Be sure your team of trusted advisors includes a financial advisor and an insurance expert! As a geriatric care manager I’ll give you the basics in this lesson, which will give you a place to start. But financial matters are complex and personal, and you will be best advised by licensed professionals. So before making decisions, meet with your financial and insurance experts!
Long term care services can be very expensive. In our lesson on building a Care Team, we will talk about utilizing free supports that are already a part of your loved one’s life. But if your loved one’s care plan includes services like home care or residential living, there will be a significant cost.
Genworth conducts a survey of long term care costs that will help you estimate the cost of your loved one’s care so you can plan accordingly. See the link in the Lesson Materials.
First, let’s bust some myths about paying for long term care.
Medicare Does Not Pay for Long Term Residential Care
It is important to realize that Medicare does not pay for non-medical residential care such as assisted living, and coverage for home care is limited and varies by the type of policy.
Medicaid Spend Down is Not a Good Funding Strategy
Some people believe they can give all their money and property to their children and have Medicaid pay for their long term care. This is not a good strategy because:
I find it helps to think of care costs in two categories – medical vs non-medical – because this often indicates which type of insurance will pay for the service.
Medical care is a service you would get from a doctor, nurse, or therapist – a diagnosis, a test, a medication, a surgery, rehabilitation services – or a stay in a facility like a hospital where medical care is given.
Non-medical care is a service you would not get from a doctor, nurse, or therapist – help with dressing, housekeeping, or meal preparation; rent, meals, and medication management at home or in a long term care facility such as assisted living.
Medical costs are often covered by medical insurance, but sometimes they are not. It is important to understand what medical insurance coverage your loved one has and what it covers.
Also, refer back to our lesson on Gaining Permission and Access so you will be able to get the information you may need in an emergency.
If your loved one has private medical insurance, their coverage, deductibles, copays, etc. will depend on the individual policy. Consult the policy, the underwriter’s website or support line, or your insurance advisor.
Note: the Medicare website provides very useful information about Medicare coverage (see link in the Lesson Materials.) I’ve included some highlights here.
Generally, Medicare is available for people age 65 or older, younger people with disabilities and people with End Stage Renal Disease (permanent kidney failure requiring dialysis or transplant). Medicare has two parts, Part A (Hospital Insurance) and Part B (Medical Insurance). Your loved one is eligible for premium-free Part A if they are age 65 or older and they or their spouse worked and paid Medicare taxes for at least 10 years. They can get Part A at age 65 without having to pay premiums if:
To find out if your loved one is eligible and their expected premium, go the Medicare.gov eligibility tool (see link in the Lesson Materials)
If your loved one (or their spouse) did not pay Medicare taxes while they worked, and they are age 65 or older and a citizen or permanent resident of the United States, they may be able to buy Part A. If they are under age 65, they can get Part A without having to pay premiums if:
While most people do not have to pay a premium for Part A, everyone must pay for Part B if they want it. This monthly premium is deducted from their Social Security, Railroad Retirement, or Civil Service Retirement check. If they do not get any of these payments, Medicare sends them a bill for your Part B premium every 3 months.
There are 2 main ways to get Medicare coverage—Original Medicare (Part A and Part B) or a Medicare Advantage Plan (Part C). Some people get additional coverage, like Medicare prescription drug coverage or Medicare Supplement Insurance (Medigap).
Original Medicare includes:
Deductibles and copays are listed on the Medicare website.
People insured with Original Medicare can use any doctor or hospital that takes Medicare, anywhere in the U.S. They can also decide to:
Medicare doesn’t cover everything. Some of the items and services Medicare doesn’t cover include:
Medicare health plans include Medicare Advantage, Medical Savings Account (MSA), Medicare Cost plans, PACE, MTM.
Medicare Advantage Plans (Also called Medicare Part C) are a type of Medicare health plan offered by a private company that contracts with Medicare to provide all your Part A and Part B benefits. Most Medicare Advantage Plans also offer prescription drug coverage. If your loved one is enrolled in a Medicare Advantage Plan, most Medicare services are covered through the plan. Their Medicare services aren’t paid for by Original Medicare. Below are the most common types of Medicare Advantage Plans.
Medicare health plans may cover some items not covered by Original Medicare.
As our loved one’s health care needs change, they may want to change Medicare Plans. This is especially true of drug plans, which change their formularies and may no longer cover your loved one’s prescriptions.
If you want to help your loved one switch plans you must do so during an enrollment period, which are listed on the Medicare website.
Medigap is Medicare Supplement Insurance that helps fill “gaps” in Original Medicare and is sold by private companies. Original Medicare pays for much, but not all, of the cost for covered health care services and supplies. A Medicare Supplement Insurance (Medigap) policy can help pay some of the remaining health care costs, like:
Some Medigap policies also cover services that Original Medicare doesn’t cover, like medical care when you travel outside the U.S. If you have Original Medicare and you buy a Medigap policy, here’s what happens:
To have a Medicare Supplement policy, you must first have original Medicare Part A and B.
Medicaid is health insurance for the very poor. Qualifications vary by state, but in all cases your loved one will only qualify if they have extremely limited assets and income.
Medicaid will pay for skilled nursing – level care in a residential or home setting, and in some cases family caregivers can be compensated through Medicaid.
If your loved one is financially destitute or you expect them to become destitute, consider talking to an elder law attorney skilled in Medicaid eligibility. They can help you understand the requirements and plan for an orderly eligibility application.
You can also contact your state Medicaid Agency, which you can find with a simple internet search.
Most Medicare Advantage Plans offer coverage for things that aren’t covered by Original Medicare, like vision, hearing, dental, and wellness programs (like gym memberships). Plans can also cover more extra benefits than they have in the past, including services like transportation to doctor visits, over-the-counter drugs, adult day-care services, and other health-related services that promote health and wellness. Plans can also tailor their benefit packages to offer these new benefits to certain chronically ill enrollees. These packages will provide benefits customized to treat those conditions. Check with the plan to see what benefits are offered and if your loved one qualifies.
Long Term Care Insurance is designed to pay for non-medical long term care costs like residential care (assisted living care for example) and non-medical home care.
Long term care insurance is most easily and economically purchased earlier in life – most people purchase it in early middle age – but it is sometimes available for purchase later in life. If your loved one has long term care insurance, it will be an important part of their funding strategy.
Policies vary widely. Some pay only for residential care, some for both residential and home care. Most policies reimburse qualifying expenditures up to a daily, monthly, and/or lifetime maximum, though some pay a stated amount per day or month regardless of the cost of care. Most have elimination periods that must expire before benefits start, and all will have qualifications for when your loved one is eligible to make a claim against the policies. These qualifications usually include needing assistance doing a certain number of activities of daily living (dressing, bathing, etc.) or having a cognitive impairment.
Read your loved one’s policy carefully. Some policies only reimburse for certain types of care facilities or certain types of caregivers.
For more information about how to utilize your loved one’s long term care insurance, see our separate course called “How to Use Your Loved One’s Long Term Care Insurance to its Fullest Extent.”
Some life insurance policies allow your loved one to use their accumulated benefit to pay for long term care. Review life insurance policies with your insurance advisor to see if they contain this benefit.
As a Veteran, your loved one may be able to get assisted living, residential (live-in), or home health care through the Veteran’s Administration. Benefits are dependent on their service-connected disability status and their income.
Residential Settings and Nursing Homes have different eligibility requirements for each setting. The VA does not pay for room and board in residential settings such as Assisted Living or Adult Family Homes. However, your loved one may receive some services at home and in the community while they are living in a residential setting. The VA also provides or community nursing home care IF your meets certain eligibility criteria involving their service-connected status, level of disability, and income.
Your loved one may also qualify for payments through the VA Aid and Attendance or Housebound programs.
For more information about these programs, visit the VA website (see link in the Lesson Materials.)
If your loved one does not have long term care insurance, they will likely pay for their long term care using their own private savings and retirement funds. If this is the case, work with their financial advisor to understand the amount of funds available for their care and how it can be liquidated in the most efficient ways as it is needed.
If your loved one has equity in their home and plans to continue living in it, they can use a reverse mortgage to turn the equity into cash that they can use to pay care expenses. In the early days of reverse mortgages there were some abuses that gave reverse mortgages a bad reputation. But due to regulations now in place, reverse mortgages can be a safe way to turn a non-liquid asset into valuable funds to pay for needed services.
If your loved one cannot afford the cost of their care but you can, it may fall to you to provide for them. If you have the means to provide and the local caregiver does not, your financial contributions can help to balance the burden.
Some employers have programs that assist caregivers with the burdens of caregiving, including family leave options. Check with your employer and your local caregiver’s employer to see if benefits are available.
If you took our course called “How to Create an Elder Care Plan that Works for Your Whole Family,” use the information from this lesson to update the “costs” portion of your Care Plan document.
If you haven’t taken that course, now is a great time to do so. In the Lesson Materials for this lesson, I’ve put a link you can use to register for that course.
Or if you won’t be taking our Care Plan course, fill out the worksheet called “How We Will Pay for Care.”