Financing Long Term Care

The Facts: What Medicaid Pays for Long-term Care

February 13th, 2007
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People often confuse Medicaid for Medicare, another popular government-sponsored program. However, these programs are very different in what they are designed to do.

Medicare is the national health care assistance program provided by the federal government. Its function is to make sure that affordable health care is available to all seniors and disabled people younger than 65.

On the other hand, Medicaid is a program run by the individual states—along with some federal assistance—and it varies considerably from one state to another. Medicaid’s main function is to provide assistance to those who have very few assets. One of those areas that many people need assistance with is health care, and so Medicaid picks up the tab for health care costs that many seniors simply cannot pay for on their own.

Medicaid is a wonderful provision to make sure that those with few means receive the care they need even when they cannot afford to pay for it themselves. However, Medicaid does have its limitations, and one area that is draining Medicaid of its precious resources is long-term care.

In fact, according to the Centers for Medicare and Medicaid Services, in 2001, Medicaid paid for almost 40% of the annual long-term care bill in this country.

So what is long-term care according to the definition put forth by Medicaid? It is generally custodial care that is provided when a person needs assistance for activities of daily living, which include eating, bathing, dressing, continence, toileting, and transferring. Skilled care on the other hand, which is paid for to some extent by Medicare, is for situations in which you are expected to get better as a result of the care. It is often referred to as short-term rehab, and includes IVs, administering medications, changing dressings, and physical and speech therapies. Once a patient’s progress stops, the skilled care reverts to custodial care.

Medicare will not pay for long-term care if it is not accompanied by the need for skilled care, and so the burden falls on Medicaid to pay for the ongoing costs of custodial care.

Although Medicaid will pay for long-term care, there are severe restrictions on the qualifications for assistance. First and foremost, Medicaid is a program designed to help those who are impoverished. In order to qualify for long-term care assistance through Medicaid, a person must spend practically all of his own assets before Medicaid will begin to pick up the tab.

Medicaid, in general, is not set up to provide care in a home setting. Usually the care must be provided within a residential facility, meaning that a person has to give up much of his independence in order to qualify. Much of the individual’s ability to control the kind of care received is also lost, because the state will determine where and how the care is administered since it is paying for the care.

The skyrocketing costs of long-term care are placing many state Medicaid programs under extreme pressure, and much needs to be done to help make sure that this vital program for those who have few means will be able to continue to serve those who need it most. As a result, both state and federal governments are encouraging most Americans to take the responsibility for their own future long-term care needs. Getting more information on the important issues surrounding long-term care and how it affects us all is a good place to start.

  

Duane Lipham is a Certified Long-Term Care (CLTC) consultant. You can get more free information, news and articles regarding long-term care and aging at The Long Term Care Consumer Guide Web site and The Long Term Care Review Blog.

Posted in Financing Long Term Care: Duane Lipham, Insurance, Medicare & Medicaid, Paying for Long Term Care

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5 Responses to “The Facts: What Medicaid Pays for Long-term Care”
  1. ShirleyB Says:

    Duane,
    thanks for writing so clearly about such a confusing topic. My family tried to get my father onto medicaid and it never happened before his passing. It’s so complicated and I think we tried to do way too much on our own. Probably should have consulted a professional.

    I think it would be unbelievably helpful to see a state by state qualification list somewhere although I imagine it might be difficult to keep something like that up to date. Aren’t the rules changing frequently. Maybe gilbert guide will someday offer something like that - it would be really helpful! My dad was in Arkansas and my family lived in Virginia, which I know have different rules. I just heard that the years they look back at your assets has increased. Scary.

    look forward to reading your posts…ShirleyB

  2. Duane Lipham Says:

    ShirleyB,

    The Medicaid qualifications for long-term care assistance can differ greatly from one state to the next. Unfortunately, I am not aware of a central web site that lists the qualifications for each state all in one place. That would be a great resource, but as you observed, it could also be difficult to maintain. If you consult the CMS (Centers for Medicare and Medicaid
    Services) site at http://www.cms.hhs.gov/home/medicaid.asp, they simply direct you to call the Medicaid office in your particular state to find out about the qualification guidelines for your state.

    Generally though, to receive assistance through Medicaid it will be necessary to spend down almost all of your personal assets and essentially become impoverished. Remember, Medicaid’s primary function is not to be the government’s long term care provider. It’s main function is to assist those who have few assets and means and so could not provide for their care on their own.

    Unfortunately, over the years many relatively wealthy folks have taken advantage of the system and have used legal tactics such as transferring of assets to family members to be able to still retain access to their assets and have their long term care costs paid for by tax dollars instead of their own. With the Deficit Reduction Act of 2005, lawmakers closed most of the loopholes that were being exploited by increasing the lookback period for transfer of assets to 5 years, with the penalty period for such a transfer starting not on the date of the transfer, but on the date of the application for Medicaid benefits.

    This is designed to send a clear message to all Americans that they need to be taking more responsibility for their own future long term care costs rather than relying on state or federal agencies to foot the bill. Toward that end, several states have begun an “Own Your Own Future” advertising campaign to help educate Americans about the challenges of financing long term care and encouraging them to start planning ahead as soon as possible.

  3. Sue Z Bell Says:

    Unfortunately I fear that long term health insurance will only, as other insurance benefits, insure the healthly and not the sick!

  4. Duane Lipham Says:

    Sue,

    You are correct Sue in assuming that long-term care insurers will require applicants to have reasonably good health when seeking to invest in a LTCI policy. However, it is often surprising just how much leeway some companies will alow in their underwriting.

    I always encourage folks not to procrastinate on getting LTCI just because their health is good at the present though. We all know that in general our health tends to deteriorate as we age, so why wait until major health issues arise before trying get insured? Remember, you can’t get home insurance while your house is on fire and burning down, and it is the same with any other kind of insurance product. The only way that insurance companies can keep their rates affordable for those who do invest in LTCI is to do their best to screen out those who will present an unreasonably high risk of future claims.

    So the lesson is, be wise and apply for LTCI long before you actually need it. You’ll be glad you did!

    Duane

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