Retirement

Who pays for long-term care? – Center for Retirement Research

People are really confused.

We have initiated many studies on long-term care. One component of this effort is to gauge the public’s understanding of how these costs are financed. A bunch of surveys over the past 10 years show that people are confused; Most think Medicare plays an important role. In fact, Medicare does not cover any type of long-term care, whether in a nursing home. Assisted living community or home.

Medicare covers medical services – hospital care (Part A), physician care (Part B), and prescription drugs (Part D). It will not pay for a stay in a long-term care facility or custodial care expenses, such as help with activities of daily living such as bathing, dressing, eating and using the bathroom – if that is all that is needed. A potential source of confusion may be that Medicare will pay for a short-term stay in a skilled nursing facility within 30 days of 3+ days in the hospital. however, More than half Skilled nursing facility stays covered by Medicare are 20 days or less, and more than 90 percent are for 60 days or less. Medicare also provides hospice care to individuals who meet minimum levels of need. Because most Medicare care is short-term and related to an acute event, no one should expect Medicare to cover their day-to-day long-term care needs as they age. will

In terms of long-term care, the main public player is Medicaid – a joint federal-state program – which covers about 20 percent of the nation’s total care hours and pays a substantial portion of the nation’s nursing home bills. However, to qualify for Medicaid, retirees must have both a certain level of functional limitations and a low level of income and assets. Because the income and asset thresholds are so low, even with allowable exemptions, it can be difficult for people to qualify for Medicaid when they initially develop care needs. However, over time, some of those with extensive needs spend down their assets and end up qualifying. So, Medicaid plays a bigger role than one might think at first glance.

Oh A recent study Expected costs for paid care consumers from death to age 65; This calculation shows that 42 percent of the total came from Medicaid and 38 percent from out-of-pocket (see Figure 1). The small amount attributed to Medicare is primarily hospice care — not traditionally considered long-term care. Private insurance only pays a lump sum because most people don’t have long-term care insurance.

It is important to note that our estimates show that paid long-term care covers only 36 percent of the total hours of care provided. Most comes primarily from informal care provided by the family (see Figure 2).

Pie chart showing percentage of total caregiving hours provided to people over age 65, by source

All that said, in a recent survey KFF asked participants: “If you or a family member had a long-term illness or disability and had to go into a nursing home, how would the bills be primarily paid?” The responses of those 65+, shown in Figure 3, indicate that 45 percent of respondents believed that Medicare would cover the cost.

Pie chart showing the sources that people age 65+ identify as the main way they pay for nursing home care.

Clearly, we have not done a very good job of defining the need for long-term care, how it is currently provided (mostly by the family), and how to finance formal care. goes


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