The vast majority of Americans believe Medicare and Medicaid will pay for their long-term care costs. Therefore, it’s important to understand the criteria for eligibility. And once eligible, it’s important to know the limitations of the coverage that the programs offer.
What is Medicare? Medicare is a health insurance program funded by the federal government for people over the age of 65. It only covers care that is deemed medically necessary for conditions that are expected to improve with treatment. Examples of care that is covered are skilled nursing care, acute care, care ordered by a doctor, prescription drugs, and short hospital stays.
Why Medicare Will not Cover Long-Term Care: While anyone over the age of 65 will automatically qualify, Medicare will not pay for long-term care because most of the time, the care given is custodial care, which is considered non-medical. And when medical care is needed, such as care to treat an injury or illness, Medicare will only cover short stays at a skilled nursing facility for up to 100 days (about 3 months). That is, for care each day after day 100, you are expected to pay for all of the cost out of pocket. According to a 2012 study by MetLife, the average stay in a nursing home is 835 days (about 28 months).
What is Medicaid? Medicaid is a health care program jointly funded by federal and state governments that provide coverage for families with low income. Medicaid covers all kinds of care, including custodial care and skilled nursing care. On the surface, Medicaid is commonly viewed as a program for the poor, but in reality it’s a primary source of coverage that millions of seniors and retirees in America depend on. According to a study, Medicaid covers more than 60% of nursing home residents, and it pays for 40% of all long-term care costs in the country. In effect, it has become an important entitlement program for middle and upper-middle class families that need long-term care. But eligibility criteria are very strict and very difficult to meet.
Note: In California, the Medicaid program is called Medi-Cal. When people talk about Medi-Cal, they are simply talking about Medicaid in the state of California.
Asset Limitations for Eligibility: In order to qualify, you must have a limited amount of assets in your name. This limit is only about $2,000 for individuals, and about $3,000 for married couples. If you have savings, investments, and college funds, you are easily over this limit. This means that before Medicaid can come in to cover your long-term care costs, you are forced to “spend down” your assets first by paying all of the costs on your own. However, there are ways to protect yourself from forced spend-down while qualifying for Medicaid benefits.
Medicaid Estate Recovery
Implications for your Home: Your home is not counted as a part of your assets when determining eligibility for Medicaid. However, if you received Medicaid benefits for long-term care, the federal government mandates the state to recover the amount of benefits given to you by placing a claim on your estate (which includes your home) after you pass away. This process is called Medicaid Estate Recovery, and it can have a profoundly negative effect on your loved ones who you wish to pass your estate down to.