Paying For Long Term Care
There are basically four ways of paying for Long Term Care services.
4. Long Term Care Insurance
1. Self-insuring means setting aside or having enough money to pay privately for future Long term care services, if they become necessary. This plan may require a dedicated aggressive and immediate savings plan. It's impossible to know if or when these services will be needed, and that makes the target savings amount difficult to determine.
For example, if a family member is involved in an accident that leaves the family member even partially paralyzed or if a family member develops Parkinson's Disease, some type of long-term care services would most likely be necessary to help the family member function on a daily basis.
2. Medicaid, a joint federal-state government program for low income individuals, will provide coverage for long term care expenses if your income and assets are very low or after you have exhausted almost all of your own assets. It is an entitlement program based on strict income and asset guidelines. You may be required to spend your own money for care, living expenses and other "allowable" expenses before becoming eligible for Medicaid. This is referred to as the "spend-down" period.
Even though every state has different eligibility criteria for this government program, assets and income are subject to review in order to determine your eligibility. Many people try to transfer all their assets immediately after it has been determined that they require long term care assistance; however, this time period will not always meet the "look-back" period criteria.
The look-back period is a 36 to 60-month period of time prior to a Medicaid application date. This means that certain assets that have been transferred for less than fair market value or simply "gifted" to others in this time period are still considered to be the care recipient's money, funds that the care recipient must use to pay for long term care services. The look-back period for assets transferred to a trust is 60 months.
When it comes to Medicaid eligibility, be sure to research your state's requirements.
3. Medicare is the federal medical insurance program for people age 65 or older, and disabled persons of any age receiving Social Security benefits for not less than 24 months.
It was designed to pay some of the costs of certain health care services in order to provide recipients access to a basic level of health care. The majority of care provided in the U.S. today in connection with chronic long-term illnesses or conditions is personal or custodial care and may be rehabilitative in some cases. Medicare will generally not pay for personal or custodial care. However, Medicare will cover some long-term care expenses for a short period of time per Medicare benefit period if:
* After a minimum three-day stay in a hospital, not including the day of release, you require a high level of care, as prescribed by a doctor, such as skilled nursing care or rehabilitation services. Medicare pays for the first 20 days of your stay in a skilled, Medicare approved nursing facility.
* On the days 21st through 99 of your stay, you pay a daily co-pay amount determined yearly by the Centers for Medicare and Medicaid Services (CMS). Medigap policies may cover the daily co-pay amount.
* After 100 days, Medicare will pay nothing for these services. The intent of Medicare Supplements policies (also known as "Medigap") is to provide coverage for Medicare co-payments and deductibles. The various types of policies, generally classified by the letters A-J in most states, are not primarily designed to cover long-term care expenses except for those described in number three.
Admission to a nursing home is not enough to qualify for Medicare payment. The level and type of care determines whether short-term Medicare coverage for long-term care will be provided. Medicare does pay for short-term home health care, providing certain guidelines are met.
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4. Long Term Care Insurance This is insurance designed to help pay for the cost of long term care services if you need them. It is not the same as medical insurance, which generally provides coverage for doctor visits and hospital stays. Depending on the type of policy and coverage selected, long term care insurance can provide coverage for long-term care in many settings: your own home, nursing homes, adult day care, and assisted living facilities.
Long term care insurance can be issued on a group or an individual basis. If it is issued on a group basis, the group sponsor is the policyholder and is issued the policy. The insured will receive a certificate as evidence of coverage. If it is issued on an individual basis, the insured is the policyholder and is issued the policy. Often times, employees enrolling in a group plan can be guaranteed coverage without providing any medical history, on the condition that employees enroll during the initial enrollment period and are actively at work (not absent due to disability, leave or illness) on their effective date of coverage. Issuers of individual long term care insurance policies require that you be underwritten before they approve a long term care insurance policy.
Source: Long-Term Care Insurance: The Essentials. 2004. MetLife Mature Market Institute