Who Pays For Long-Term Care?

People pay for long-term care in a variety of ways. These include: using the personal resources of individuals or their families, long-term care insurance, and some assistance from Medicaid. State Medicaid programs pay about one-half of the costs of nursing home care nationally. Medicare, Medicare supplement insurance, and the major medical health insurance you may have at work usually will not pay for long-term care.

Individual Personal Resources

Individuals and their families pay one-third of all nursing home costs from their own funds. Many use savings and investments. Some people sell assets, such as their homes, to pay for their long-term care needs.

Medicare and Medicare Supplement Insurance

Medicare's skilled nursing facility (SNF) benefit does not cover most nursing home care. Medicare will pay the cost of some skilled care in an approved nursing home or in your home but only in some situations. The SNF benefit only covers you if a medical professional says you need daily skilled care after you have been in the hospital for at least three days. You should not rely on Medicare to pay for your long-term care needs.

Medicare does not cover homemaker services. Medicare does not pay for home health aides to give you personal care unless you are homebound and are also getting skilled care such as nursing or therapy. The personal care must also relate to the treatment of an illness or injury and you can only get a limited amount of care in any week.

Medicare supplement insurance is private insurance that helps pay for some of the gaps in Medicare coverage, such as hospital deductibles and excess physicians' charges above what Medicare approves. Medicare supplement policies do not cover long-term care costs. However, four Medicare supplement policies--Plans D,G,I, and J-- do pay up to $1600 per year for services to people recovering at home from an illness, injury, or surgery. The benefit will pay for short-term, at-home help with activities of daily living. You must qualify for Medicare-covered home health services before this Medicare supplement benefit is available.

Medicaid

Medicaid pays for nearly half of all nursing home care. Medicaid also pays for some home and community-based services. To get Medicaid help, you must meet federal and state guidelines for income and assets. Many people start paying for nursing home care out of their own funds and "spend down" their financial resources until they are eligible for Medicaid. Medicaid may then pay part or all of their nursing home costs. You may have to spend down or use up most of your assets on your health care before Medicaid is able to help. Some assets and income can be protected for a spouse who remains at home.

State laws differ about how much money and assets you can keep and be eligible for Medicaid. (Some assets, such as your home, may not count when deciding if you are eligible for Medicaid.) Contact your state Medicaid office, office on aging, or state department of social services to learn about the rules in your state. The insurance counseling program in your state also may have some Medicaid information.

Long-Term Care Insurance

Long-term care insurance is one other way you may pay for long-term care. This type of insurance will pay for some or all of your long-term care. Long-term care insurance is a relatively new type of insurance. It was introduced in the 1980s as nursing home insurance but has changed a lot and now covers much more than nursing home care. The rest of this shopper's guide will give you information on long-term care insurance.

You should know that a federal law, the Health Insurance Portability and Accountability Act of 1996, or HIPAA, gives some federal income tax advantages to people who buy vertain long-term care insurance policies. These policies are called Tax-Qualified Long-Term Care Insurance Contracts, or simply Qualified Contracts. Your state may have taken action to offer additional tax advantages. You should check with your state insurance department or insurance counseling program for information about tax-qualified policies. Check with your tax advisor to find out if the tax advantages make sense for you.