Medicare and Medicaid – Which Pays for What in Long Term Care?
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Let’s compare two of public programs that pay for long-term care services – Medicare and Medicaid.
As the U.S. population ages, more and more people are handling long-term care plans for themselves or their loved ones. Government programs have specific rules about how to qualify for benefits, which services are covered, how long benefits can be used, and how much needs to be paid out of the patient’s pocket. It can be confusing! We will break down the basics, but first:
What is Long-Term Care?
Long-term care (LTC) is defined as daily assistance with basic functions of life, such as eating, bathing, and dressing. When someone becomes physically or cognitively impaired, they often require LTC, and the likelihood of needing long-term care services increases with age. 21.9% of individuals use personal savings to pay for their care, while 11.6% rely on LTC insurance. The rest of LTC is paid for by Medicare and Medicaid as 62.2% of individuals receiving LTC utilize Medicaid.
Medicare and Long-Term Care
Medicare is a program directed by the federal government. Medicare does not generally pay for long-term care services, and is mainly a health insurance program for people over age 65. * Medicare Part A covers skilled nursing care (medically necessary services) such as physical therapy, wound care, and intravenous injections, under certain conditions and for a limited amount of time. Medicare benefits are intended for short-term services, when the medical condition is expected to improve, and acute care, such as emergencies, normally for no more than 100 days. Co-pays are typically required for inpatient stays longer than 21 days.
But what about custodial care? Custodial care is non-medical assistance with daily life activities (bathing, dressing, etc.) and is intended for individuals who cannot perform these activities without help. This type of care is typically provided in nursing or assisted living facilities. In most cases, Medicare does not pay for custodial care.
Medicaid and Long-Term Care
Medicaid pays for the majority of LTC services in the United States. It is a jointly administered program between the state and federal governments. Individuals must meet specific criteria** to qualify for Medicaid services. Once qualified, Medicaid can cover LTC in a variety of settings:
- Home health care
- Assisted living facilities
- Nursing homes
Medicaid also covers custodial care – non-medical assistance with daily life activities (bathing, dressing, etc.). Once in a nursing home, individuals that qualify for Medicaid have their room, board, and medications covered. Depending on their financial situation, individuals typically pay a Medicaid co-pay every month.
Case Study: Helen Uses Medicare and Medicaid
Helen is an 82-year-old widow who recently suffered a hip fracture that required replacement surgery. After surgery, Helen spent several days as an inpatient of the Emergency Department at her local hospital. Medicare requires a 3-day inpatient stay to qualify for benefits, and Helen met this requirement.
Helen’ doctor put together a treatment plan that included physical therapy. Since she cannot safely recuperate alone at home, Helen is moved to a nursing home for skilled nursing care, including the doctor-prescribed physical therapy. Medicare covers Helen’ treatment in skilled nursing care, as long as it is under a doctor’s supervision and she continues to see improvements.
Nearly 100 days have passed, and Helen’ medical progress has stalled. She cannot perform daily activities (dressing, going to the restroom, etc.) without assistance. Under the recommendation of her doctor, she makes the decision to move into the nursing home on a permanent basis.
During the first 100 days of her nursing home stay, Helen’ care is subsidized by Medicare insurance, which includes her supplemental plan. After 100 days have passed, Helen meets the non-financial** requirements of Medicaid. But, because she has $185,000 in countable resources, she does not meet the financial** requirements of Medicaid.
Now that her Medicare benefits no longer apply, Helen decides to work with her elder law attorney to finalize her estate plans and dispose of her excess assets, so that her long-term care can be covered by Medicaid. Read about the details of this plan in the Krause Report.
Further Resources for Understanding Medicare and Medicaid
Medicare and Medicaid can be complex, but navigating these programs is essential for retired individuals, their family members, and elder law attorneys across the nation. Krause Financial Services has over 25 years of experience, helping thousands of elder law attorneys throughout the United States qualify their clients for Medicaid and Veterans benefits to help pay for long-term care services.
Medicare and Medicaid Footnotes
*Medicare is also provided for individuals under age 65 who have certain disabilities, in addition to people with late-stage kidney failure.
**Non-financial requirements for Medicaid: U.S. citizen or qualified alien, age 65 or older and/or disabled. Financial requirements for Medicaid: Countable cash assets for a single person at $2,000 or less, countable cash assets for a community spouse at $120,900 or less (2017), monthly income for the individual less than the nursing home private pay rate. These requirements vary by state.