Though it’s not pleasant to contemplate, according to the US Department of Health and Human Services, an individual who is 65 years of age today has a nearly 70% chance of needing some type of long-term care in their older years. Long-term care is a blanket term that incorporates care over an extended period of time, both in your home or in a facility and it can range from general assistance with daily tasks to more comprehensive medical care. AARP reports that the national average for a private room in a nursing home is $108,405 per year and $61,776 for a home health aide.
While both Medicaid and Medicare can provide some kinds of care, it can be very limited and/or subject to very restrictive requirements to qualify. Here we will be discussing the broad differences between Medicaid, Medicare, and long-term care insurance so you can adequately prepare for getting the care you desire.
Aside from a major medical event, the need for long-term care often arises with a person needing support to complete everyday activities. This is referred to as custodial care. Custodial care can be divided into two categories: Activities of Daily Living (ADLs) and Instrumental Activities of Daily Living (IADLs).
| ADLs | IADLs |
| 1. Bath / Hygiene 2. Dressing 3. Toileting / Continence (using the toilet and managing one’s bladder) 4. Eating 5. Transferring to / from a bed or chair 6. Ambulation (walking) | 1. Cooking / Preparing meals 2. Cleaning / Housekeeping / Laundry 3. Transportation 4. Managing medications 5. Managing finances 6. Shopping |
It’s important to differentiate between medical care and these two categories of custodial care because long-term care options will use different definitions as qualifiers for benefits to go into effect. A stricter definition could prevent you from getting the assistance you need.
Medicare
The broad definition of Medicare Part A coverage includes skilled nursing facilities and home healthcare, leading many people to believe Medicare will provide long-term care benefits when needed. However, the benefits provided by Medicare are meant to be temporary (for example, coverage is only for the first 100 days in a skilled nursing facility) and are only available following hospitalization for an injury or illness where the individual is expected to improve. Additionally, it is limited to medical care that is provided by licensed professionals only. Medicare will not cover custodial care that can support individuals being able to age in their own home nor will it cover living in a nursing home or assisted living community.
Medicare Advantage plans, as of 2019, can offer coverage for some long-term care services however the number of available plans is still very limited and benefits are not comprehensive.
Medicaid
Unlike Medicare, Medicaid can provide coverage for long-term care, both custodial and medical services. Your income and assets, however, cannot not exceed certain thresholds that are typically very low (varies by state). Furthermore, there is a five-year “look-back” window where assets are evaluated to ensure individuals don’t simply transfer assets away at below market values in order to qualify for Medicaid.
Long-term care insurance
Long-term care insurance is much like any other insurance policy you purchase. You pay a recurring premium for coverage that will go into effect should you need it. The need is typically determined using the ADLs listed above; for example, requiring assistance with at least two ADLs or having cognitive impairment. Policies will generally cover both skilled and unskilled care in various settings such as your home or a facility. The policy’s premium will vary depending on several factors such as your age, health, coverage period and amount, and waiting period. The premium is generally more expensive than other types of insurance and can increase over the life of the policy. According to the Oregon Division of Financial Regulation, a policy issued to an individual between the ages of 55-65 could cost between $1,433 to $3,358. You can view companies’ requests for rate increases on their website here:
https://dfr.oregon.gov/insure/health/long-term-care
Self-insure
Some people look at their assets and decide that they feel comfortable covering out of pocket any long- term care costs they might incur as they age. Because long-term care insurance can be costly, others may decide to save monthly towards anticipated costs rather than paying the premium. While this takes discipline, some people, especially those younger and with an ability to contribute to a tax-advantaged account such as an HSA this can be an option.
While the need for long-term care may seem far off, it is good to start planning as early as possible as you will have more options available to you. These basics can get you started but they are by no means as exhaustive list. If you are a veteran, you may have additional options through the US Department of Veterans Affairs and there may also be some state-specific programs available to seniors such as Oregon Project Independence and long-term care insurance partnership policies that work in tandem with Medicaid.
If you are interested in learning more, plan to join us at our upcoming Life and Long-Term Care Insurance virtual event with Chris Peyton on March 22 nd , 2023 at 12pm PST or get in touch with your Vision Capital Client Relationship Manager to discuss your options.
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