Does Medicare Cover Long-Term Care?

Medicare is the primary medical insurance for most Americans ages 65 and over. But does Medicare cover the expensive costs of long-term care?

The possibility of needing long-term care, and having to pay for that care, is one of the great fears of older Americans. Understanding exactly which long-term care costs Medicare will cover, and won’t cover, is important to developing a plan to pay for any long-term care costs.

Defining Long-Term Care

Long-term care is the provision of personal services and medical care to someone who is cognitively impaired or can’t perform two or more of the six activities of daily living (ADLs). The ADLs are dressing, bathing, eating, walking, toileting, and transferring (such as moving from a bed to a chair without help). Despite the name, some people need long-term care relatively briefly, such as when they are recovering from surgery or an accident. Others need the care for months or years, such as when they have chronic disabilities or illnesses or are declining due to age.

Long-term care services include:

• Home health care
• Adult day care
• Nursing homes
• Senior transportation services
• Assisted living facilities
• Memory care
• Hospice

What Long-Term Care Services Does Medicare Cover?

Unfortunately, Medicare covers few long-term care costs. Most long-term care services are known as custodial care, which is non-medical care that helps individuals with the ADLs. Medicare is designed to help individuals with medical expenses, primarily those associated with hospitalization. Most long-term care services are not covered.

Medicare will cover long-term care for short stays in a skilled nursing facility when the beneficiary meets the following requirements:

• The beneficiary had an inpatient hospitalization for at least three days.
• Skilled care is required such as professional nursing services, physical therapy, or other forms of therapy.
• The beneficiary entered the Medicare-certified nursing facility within 30 days of a hospital stay.

If these conditions are met, Medicare will pay 100% of the cost of the first 20 days of LTC. After the 20^th day, the beneficiary pays a daily copayment of $170.50 per day until the 100^th day. (The copayment amount changes each year with medical cost inflation.) After 100 days, the beneficiary pays 100% of the cost of additional LTC.

Medicare also covers some short-term skilled nursing care received at home. When a doctor prescribes medical care at home, Medicare will cover the cost of any nurses or therapists. Coverage generally is limited to 28 hours per week unless the doctor specifies that the individual needs more attention.

Medicare also covers hospice care costs. Hospice care provides comfort care to people with terminal illnesses. Medicare will cover hospice costs if the person has less than six months left to live, or a doctor certifies them as terminally ill.

Alternative Ways to Pay for Long-Term Care

Since Medicare doesn’t pay for the large majority of long-term care costs, there must be some alternative ways to pay for long-term care. These ways include:

• Private pay: Many wealthier individuals and families are able to finance long-term care with their own money.  Financial advisors generally advise that a family has at least $3 million in assets that can be easily converted to cash before considering this option.
• Long-Term Care Insurance: Long-term care insurance (LTCI) will cover most LTC costs incurred by an insured. But the insured usually must pay for the first 90 days of care, and there are limits to the amount the insurance will cover. The average annual LTCI premium in 2020 was $2,727, but the cost varies with the age of the insured, where the insured lives, and among insurers. “A frequent complaint about LTCI is that it is expensive. It can be a major annual expense, but it needs to be compared to the potential cost of LTC” said Bob Carlson, editor of RetirementWatch.com.
• Hybrid Insurance: A hybrid, or asset-based, insurance is an annuity or life insurance policy that also has long-term care benefits. If the insurance owner needs long-term care, monthly payments are issued under the policy. The hybrid policies have become very popular in recent years. That’s partly because traditional LTCI increased in cost and partly because if LTC is never needed the policy beneficiaries receive the annuity or insurance benefits.
• The VA: The U.S. Department of Veterans Affairs offers long-term care coverage to military veterans. The Veterans Aid and Attendance Pension can provide payments for long-term care, but the veteran must meet a number of requirements and generally must be impoverished to qualify.
• Medicaid: Medicaid pays up to 100% coverage at Medicaid-approved facilities for low-income people. Only nursing home care is covered by Medicaid, not other forms of LTC. Medicaid qualifications vary by state but typically the individual must be impoverished.

The Bottom Line

Those expecting Medicare to cover all of their LTC expenses need to re-evaluate how they will pay for long-term care should the need ever arise. Medicare is unlikely to pay for their LTC. There are multiple ways to pay for long-term care. An individual should compare all the options and develop a plan to pay for LTC. Many people will find that relying on a combination of private pay and an insurance policy will meet their needs.

Valuable assistance for this summary of “Does Medicare Cover Long-Term Care?” was provided by Bob Carlson, editor of the Retirement Watch advisory service and chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets.

Jaxon Kim is an editorial intern with Eagle Financial Publications.