The most commonly utilized and misunderstood aspects of the U.S. Medicaid program are its long-term care (LTC) benefits. Medicaid is not synonymous with long-term care insurance, but many who plan to rely on it are unaware of this. As a result, they find themselves without the care they really need or desire. Before you "plan" to have Medicaid cover your LTC needs, it is important to understand its coverage and how it differs from LTC insurance. (One program is for the poor; the other is for the elderly. Learn which is which in What's The Difference Between Medicare And Medicaid?)
Medicaid is a multi-part program designed to provide a wide variety of medical and custodial services to those who cannot afford it. It evolved during the so-called war on poverty in the 1960s as a program for the truly poor - the indigent population who were surviving on less than about 125% of the official poverty level. (For more on poverty guidelines, see the website of the U.S. Department of Health and Human Services.)
Medicaid LTC is a great benefit for those people who didn't necessarily have the chance to accumulate much, and now need LTC services beyond what their families can (or will) provide. (See Taking the Surprise Out of Long-Term Care.)
Some individuals, however, deliberately decide not to buy long-term care insurance, "planning" to use Medicaid instead. There is an entire legal specialty that focuses on helping older Americans bankrupt themselves in order to qualify for Medicaid benefits. Unfortunately, many of these people find out too late that Medicaid does not offer what they desire - the same choice, benefits or coverage options provided by LTC insurance.
Unlike Medicare, which is largely a federal program, Medicaid is primarily state-run, resulting in varying degrees and types of LTC coverage.
Medicaid LTC Benefits and Requirements
Generally speaking, for qualifying people, Medicaid covers custodial care in a nursing home in all states. Custodial care is for when you can't perform some or all of the activities of daily living (ADL) without assistance:
Medicaid generally requires you to be unable to perform at least two of these six ADLs independently - much like LTC insurance policies. (See Long-Term Care Insurance: Who Needs It?) If you qualify for Medicaid by meeting the ADL requirement and your state's income and asset requirements, you can probably use Medicaid to pay the entire cost of care in a nursing home.
Comparing Insurance and Medicaid
Aside from imposing no income and asset limits (because you purchase it), LTC insurance offers options and flexibility not found in Medicaid benefits. But Medicaid does have a few benefits not offered by most LTC insurance plans. The following chart summarizes the key general differences between these two ways of funding LTC needs. (Keep in mind that all Medicaid programs and LTC insurance policies are different.)
|Coverage from the first day in a nursing home||Usually||Rarely: too expensive and not tax-qualified.|
|Coverage for as long as needed in a nursing home||Usually||Rarely: too expensive|
|Coverage in any nursing home||Rarely: many places do not accept Medicaid||Usually|
|Coverage in a home-care situation||Not in most states||Available option|
|Coverage for adult day care||Rarely||Available option|
|Coverage for assisted-living facilities||Not in most states||Available option|
|Coverage for Respite Care||Rarely||Available option|
|Access to all services at a nursing home||Rarely: often no access to private or spousal rooms, shopping trips and personal-care items (family must pay for these things)||Usually - to private or spousal rooms available, trips, personal care and whatever else the policy benefit covers|
|Ability to stay in one place||No guarantees: you can be moved if a facility stops accepting Medicaid patients, or becomes too full||Yes, as long as the facility is open. Plus, you can change facilities at will|
Both LTC insurance and Medicaid provide nursing-home coverage. Some LTC policies cover other types of care in addition to, or in lieu of, nursing-home care.
In many states, nursing-home stays (for non-skilled custodial care) are all that Medicaid covers. This means, if you are covered by Medicaid, staying at your own home is not always an option - even though care given at home is less expensive and often what you really need and want. Compared to this inflexibility of Medicaid, LTC insurance can be a great advantage. (Learn what you can do now to keep your options open in the future, in Long-Term Care: More Than Just a Nursing Home.)
Not all nursing homes accept Medicaid patients. If the facility doesn't take certain types of state or federal funding, it might not have to take Medicaid patients either. So your facility of choice may not be available to you.
Medicaid doesn't cover the fun things in life: trips to museums, shopping centers or other non-medical forms of care. It may not cover a private room, or allow you to have your spouse as a roommate. There may even be a special "Medicaid wing" or floor in the facility.
Medicaid does pay for your stay in a facility for as long as you need the care. LTC insurance, on the other hand, does so only if you elect the lifetime option and chose a benefit level high enough to cover a lifetime of costs. Medicaid also covers your costs from day one, while LTC insurance does so only at a very high cost, imposing an elimination period (explained in Taking the Surprise Out of Long-Term Care). Also, LTC plans are not tax-qualified, so your benefits are likely to be taxable.
Aside from nursing-home care, in-home care is one of the two preferred ways to receive LTC. (The other is an assisted-living or continuing-care facility.) Much of the care people need is custodial in nature and can be given in a home setting.
If you and your spouse, like most others, prefer to stay in your home as long as possible, then LTC insurance is the way to go as it allows you to choose this type of care.
Also, if you own a home, think twice before using Medicaid for receiving any form of LTC. If you receive care and your spouse remains in your home, some states may force your heirs to reimburse the costs of your care from the sale of your home when the community spouse - the one who stayed in the home - dies. This has come as a rude shock to many heirs!
Assisted-Living and Continuing-Care Facilities
Sometimes, before you quite need nursing-home care, you need more assistance than you can get at home, or maybe you just want to live in a retirement-oriented facility. Assisted-living centers provide you with an apartment and offers as much assistance as you need (for a price, of course). You can get housekeeping help, meal preparation and much more.
Continuing care takes assisted living a step farther by having an on-site nursing home, so the transition is an easy one.
Again, if assisted-living or continuing-care facilities appeal to you, LTC insurance is what you'll need. (Your illnesses should not infect your savings. Read more in Failing Health Could Drain Your Retirement Savings.)
Adult Day Care
Often, an elderly person's family, instead of sending that person to a nursing home, chooses to provide much of the needed LTC but cannot be at home in the daytime due to work obligations and the elderly individual cannot stay home alone because of dementia or an inability to complete ADLs. Adult day care can solve this problem. This community-based care is often provided by churches and community centers. The premise is simple: drop the person off in the morning and pick him or her up in the late afternoon or early evening.
LTC policies offer the option to cover this care, while Medicaid does not pay in most states.
Becoming a Medicaid User
The process of deliberately adjusting your financial situation to get Medicaid appears simple: gift your assets or put them into certain trusts and poof! now you're poor, so Medicaid will have to pay for your needs.
If you go this route, make sure you know what you are forgoing. Here are the things to keep in mind:
- Not all facilities accept Medicaid patients.
- You may not be able to get care at home.
- If you come out of the nursing home your assets are probably not available to you.
- Do you want a roommate (not your spouse)?
- Is getting out into the community important to you?
- Do you really want to give all your assets to a trust or your heirs while you're still living?
Think long and hard before counting on Medicaid for LTC. Both have their benefits (and drawbacks), so ensure that all of your needs are covered before jumping in. As always, hasty decisions - especially when they relate to something as important as your health - can come back to bite you. You just might not get what you had expected.