing self-insurance, you still need a plan for you and your family to follow when this plan has to go into action.
- Traditional Long-Term Care Insurance: Traditional long-term care insurance is what most people are familiar with. Coverage from traditional long-term care insurance is for multiple years, though Cardinal does not recommend getting one to cover more than five years, as the premiums can become unmanageable. Premiums for these plans can also be raised, resulting in a higher percentage of people dropping the plans. Though people have had bad experiences with this type of insurance in the past, this plan is still the best option for certain situations.
- Hybrid Long-Term Care Insurance: Hybrid long-term care insurance combines both life insurance and long-term care. In most cases, if the insured does not need long-term care, their beneficiaries receive a death benefit. If they do need long-term care,this money is taken out of the death benefit. They are increasingly popular, as they give consumers more flexible options. Consumers also do not feel as though they are wasting their money, because it is not a use or lose situation.
- Short Term Care Insurance: This insurance, like the name suggests, covers a short amount of time, usually under a year. Often, a short term care insurance policy is used in conjunction with self-insurance. This gives you and your family some much needed time to figure out how you are going to pay for this care after the year is up.
These four solutions are not mutually exclusive – they are be mixed and matched depending upon your assets, income, and personal preferences.
Does Medicaid pay for long-term care?
Medicaid is not a private option for long-term care insurance, but it is an option many people end up using. Medicaid will pay for long-term care, but there are guidelines you must meet, including asset and income limits, which are very low. Medicaid does not give you much of a choice in facility either. This can be harmful when someone has spent some time in one facility and must move to another because Medicaid will not pay for it. Even if Medicaid is your only option, it can still be advantageous to plan for it.
Long-term care is an expense that needs to be planned for, Medicare will not pay for it. While it can be daunting to start planning for this, it is a gift that you and your family will be thankful for if the time comes.