Who Pays for Long Term Care?

There are two costs to long term care: financial and emotional.

Take a minute to ask yourself this question: "What would be the financial and emotional consequences to my family and friends if I needed long term care."

What was your answer? The fact is that regardless of any planning or not, if you needed long term care you would get it. But how would it effect those around you? Are you prepared to let that happen?

Financially the choices are:
Self-insure (you or family pays)
• Health Insurance and Medicare pays for a short period (see below)
• Medi-Cal (Medicaid state welfare health care)
Long-term care insurance or a linked benefit asset based insurance.

Using personal savings is equivalent to self-insuring in that personal funds are put at risk in order to cover the potential cost of care. This is the position that most people are in, though few would choose to see it this way. If you don't want to get stuck with the entire long term care bill you can consider long term care insurance

Given how rarely people self-insure against the risk of medical, auto or property loss, it's curious how many seem willing to accept the long term care risk. It is because we are yet unaccustomed to paying long term care bills, but that is about to change.

If the need for long term care never arises then the (self-insured) bet pays off, but the same could be said of health, auto, and home insurance, which have a lower chance of occurrence than long term care

Counting on the government to pay for your care is hardly more encouraging. You will read later how little the federal Medicare will pay and how little you can own before state Medi-Cal will pay.

Doesn't The Government Pay For Long Term Care?
While many people think the state or federal government pays for long term care expenses. Nationally, about 35% of all nursing home expenses are paid out-of-pocket by individuals and their families.

The long term care financial burden on a family can be as heavy as the emotional toll. Some will end up spending a lifetime of savings only to be on state welfare at the very end of their lives.

Regardless of what a Medi-Cal (Medicaid) Planning attorney may say, Medi-Cal Planning is really Poverty Planning. You must be living at the poverty level to qualify for Medi-Cal and it is doubtful that those attorneys will be living in poverty on Medi-Cal when they are in long term care. It is a federal crime to attempt to defraud Medi-Cal by hiding assets.

In California a long term care insurance policy is available called the California Partnership for Long Term Care which provides some asset protection from the Medi-Cal spend-down rule.

Medicare, Medi-Cal, Medicare Supplemental Insurance (Medigap), or standard medical insurance plans (HMO, PPO, Kaiser, Blue Cross, etc.) are not designed to pay for long term care expenses.

As you can see from the National chart above 69% of the people receiving long term care are either in poverty (Medi-Cal/Medicaid) or heading that way paying $70,000+ a year out-of-pocket. As you'll read below the 18% receiving Medicare will only be getting that for a maximum of 100 days, then they switch to either Medi-Cal or pay out-of-pocket.

Medicare and Long Term Care
Medicare (65+ or disabled) is an entitlement program with eligibility requirements. It's purpose is to get you back on your feet and home. First, a physician must determine that you need acute restorative/rehabilitative care. You can only receive this rehabilitative care in a Medicare certified facility. Medicare covers skilled care only, not custodial care and over 95% of long term care is custodial care.

  • While Medicare helps provide up to 100 days of skilled nursing facility care, it doesn't cover custodial care for personal needs or care that doesn't require professional medical skills or training.
  • Admission to a skilled nursing facility must be within 30 days of a three-day hospital stay, and admission can only be for the condition that was treated during that hospital stay.
  • A physician must certify the need for daily skilled care.

Medi-Cal and Long Term Care
Medi-Cal (Medicaid) is the welfare health care system. Most of the money to fund the States Medi-Cal program comes from the Federal government.

The Medi-Cal welfare program requires individuals to spend down most of their savings and income before becoming eligible for benefits. Medicaid is not an entitlement program like Medi-Cal, but is a means-tested program.

Medi-Cal looks at your income and assets to see if you have the means to pay. If you have more income and assets then Medi-Cal allows, you pay for your own care until you deplete your income and assets until they are at or below your states poverty level. Medi-Cal is a zero interest loan that you must qualify for and repay (estate recovery).

Medicaid (Medi-Cal) Gets Tough
Prepare to pay for your own long term care.
William Zatlin, of North Babylon, N.Y., may not realize it, but his bed in a Long Island nursing home costs about $11,000 a month and wiped out his cash savings in less than a year. Kiplinger Financial

Medi-Cal also imposes many restrictions, and your choice of facilities and locales is limited to those that accept Medi-Cal eligible patients. The facility you end up in may not be close to your family.

Medi-Cal is spending much more than it is taking in. The result of this is that Medi-Cal through "estate recovery" could be looking more diligently for any assets of yours that they can claim to pay for the long term care expenses you've incurred. They also may change what are allowable exemptions (non-countable assets).

Check with your local county welfare office for more Medi-Cal information.

Contact us if you have any questions, need additional information, or have feedback for us.

Next: Self-Pay/Self-Insure