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Unfortunately, private health insurance, Medicare, and Medicaid (Medi-Cal in California) are not realistic options to rely on to pay for your long-term care. This section addresses who pays for long-term care and what the limitations and disadvantages are in relying on those programs.
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| Source: Congressional Budget Office, Financing Long-Term Care for the Elderly, 2004 |
It is very important that you are aware of Medicare's limits. Medicare may be one of the most misunderstood government programs in defining what is actually covered for long-term care services. Medicare is a federal program administered by the Center for Medicare and Medicaid. It is available to most people at age 65 or those with end stage renal disease.
According to the pie charts shown above, you can see that Medicare paid only a small percentage of the nation's long-term care bill. The reason that Medicare doesn't pay for more long-term care is that most long-term care is not skilled care and that is what Medicare primarily pays for. There are two parts to Medicare, Part A and Part B. As it relates to long-term care, Medicare Part A will pay for skilled nursing care, home health care (very limited), and hospice.
Medicare Skilled Nursing Facilities
Relying on Medicare to pay for your long-term care is not an adequate solution because it only has the potential to pay for up to 100 days in a skilled nursing facility. The requirement is that you have to be receiving skilled care on a daily basis at least five days a week and you have to have had a three-day hospital stay prior to entering the nursing home. Most people do not qualify for the entire 100 days because they don't meet Medicare's criteria. *There are additional criteria as well.
Medicare will pay for the first 20 days in full, and will pay for all costs except a
co-pay in 2008 of $128.00
for the next 80 days. However, the average number of days paid by Medicare is only 23 days according to the Health Care Financing Administration, 1998.
It is important to point out that if you only needed custodial care you would not receive any Medicare benefits.
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Example:
If you had Alzheimer's disease and needed supervision, or if you needed help with your activities of daily living due to old age, these conditions would not qualify for Medicare benefits.
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Medicare Home Health Care Benefits
Many people mistakenly think that Medicare will pay for an unlimited amount of home care. Medicare will not pay for full-time long-term care. Medicare will only pay for a limited number of visits. The pie chart above shows you the percentages of the nation's long-term care bill that covers home health care benefits. There are many requirements to get home health care benefits under Medicare. A few of them include that you must be homebound and must need skilled care for fewer than five days per week. In any case, Medicare generally does not adequately cover long-term care.
For more information on Medicare you can call 1-800-Medicare (1-800-633-4227) to speak to a Medicare Customer Representative or visit www.medicare.gov
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If Medicare doesn't pay, won't my Medicare Supplement pay for my long-term care?
Generally, Medicare supplements only pay co-payments of Medicare. If Medicare will not pay for your care, then your Medicare supplement probably will not pay either.
I have an HMO, so doesn't that pay for my long-term care?
Generally, HMO's offer the same benefits that Medicare offers. To encourage people to assign their Medicare benefits to an HMO, many HMO's offer additional ancillary benefits like vision and prescription benefits. However, they generally use the same criteria that Medicare does when it comes to paying for long-term care services.
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If you do not qualify for Medicare or Medicaid to pay for your long-term care, then you have to pay long term care costs out of your own pocket. This may mean depleting your savings, cashing in your CDs, selling stocks and bonds, or even using cash value in a life insurance policy you may have. Unfortunately, for many people it does not take long before they deplete their hard-earned savings and end up qualifying for Medicaid (Medi-Cal in California).
Medicaid (called “Medi-Cal” in California and “MassHealth” in Massachusetts) is a joint federal-state program that provides care in a nursing home for those who qualify. To qualify for Medicaid, an individual must have limited income and few assets. Medicaid eligibility rules are complicated, and different states apply different rules. Each state operates its own Medicaid program, consistent with federal law.
Medicaid pays for a majority of our nation's nursing home care costs. Unlike Medicare, Medicaid will pay for both skilled and custodial care, but in most cases is limited to nursing facility care. Medicaid pays for physician-approved hospital stays, medical care, prescription drugs, and skilled nursing home care. (There are exceptions in certain states)
The disadvantage to relying on Medicaid is being very limited in your choices of nursing homes, or being forced to go to a nursing home, since Medicaid usually does NOT pay for home care.
Income Limits
The income of a Medicaid nursing-home patient--usually Social Security and pension income--must generally be used to pay the costs of long-term care. The patient may keep a "personal-needs allowance" which averages $30-$60 per month. (This varies by state.)
However, if the Medicaid nursing-home patient is married, the ‘community spouse’ is allowed to keep a certain amount of income, which can vary between $1,711.00 and $2,610.00. (in 2008) This varies by state. If the ‘community’ spouse has income that comes in their name alone, they can keep that income and it does not have to be applied to the nursing-home patients long-term care costs.
Generally speaking, if the nursing-home patient has enough income to pay for their own care they will not qualify for Medicaid even if they meet the asset requirements below. If a couple has enough income to provide the ‘community spouse’ with the minimum income requirements and pay for the nursing home spouse's long-term care, they will not qualify for Medicaid even if they meet the asset requirements.
Asset Limits
In order to be eligible for Medicaid benefits the nursing-home resident must spend down to $2,000 in “countable” assets. The spouse of a nursing-home resident—called the ‘community spouse’—is limited to one half of the couple’s joint assets up to $104,400 (in 2008) in “countable” assets. (This does not include the car, house and a few other personal items.) This figure changes each year to reflect inflation. In addition, the community spouse may keep the first $20,880 (in 2008), even if that is more than half of the couple’s assets. This figure is higher in some states. There are a few states which automatically allow the at-home spouse to keep the maximum of $104,400 (in 2008) if the couple has that much in assets.
Transferring Your Assets to Qualify for Medicaid
Many people think a solution to qualify for Medicaid is to falsely impoverish themselves by giving their assets away. When applying for Medicaid, the federal government requires a “look back” period where they look to see if you have transferred your assets for less than fair market value (i.e. to children or others).
The 1993 budget bill (OBRA '93) required the Medicaid program to "look back" 36 months prior to the application for Medicaid's nursing home benefit. The recently passed Deficit Reduction Act (DRA ’05) now requires Medicaid to “look back” 60 months for all transfers. This includes transfers made to or from certain kinds of trusts.
If a transfer is found during the “look back” period a penalty period is applied. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in your state.
Estate Recovery for Medicaid Benefits
Federal Law requires states to recover what was spent for the care at the death of the second spouse. State rules and practices for estate recovery vary significantly. Some states are stricter than others. In some states, placing a lien on your home is part of the estate recovery act.
The percentage of long-term care paid for by private insurance includes both care paid for by individual and group long-term care insurance. It also includes care paid for by health insurance. For example, short-term rehabilitation after a car accident.
There are other funds that can pay for long-term care, but they all have strict criteria and guidelines that must be met. An example would be the Veteran's Administration. The Veteran's health care benefits include medically necessary hospital and nursing home care and some outpatient care. The VA prioritizes veterans that qualify for care according to several categories. The first priority of veterans for receiving care is those veterans that have a service-connected disability. If you do not have a service-connected disability you are at the bottom of the priority list. There are income and asset requirements as well that must be met.
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To learn more about your eligibility benefits as a veteran, contact your local Department of Veterans Affairs Regional Office, or write to:
Veteran's Benefits Department
Paralyzed Veterans of America
801 18th Street N.W.
Washington, D.C. 20006
Or call 800-424-8200
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