The most commonly utilized and misunderstood aspects of the U.S. Medicaid program are its long-term care 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 long-term care needs, it is important to understand its coverage and how it differs from long-term care insurance.
Medicaid is a multi-part program designed to provide a 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 surviving on less than about 125% of the official poverty level.
Medicaid long-term care is a great benefit for those who don't have much savings or retirement income and now need services beyond what their families can provide.
Some individuals, however, deliberately decide not to buy long-term care (LTC) insurance and rely on Medicaid instead. There is an entire legal specialty focused on helping older Americans bankrupt themselves to qualify for Medicaid benefits. Unfortunately, many of these people find out too late Medicaid does not offer what they desire – the same choices, benefits or coverage options provided by LTC insurance.
Long-Term Care Benefits and Requirements
Unlike Medicare, which is largely a federal program, Medicaid is primarily state-run, resulting in varying degrees and types of LTC coverage. 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. 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 Long-Term Care 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 differences between these two ways of funding LTC needs.
|Nursing home stays||Usually||Usually|
|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||Many places do not accept Medicaid||Usually|
|Coverage for in-home care||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||Often no access to private or spousal rooms, shopping trips and personal-care items (family must pay for these things)||Usually access to private or spousal rooms, trips, personal care and whatever else the policy benefit covers|
|Ability to stay in one place||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|
Nursing Home Stays
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 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.
(For related reading, see: Long-Term Care Insurance: You Have Options.)
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, do so only if you choose 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. Also, LTC plans are not tax-qualified, so your benefits are likely to be taxable.
(For related reading, see: Taking the Surprise Out of Long-Term Care.)
Aside from nursing home care, in-home care is one of the preferred ways to receive long-term care (The others 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 people, would prefer to stay in your home as long as possible, 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 care. If you receive care and your spouse remains in your home, depending on your state's rules, your heirs may be forced 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.
Assisted Living and Continuing Care Facilities
Sometimes, before you 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 offer 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 further 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.
Adult Day Care
Often, an elderly person's family chooses to provide much of the needed care but cannot be home in the daytime due to work obligations. 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 in most states.
The Bottom Line
Think long and hard before counting on Medicaid for long-term care. 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.