And the difference between Medicare and Medicaid
This guide will focus on some of the different ways to pay for long-term care. Please consult your financial advisor, attorney, and advisory team to fill in all the details. I am happy to refer you to local professionals if you would like.
A large proportion of seniors in America have Medicare as their primary health insurance. Medicare only pays for medical costs and does NOT pay for the cost of staying in any long-term facility—it does not cover personal care, grooming, eating, transportation, bathing, and other personal care items that are considered non-medical.
Medicare pays for medical care at skilled nursing homes and some types of medical care at assisted living facilities or at home, if it is administered by an independent third party. If you qualify, Medicare will pay for a 20-day-or-less stay in a skilled nursing facility. After 20 days, you have to pay for part of the costs until the 100th day. After 100 days, you pay the full bill.
Medicare covers 80% of the cost of medical care for a senior who is enrolled. Most opt to purchase a supplement plan to cover the rest of the 20%. However, it is also possible to let go of the “straight Medicare” and join an HMO or Medicare Advantage Plan. These plans will cover 100% of the medical costs (less some pre-announced co-pays), however, the senior is now required to stay in-network. Depending on the chronic illnesses or wellness of the senior this may be just fine or it could be very limiting.
Source: “What Is the Current Medicare Coverage for Long-Term Care?” AARP.
Medicare Supplemental Insurance
Have you seen the TV ads or received a flyer in the mail for Medicare supplemental insurance? Medicare supplemental insurance is not going to cover long-term nursing home care. Medicare supplemental insurance will help fill the gaps from days 20 to 100 in a skilled nursing home facility. At the time of writing, any care that lasts over 100 days will not be paid for by Medicare.
If you have used all your out-of-pocket resources and are out of money, you can attempt to qualify for a state-run Medicaid program. Medicaid is for low-income individuals that have very limited financial assets. If you qualify, Medicaid will pay for nursing care (medical and non-medical expenses) and some home care expenses.
There are very few assisted living locations available for people on Medicaid. If you only need assisted living care and have very limited financial means, you are probably not going to find a place. In most states, you must have whittled all your assets down to a small amount (below $2,000) before Medicaid will kick in. Additionally, there is a long waitlist and the homes that accept Medicaid may not always be the top assisted living homes you had hoped for yourself or for your loved one.
Source: “Nursing Facilities,” Medicaid.gov. Retrieved from
Source: “Medicare Supplemental Insurance Benefits for Assisted Living & Long-Term Care,” Medicare Supplemental Insurance (Medigap) Benefits for Long- Term Care.
VA Aid In Attendance
If the senior had been a veteran or a spouse of a veteran, they may be eligible for the VA’s version of assisted living assistance: Aid in Attendance.
The veteran would have needed to have served 90 days of active service and at least 1 day during an eligible war-time period. The spouse would have needed to be married to the veteran for at least a year and also be married at time of death of the veteran (if the veteran had passed.)
The amount of the benefit is similar to the amount that Medicaid provides, however, there are little fewer restrictions in regards to the location one may choose, as Aid in Attendance goes directly to the beneficiary, not to the care facility.
Long-Term Care Insurance
If you or your senior is younger than 60, it might be time to start looking at a long-term care policy. You can still find policies for clients over 60, but the prices start going up rapidly.
Depending on the policy, long-term care insurance starts kicking in when a senior cannot perform two of the six activities of daily living (ADLs):
- Going to the bathroom
- Getting out of a bed or chair
Long-term care insurance may cover assisted living, nursing care, Alzheimer’s facilities, home modification, home care, adult daycare, hospice care, and more. Most policies start covering people on the first day of need. Some policies will also pay for a live-in caregiver. Rates will depend on your health and age, so consult your financial advisor for more details. Some policies have lifetime total limits or monthly limits.
Family members with average health who buy into policies at around 60 years of age are paying around $2,000 a year.
Source: Stark, E. “5 Facts You Should Know About Long-Term Care Insurance,” AARP, 1 March 2018.
A reverse mortgage is something you need to talk about with your financial advisor. It can be complicated and sometimes sounds too good to be true. Instead of taking out a mortgage and making payments to buy a house, a reverse mortgage company will put a lien on a high equity or paid-off house and then pay you.
A reverse mortgage is a way for you to take equity out of your house without having to sell it. The advantage of this product is that as long as you can keep paying the taxes, insurance, and maintenance, you can stay in the home until you pass away or move. The money that you use from the reverse mortgage will be used during your life and will reduce the amount of your estate.
For some people, this may be the right choice; however, as with any financial instrument, you need to read the fine print and consult your team.
Max’s grandmother looked into one of these. After the family reviewed all the documents, they decided not to do it. Her property taxes had almost tripled in a short period of time, but the county was able to defer her taxes until her house was sold. Max told his grandmother that if she needed to take out a reverse mortgage to stay in her home, her home was probably too expensive for her. If she was not able to defer her property taxes, she would probably have sold the house and either moved in with a family member or moved somewhere cheaper with less maintenance.
One of the biggest mistakes people make with reverse mortgages is thinking that they cannot be foreclosed on and that the reverse mortgage company is paying their insurance and their annual property taxes for them. Many people have got into property tax trouble and have even been threatened with foreclosure due to delinquent property taxes because the customer thought they were getting paid by the reverse mortgage company—but they were not.
The fine print of some contracts states that not keeping up the maintenance on your home is considered a default against your reverse mortgage, and the lender can foreclose.
On some reverse mortgage agreements, if one of the homeowners dies, the spouse is required to pay back a large amount or the full amount of the loan. That is not the letter you want to get in the mail right after your spouse dies. In addition, interest rates can be pretty high.
Source: “14 Important Reverse Mortgage Facts,” New Retirement, 12 January 2016.
Things to Watch Out For
- Prices going up for senior housing
- Rates increasing each year while you are in senior housing
- Fine print
- Understanding the base price and any additional costs
- What Medicare will and will not pay for
- The qualifications for Medicaid.
Source: McKim, J. “More Seniors Are Taking Loans against Their Homes – And It’s Costing Them,” The Washington Post, 25 August 2017.