Consumer surveys have revealed some common misunderstandings people have about which public programs pay for long-term care services. Many people believe they can rely on Medicare to pay for any long-term care services they will need. However, Medicare only pays for long-term care if you require skilled services or recuperative care for a short period of time. Medicare does not pay for what comprises the majority of long-term care services – non-skilled assistance with Activities of Daily Living.
Medicaid is the joint Federal and state program that pays for the largest share of long-term care services, but only if you meet financial and functional criteria. Other Federal programs such as the Older Americans Act and Veterans Affairs pay for some long-term care services, but only for specific populations and in specific circumstances.
Most forms of employer-sponsored or private health insurance, including Health Maintenance Organizations (HMO) or managed care, follow the same general rules as Medicare. If they do cover long-term care, it is typically only for skilled, short-term, medically necessary care. Therefore most people who need long-term care end up paying for some or all of their care on their own out of their income or assets.
There are, however, an increasing number of private payment options that help to cover the costs of long-term care services. These include long-term care insurance, reverse mortgages, and other options.
It is important to understand the differences among the public programs and private financing options for long-term care services. Each public program and each private financing source has its own rules for what services it covers, eligibility requirements, co-pays, and premiums.
If you have sufficient income and assets, you are likely to pay for your long-term care needs on your own, out of those private resources. If you meet functional eligibility criteria and have limited financial resources, or deplete them paying for care, Medicaid may pay for your care. If you require primarily skilled or recuperative care for a short time, Medicare may pay. The Older Americans Act is another Federal program that helps pay for long-term care services. Some people use a variety of payment sources as their care needs and financial circumstances change.
The total amount spent on long-term care services in the United States (in 2005) was $206.6 billion. This does not include care provided by family or friends on an unpaid basis (often called “informal care.”) It only includes the costs of care from a paid provider.
While most information on “who pays for long-term care” presents these national figures, it is important to remember that each person’s individual experience will differ. These figures combine the experiences of everyone receiving paid care, but there are significant variations from person to person.
On an aggregate basis, the biggest share, 49 percent, is paid for by Medicaid. On an individual basis, however, “who pays for long-term care” can look very different. This is because people with their own personal financial resources do not qualify for Medicaid unless they use up their resources first paying for care, so-called “spending down”. If you have reasonable income and assets, most likely you will be paying for care on your own.
Also, while Medicare overall pays for 20 percent of long-term care, it only pays under specific circumstances. If the type of care you need does not meet Medicare’s rules, Medicare will not pay and you are likely to pay for your care on your own.
Learning more about the “rules” for when Medicare, Medicaid, other public programs or private insurance might pay for long-term care is an important part of understanding “who will pay” if and when you need care.