3 Misconceptions about using Medicare and Medicaid to Pay for Long-Term Care
With 3 solutions for protecting yourself and your family
Are you unsure about the difference between Medicare and Medicaid? If so, you are certainly not alone. The two programs are commonly confused, which can lead to uncertainty, particularly when coordinating long-term care services.
Medicare and Medicaid are similar in that both are government programs offering health care coverage to those who qualify. This however is where the similarities end. Qualifying criteria and enrollment processes between the two programs are also very different. Medicare and Medicaid are even funded by different sources.
If you find yourself navigating the long-term care system for the first time on behalf of yourself or a family member or client, sorting through what Medicare and Medicaid does and does not cover could prove to be a challenge. Being aware of these misconceptions about Medicare, Medicaid, and what they do and do not cover can better prepare you to keep it all straight.
Misconception 1: I heard that Medicare always pays for rehabilitation at a nursing home.
For many, rehabilitation after an injury or illness serves as their first introduction to long-term care. Although these rehab stints are often short-term in nature, the admission process is similar to the application process for permanent placement in a nursing home. In both cases, disclosure of financial and insurance coverage information is needed to determine placement.
While federally-run Medicare does cover the costs of skilled nursing rehabilitation, there are limitations. To start, Medicare coverage kicks in only if the rehabilitation guest has been previously admitted to a hospital for a minimum of 3 days, with a safe discharge planned from that hospital to a licensed skilled facility. And while Medicare Part A does provide coverage for inpatient rehabilitation, coverage is capped at 100 days. Additionally, full coverage of all nursing homes costs only come during the first 20 days, with copayments applicable for days 21-100.
So while Medicare can cover quite a bit of the costs of a typical rehabilitation stay, it is important to know about coverage limitations in advance.
Misconception 2: Is it true that if I apply for Medicaid, the Federal government will pay for everything?
Not exactly. Medicaid is funded jointly by the state and federal government; however, Medicaid is generally run by the state you live in, not the Federal government.
For those who meet the income and asset guidelines to apply for Medicaid—and are also 65 or older and qualify for Medicare— dual coverage is established. In instances when Medicare typically provides coverage, Medicare covers costs for services (like skilled nursing rehabilitation) first.
Medicaid is in fact responsible for covering nursing home care past the point of Medicare coverage. Elder law attorney and Partner Joshua Beisker of Underberg & Kessler LLP explains that long-term care costs make up about a quarter of all health care expenses picked up by Medicaid, with hospital care, physician services, and prescription drug costs accounting for the rest. “Federal rules require state Medicaid programs to cover certain “mandatory” services, such as hospital and physician care, laboratory and x-ray services, home health services, and nursing home care for adults.”
Beisker adds that “Medicaid covers more than 60 percent of all nursing home residents and roughly 50 percent of costs for long-term care services and supports.” He also explains that Medicaid does not provide health care directly. “The large majority of Medicaid beneficiaries are covered through private managed care plans. For others, state Medicaid programs pay hospitals, doctors, nursing homes, and other health care providers for covered services that they deliver to eligible patients.”
So yes, Medicaid provides safety net for covering nursing home costs. However, it is unwise to count on this program to cover the future needs of you or a loved one. Medicaid recipients often lose the control of choice—choice in the types of services you can get and the setting in which you receive them.
Misconception 3: Someone told me that Medicaid will take my parents’ house to pay for the nursing home.
Depending on the situation, you can in fact be forced to sell your home to help pay for long-term care. This can occur once you have spent down your assets and successfully applied for Medicaid.
There are, however, protections against losing your home. If the Medicaid beneficiary (the person receiving coverage) and/or their spouse is a permanent resident of the house, they cannot lose it. “The basic rule is that a person’s primary residence is an exempt asset and therefore, will not be counted when they apply for Medicaid,” says Beisker. “If a Medicaid applicant is married and their spouse continues to live in the home (officially making them the “community spouse”), then the home is exempt regardless of its value.”
Beisker says that once a Medicaid recipient has died, “the state may seek repayment of its outlays for the senior’s long-term care. This has become increasingly common as more seniors require long-term care but do not have the personal funds to pay for it. The Medicaid Estate Recovery Program (MERP) recoups this money by filing claims against any assets a Medicaid recipient held an interest in at the time of their death, such as a home. However, if a senior died without any assets (or with very few assets), then there is no way for the state to be repaid.”
Solution 1: Review your legal and financial situation with an expert.
If your family’s attorney has expertise working through the intricacies of estate planning, be sure to stay in touch with them and review you or your loved ones’ portfolio regularly.
If not, you may want to consider enlisting the help of an elder law attorney. “As is the case with any specialized area of law, it is prudent to work with an expert in elder law so that the client is being properly advised as to his/her options and planning strategies,” says Beisker. “It is absolutely critical that clients receive correct advice in regard to the protection of their assets.”
Solution 2 Consider options for additional programs while you are healthy.
If available to you, additional coverage like Medicare Advantage plans for additional health insurance or long-term care insurance products can offset costs throughout your lifetime and help preserve assets.
One possible deterrent to Medicaid is obtaining Long Term Care (LTC) Insurance. LTC Insurance can be extremely useful to help cover the nursing care facility costs. However, the premiums can be quite steep and it is prudent to be as proactive as possible when looking to obtain LTC insurance because individuals likely will not qualify for long-term care insurance if they already have a debilitating condition.
Solution 3 Learn more about what your preferred long-term care provider(s) require for admission.
Understand what your long-term care provider requires for admission, if you prefer a private room, and what is needed to secure care in your preferred location?
Learn more about the admission and application process at St. John’s: The Application Process: A Step-by-Step Guide.
Many long-term care providers also offer lower levels of care (like independent living and enhanced assisted living) as part of a spectrum of senior services. Learn more about what other locations with which your preferred nursing home is connected.