Long Term Care Funding

USA Today had an interesting article about a recent study finding that most Americans are uninformed about the reality of Medicare and long-term care, causing them to be unprepared to deal with the tremendous costs of their future needs.

Long-term care refers to various services that exist to assist people in their everyday activities, such as dressing, bathing, or eating.  While more than 80% of Americans will eventually need this long-term care, a study by Nationwide discovered that 58% of us incorrectly expect Medicare to finance these expenses.

Why is this?

Part of this misunderstanding stems from basic confusion between Medicaid and Medicare. For example, while Medicare is a federal health insurance program for seniors and does cover some short nursing home stays, it does not generally cover longer stays. Meanwhile, Medicaid does cover most long-term care.

The reason is that most long-term care is not considered to be “medical care”—which is the focus of Medicare. Because of this, Medicaid has actually become the largest payer of long-term care in the U.S.

This mix-up of services between Medicare and Medicaid causes many to believe they already have long-term care covered by having Medicare. However, this is a common myth regarding aging in the U.S., as Medicare does not generally cover long-term care.

Additionally, many Americans of various economic circumstances believe they can rely on Medicaid as they age, but really, to qualify for Medicaid, you must first spend all of your assets. As Wettstein, a senior research economist at Boston College described it, “It’s an insurance product that has ‘everything you own’ as a deductible. You have to spend everything you own in order to use it.”

Therefore, if you are a rising senior in need of long-term care, you should hope to be wealthy enough to afford your own private-care or completely broke, so you can qualify for Medicaid.

The wealth that is necessary to afford long-term private care is far higher than many Americans may realize, with typical nursing monthly nursing home charges around $9,733 and $5,350 for assisted living facilities.

These are staggering costs that Americans should be preparing for. Because most don’t understand the extent of these impending costs, they do not properly prepare by considering long-term care insurance policies. While most seniors will eventually need this insurance, only about 4% of adults actually have it.

If you’re considering purchasing a long-term care insurance policy, know that they all tend to vary in costs and benefits. For example, many traditional policies do not reimburse the buyer in any capacity if they never end up needing long-term care. However, other hybrid insurance plans may allow the buyer to send their long-term care benefits to their beneficiaries upon their death.

Regardless of the plan you choose, it’s ultimately most important that you are aware of the options available and begin preparing for a long-term care plan that’s best suited for you and your loved ones.