Who pays for long-term care?

Long-term care includes nursing homes, assisted living, and home and community based services.  With nursing home costs now exceeding $330 on average in Western New York (that’s $120,000 per year!), who pays has become increasingly important.  Even our rural edge in costs doesn’t help much: the cost is now $275 per day at the Orleans County Nursing Home.*

Many people believe that Medicare covers long-term care, but in fact Medicare paid only 14% of all long-term care costs in 2000.**   For skilled nursing, Medicare pays the first 20 days in full, then the next 80 days with a co-payment of $137.50 per day for 2011.  Medicare pays nothing after 100 days, and pays nothing at all if care is primarily personal or custodial.  Private health insurance and medigap policies do not usually provide any coverage for long-term care.

For most people, long-term care expenses are paid from their personal savings until used up.  Medicaid provides a safety net, but not until assets are spent down to almost nothing (in 2009: $4,350 in the case of a single person, plus $1,500 for a burial fund).  Unfortunately, the Medicaid system is currently set up to favor nursing homes over home care, exactly the opposite of what most people prefer.  Many nursing homes have a limited number of beds for Medicaid recipients, so choice is often extremely limited.

Increasingly, people are choosing to purchase Long-Term Care Insurance to finance their long-term care needs.  Insurance allows the spreading of costs over several years, and protects against the possibility of a long nursing home stay.  Further, insurance allows for more flexibility with home care options, and gives the consumer more choice when it is time to select a nursing home.

Next Steps:

The information in this post is general in nature, and geared toward insurance conditions in Western New York.  As always, you should speak with an insurance adviser to determine your specific insurance needs.

* figures are from a 2010 survey
** United States General Accounting Office, Long-Term Care: Aging Baby Boom Generation will Increase Demand and Burden on Federal and State Budgets (GAO-02-544T 2002).

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