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Who pays for long-term care?

One of the big questions we see at SeniorMag relate to who pays for long-term private care of senior parents and grandparents.  We've even seen people quit their own jobs being quite sure that they could "get on" with the state and get paid to stay home and take care of Dad.  The question to us then is "Who do I contact to start getting paid?"

The answer plain and simple is, you don't. There is no government program that will pay you to take care of your own family.  Sure, it may sound fun to sit around all day with gramps, watch Nickelodeon, make something for lunch, and get paid for a full day's work.  But if you are thinking that, you are thinking that you can still get on the free lunch program.  There is none.  

And why should someone pay you to take care of your own family?  They are YOUR family and YOUR responsibility.  It isn't everyone else's responsibility to take care of your family, or you for that matter.   Social Security and Medicare are stop-gap programs in the even that someone doesn't have enough to retire on.  They are safety nets, not retirement plans and they are certainly not an employment program.  

Admittedly, it would solve any unemployment problems we have in the US and let a lot of people quit jobs they don't like if they could just find an old person and get paid take care of them.  

But imagine the chaos as people run around fighting for the right to claim an old person and 10% of Americans have another 10% of Americans being paid by the government to care for them.  Imagine the lawsuits between family members who sue for the right to be on the state payroll for taking care of Dad.

Long-term care is so expensive that many people risk losing their life savings within a year of having such care. A year in a nursing home can cost from $40,000 to $80,000*, depending on the area of the country. Even a temporary stay in a nursing home can derail years of careful financial planning.

Insurance experts estimate that about one-third of all long-term care services are paid for by individuals out of their own savings or investments. The funds may come from pension plans, employee stock ownership plans, single premium annuities, the cash value of life insurance or savings.

* Business Week 7/19/99

Medicare is the federal government’s health insurance program for the disabled and those 65 years and older. Many Americans believe Medicare will pay their long-term care bills, but in fact it pays for a small percentage of all nursing home costs. 

At present, it may cover skilled care in a nursing home for the first 20 days (and a portion of the cost for the next 80 days) if admission follows a three-day hospital stay. The biggest gaps in Medicare’s long-term coverage are:

  • No coverage for custodial care, either at home or in a nursing home
  • No coverage in a nursing home without prior hospitalization
  • No coverage for nursing home care after 100 days
  • Coverage only in a Medicare-approved facility

To apply for Medicare or obtain information about the program, contact your local office of the Social Security Administration. For a free copy of The Medicare Handbook, write to CMS, Office of Public Affairs, 200 Independence Ave. SW, Washington, DC 20201, or call the Medicare Hotline at 1-800/772-1213.

Medicare supplement insurance (often called Medigap) is private insurance that supplements Medicare benefits and may cover co-payments and deductibles for medical and hospital expenses. Medigap policies generally do not provide coverage for long-term care.

Medicare managed care. Instead of purchasing a Medigap policy, some people enroll in a Medicare HMO to supplement their Medicare benefits. Such plans may provide more preventive services and charge lower co-payments. 

However, you are generally restricted to participating providers (physicians, hospitals, nursing homes, etc.). Again, such plans generally do not provide coverage for long-term care. Short-term nursing home care covered by Medicare and your Medicare HMO is usually available only in participating facilities.

Medicaid is a joint federal/state program that pays for health care for people with limited income and assets. More than half of all nursing home costs are picked up by Medicaid. To be eligible for Medicaid reimbursement, nursing home care must be provided in a Medicaid-approved facility. 

To receive Medicaid you must meet federal poverty guidelines for income and assets and may have to “spend down” or use up most of your assets. Some assets, such as your home, may not be counted when determining Medicaid eligibility. To obtain information about the program, contact your local Medicaid office or Department of Social Services.

Long-term care insurance is private insurance designed to help pay for nursing home or home health care expenses. It is available to individuals and may be available under a group policy. You pay a premium to an insurer in return for protection against the high costs of long-term care.





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