This article is the second in a 4-part series about long-term care.
In the first, we looked at the various types of care, why and when they might be needed, and how to decide.
In this article, we'll discuss the part that Medicare and, most importantly, Medicaid play in the long-term care (LTC) planning and decision process. (I often refer to these programs as part of God's common grace as all can choose to take advantage of them. Medicaid is a great help to many who cannot afford care.)
In the next article, we'll look at the costs of care and the various ways to pay for them. In the fourth and final article, we'll examine long-term care insurance.
Health insurance, Medicare, and Medicaid
Most people will have some form of private health insurance before age 65 and will be covered by Medicare after reaching age 65. I have written about getting healthcare before age 65, and also about Medicare after age 65.
Those younger than 65 can qualify for Medicaid healthcare assistance under certain circumstances.
In general, neither private health insurance nor Medicare covers long-term care expenses (whether at home or in an assisted living or long-term care facility) unless a physician specifically orders them. That typically occurs after an accident or injury, or a recuperation period after a serious illness or surgical procedure. Coverage in such cases is usually for a few days, weeks, or months—not years.
However, Medicaid may help with certain types of in-home care, assisted living, and long-term nursing care, but only if the person meets specific income guidelines and their financial assets are depleted (more on that later). Therefore, those who need it for other reasons will have to pay for it out-of-pocket (from Social Security, pension, savings, or by leveraging assets such as their primary residence—more on this in the next article).
When planning for long-term care, it's essential to understand the details of both Medicare and Medicaid coverage, including their eligibility requirements.
Medicare and Medicaid basics
Medicare and Medicaid are both operated by the Federal Centers for Medicare & Medicaid Services (CMS).
Many people think that Medicaid is Medicare for those with lower incomes. While they do share some things in common, they are actually two very different programs. Medicare is a federally administered program for those age 65 and older. Medicaid is a jointly-administered program by state governments and the federal government, so the eligibility rules and benefits vary by state.
The benefits and eligibility requirements of these programs can change over time, and as already noted, some benefits differ from state to state. Be sure to check with CMS or the individual programs directly for the most recent information in your state.
Medicare is a government health insurance program that pays some medical costs for people age 65 and older. It also pays some medical expenses for those who have received Social Security Disability Income (SSD) for 24 months.
Medicare does not cover ongoing personal care at home, assisted living, or long-term care. However, there are exceptions. Medicare Part A will pay for brief stays in a nursing home to get remedial care for a post-hospital-related medical condition.
To qualify, you must have been hospitalized for at least three consecutive days and admitted to the nursing home within 30 days of discharge from the hospital. Also, per a doctor's order, if you need skilled nursing services, physical therapy, or another type of therapy to aid in your recovery.
According to Medicare.gov, if you meet those conditions, Medicare will pay a portion of the costs for up to 100 days. For the first 20 days, Medicare pays 100 percent. For days 21 through 100, you have a co-pay, which in 2020 is $176/day. You are required to pay 100 percent of the costs for days 101 and beyond.
In some cases, Medicare also covers preventative, ongoing long-term care for those with medical conditions that may not improve—such as stroke, Parkinson's disease, ALS, MS, or Alzheimer's disease.
Medicare Part A will also pay for up to 6 months of Hospice (end-of-life) care. You must have a terminal illness, no longer be seeking a cure, and not be expected to live more than six months.
Medicaid is a joint federal and state program for low-income persons and families. It covers the costs of medical care and some types of long-term care for people with limited income and who meet other eligibility requirements.
For Medicaid to pay, there must be a "medically necessary" need for the service. Each state has its own rules, but all require that you have a doctor's certification.
Medicaid covers nursing home services for people ages 21 and older. It also covers home-care and community-based services for those who would otherwise need to be in a nursing home. The goal is to help them remain in their home and the community for as long as possible.
Covered services include medical and non-medical care for people with a chronic illness or disability. Long-term care services include assistance with the usual activities of daily living, as well as skilled nursing services.
You may remember my wife's question from the last article about transfers between facilities. Facilities can transfer residents from one facility to another, but only in accordance with state law. Plus, a family can move a person from one Medicaid-approved facility to another, providing there is bed space available. (I recently spoke with my friend who said he is trying to find a closer alternative for his mother, but bed availability is the problem.)
Both Medicare and Medicaid typically pay less than private pay residents. Therefore, some facilities try to limit the number of Medicaid-covered beds. There are sometimes waiting lists for Medicaid beds at some facilities. Sadly, my friend is experiencing this first-hand.
Financial eligibility requirements
Medicare has no income or asset limits. You can get premium-free Part A benefits at age 65 if you or your spouse worked and paid Medicare taxes for at least ten years. Most people who qualify for Social Security will also be eligible for Medicare benefits.
You can also get Part B (medical benefits) for a monthly charge. The standard Part B premium amount is $144.60 in 2020. You pay more if your modified adjusted gross income (MAGI) as reported on your IRS tax return from 2 years ago is above a certain amount.
Additional plans, such as Medicare supplemental plans (a.k.a., "Medigap" plans), prescription drug plans (Part D), and vision and dental plans, also cost extra. These vary based on coverage and the state where you live.
The benefits I enumerated above are covered by "Original Medicare," which is Medicare Part A (hospital coverage) and Part B (physician and other medical expenses). (Original Medicare does not include "Medicare Advantage" plans and Medicare supplemental plans, which cover some of the things that Parts A and B do not. Long-term custodial care not ordered by a physician is not one of them.)
Medicaid, on the other hand, has stringent income and asset limits for eligibility. These requirements vary by state. Most use the federal Supplemental Security Income (SSI) guidelines, but some set their own.
In most states, a person can make up to 300% of the SSI income limit and still qualify for nursing-home-only Medicaid ($2,349/month, or $28,188, in 2020). Note that this is more than the average amount ($18,000/year) that a Social Security recipient receives in 2020. (The person doesn't receive the income—it has to go directly to the LTC facility.)
For example, my state (NC) has a lower income limit of $1,064/month for a single person ($1,437 for a couple with both applying). The maximum assets are $2,000 and $3,000, respectively.
Many states (NC included) have a "spend down" provision. This means that the income requirements are guidelines, and those who don't meet them may still be eligible for Medicaid if they participate in a "spend down program." "Spend down" refers to spending excess income on medical bills (health insurance premiums, prescriptions, doctor visits, and unpaid medical bills).
It's important to note that Medicaid is an option only after a person has depleted their financial assets. "Depleted" means that they have liquidated most of their savings and have sold some property. Some assets are excluded, such as the person's home, if a single person plans to return to it (if they can), or a spouse still lives in it. (These rules also vary by state.)
Medicaid does not allow below-market-value transfers of assets to reduce their assets to meet the asset eligibility limit. Medicaid examines the person's previous five years of financial records (called the "look-back period") to ensure that such a "gift" has not been given.
If a person has done that, they may still be eligible for benefits, but only after a penalty period as determined by the governing state. (Typically, the larger the asset, the longer the penalty period.) Some gifts or transfers during the 5-year look-back period are permissible—for example, certain personal belongings or their car.
After a person who was covered by Medicaid LTC passes, the state may seek to recover all of the money it spent on behalf of that person from their estate. The amount depends on what it defines as the recipient's "estate." Some only look at assets subject to probate, which would exclude things like life insurance, annuities, IRA, joint bank account, jointly-owned real estate, etc. that would transfer through a designated beneficiary right of survivorship. Others may expand the definition.
One final thing: A retiree who relies on Medicaid (due to the requirement to deplete specific resources) to pay for long term care will have little left for their heirs. This may or may not be a concern.
Medicare and Medicaid are the programs most commonly used by older people, but they are not the only ones available.
The Department of Veterans Affairs (VA) pays for long-term care services for service-related disabilities. It also provides benefits to other eligible veterans who do not have service-related disabilities but are unable to pay for the cost of necessary care. Co-pays may apply depending on the veteran's income level.
The (VA) pays for long-term care for qualified veterans with chronic illness or disability. The services provided are similar to those covered by Medicare—assistance with the activities of daily living such as dressing, bathing, and using the bathroom.
Long-term care can be provided at home, in the community, or in a long-term care facility.
In addition to this basic coverage, the VA has two more programs to assist veterans needing care:
- The Housebound Aid and Attendance Allowance Program. This program assists veterans with disabilities and their surviving spouses in purchasing home- or community-based long-term "custodial" care. That means non-skilled services such as assistance with necessary daily activities.
- A Veteran Directed Home and Community Based Services program (VD-HCBS). This program started in 2008 for eligible veterans of any age. It provides veterans with funds and the flexibility to purchase certain services. The Aging Network, in partnership with the VA, provides counseling and other support services.
Both of these VA pension programs are explained in detail here.
In addition to government-provided assistance programs for veterans, many private non-profits also offer a variety of different services. You can find a list at Military.com.
Other state programs
Many states have programs to assist with home- and community-based long-term care. These include both medical and non-medical care for people with a chronic illness or disability.
These programs are often eligible for Medicaid if the care required is equivalent to that ordinarily provided in a long-term-care facility. The states often receive additional funding from county, state, and federal sources such as the Older Americans Act.
The goal of these programs is to help seniors stay in the community and live as independently as possible. The states administer these services through state and local agency networks known as the Aging Network.
Eligibility for these programs differs by state and by the program. Typically, there is an income assessment made to determine if the person meets Medicaid eligibility requirements.
Local Area Agencies on Aging (AAAs) coordinate these programs. They work with the State Units on Aging (SUAs) to plan and develop the service and support programs for needy older adults and their families.
Local agencies, called Area Agencies on Aging (AAAs), work with State Units on Aging (SUAs) to plan and develop service and support programs based on the needs of older adults and families. You can learn more about your local Area Agency on the Administration for Community Living website.
Getting Medicaid or Veterans Benefits
The type of care required will be a crucial determinate of whether to apply for Medicaid or a VA pension. Eligible veterans in need of home-care or assisted-living will, generally, be better off using Veterans Homebound or Aid and Attendance pensions.
Medicaid is usually the better option for both veterans and "civilians" who require nursing home care.
Both of these have similar, but not identical, income limits. However, Medicaid and VA pension have very different asset limits and use different methods for deciding what is an eligible asset. The VA, like Medicaid, also has a "look back" rule.
Navigating the federal, state, and local bureaucracy to get approval for any of these benefits can be challenging. How to best apply depends on a person's situation. As the application process is complicated, and the approval time may be lengthy, it may be wise to get assistance from an expert in these matters before applying.
Medicaid applicants can usually begin receiving benefits within 2-3 months. But it may take 6-12 months to get approval for a veteran's pension. Again, working with a professional planner (for Medicaid or VA benefits) can shorten the wait time significantly by getting help in submitting a Fully Developed Claim.
One situation or the other
At this point, you have likely realized that everyone who needs LTC will be in one of two situations: They will pay for the care they need using their own resources (perhaps with help from their families), or they will rely heavily on government assistance to fund those services, mainly Medicare.
Most would prefer to pay for it using private funds, but where will that money come from? And how can you plan now for possible LTC expenses in the future?
We'll tackle these questions and others in our next article.