People’s Needs Go Beyond Medicare and Medicaid
What exactly is the difference between Medicare and Medicaid, and which pays for long-term care?
Medicare is the federal program that provides hospital and medical insurance to people aged 65 or older and to certain ill or disabled persons. Benefits for nursing home and home health services are limited to only those days that are medically necessary.
Medicaid is a joint federal/state program that pays for health care services for those with low incomes or very high medical bills relative to income and assets. Therein lies the key words: relative to income and assets.
Medicaid offers some coverage for long-term care, but individuals must spend-down their income and assets. The rules vary by state, but one typically can’t keep more than a few thousand dollars in “countable assets”. And, in many cases, most of the income of the Medicaid recipient has to go towards his/her care.
Qualifying for Medicaid can be difficult for married couples. Depending on the circumstances, the healthy spouse might have to forfeit the income of the spouse needing care. The real kicker is the estate recovery portion of Medicaid. According to the National Clearinghouse for Long Term Care Insurance, “If you receive Medicaid coverage for long-term care services, federal law requires states to recover the amount Medicaid spent on your behalf from your estate after you die.” Although surviving spouses are protected until after their death, how devastating this would be for children to lose their loved ones, then be required to reimburse the state for the care provided after their death?
So what about the Patient Protection and Affordable Care Act? Otherwise known as Obamacare, it contained a section addressing long-term care, which was supported by the late Senator Ted Kennedy (D-Mass). This section of Obamacare was known as the CLASS Act (Community Living Assistance Services and Support), which was supposed to provide voluntary long-term care insurance to workers over the age of 18. If needed, this provision would have allowed participants to receive on average $50 per day to help them pay for long-term care services they received at home or in a facility, without spending down their assets in order to qualify for Medicaid.
The Administration decided not to implement the program because they concluded it was not financially sustainable. The premiums would have been far too expensive and most healthy workers would have opted-out of the program, thus making it unsustainable. As a result, Congress never funded this portion of Obamacare, and in fact repealed it completely with the recent passage of the New Year’s Day budget agreement that avoided the “Fiscal Cliff”.
The only government program available to pay for long term care is Medicaid. As a general guideline, if your household income is less than $50,000 per year and your net worth (not including your personal home) is less than $50,000, then relying on Medicaid for your long-term care needs probably make sense. But, if there are significant assets and/or income streams to protect, then it might be time to talk do some serious planning for long-term care. Although annual premiums for long-term care insurance can be $1,500 and up (depending upon your age, health, and choice of benefits), the benefits in the long run can be substantial.
If you’re married and you can only afford a long-term care policy for one spouse, or your income stream is higher than $50,000 per year yet your assets are far less than $50,000, then you need to know which spouse should get a long-term care policy.
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