Medicare is not a long-term care plan. Here is what it covers, what it does not, and why that gap matters.
Over the years, clients and others we've talked with have been reluctant in initial conversations about long-term care planning to consider long-term care insurance (LTCI) because they thought Medicare would take care of them.
If you're part of that school of thought, experience a long-term care event, and don't have LTCI, you're in for a big surprise. A large part of the problem is that most people don't know what constitutes a "long-term care event," let alone how this compares to what Medicare will cover.
What qualifies as a long-term care need
In order to qualify for benefits under a tax-qualified LTCI policy, which represents 95% of policies sold today, you're required to be certified by a qualified health professional as having a chronic illness that will last for at least 90 days whereby the illness must result in you being unable to perform at least two out of six activities of daily living ("ADLs"), or having a severe cognitive impairment that requires substantial supervision.
The six ADLs include bathing, dressing, eating, continence, toileting, and transferring.
The majority of long-term care expenses are for custodial, or personal, care, none of which is covered by Medicare. Custodial care is designed to assist a person who has limited ability to perform daily activities due to deficiencies in physical and/or cognitive functions. It's provided to help someone with his or her ADLs or instrumental activities of daily living ("IADLs"). IADLs are the cognitive functions pertaining to comprehension, judgment, memory, and reasoning. Activities include shopping for personal items, managing money, using the telephone, preparing meals, managing medication, and doing housework.
In addition to skilled nursing facility services, Medicare will pay for various services when your doctor says they are medically necessary to treat an illness or injury. If you're unable to perform ADLs and/or IADLs for reasons unrelated to the treatment of an illness or injury, Medicare won't provide any coverage for home and other care services.
What Medicare actually covers
Will Medicare provide benefits for either of these situations? It's not likely, and, if there's coverage, it will be limited as far as number of days, dollar amount, and type of coverage. Medicare wasn't designed to handle significant long-term care expenses. Medicare only covers medically necessary care with the focus on medical acute care, such as doctor visits, drugs, and hospital stays.
There are three qualifications that you must meet in order to receive Medicare benefits: (1) have had a recent prior hospital stay of at least three days, (2) be admitted to a Medicare-certified nursing facility within 30 days of your prior hospital stay, and (3) need skilled care, such as skilled nursing services, physical therapy, or other types of therapy.
If you meet these strict requirements, none of which are necessary to qualify for LTCI benefits, Medicare will pay for some of your costs for up to 100 days. Medicare will pay for 100% of your costs for the first 20 days, with the cost being shared for the next 80 days. In 2013, you're required to pay the first $140 per day and Medicare pays any balance for days 21-100. The home and other care services that Medicare covers, some of which are for a limited number of days, include part-time or intermittent skilled nursing care, physical and occupational therapy, speech-language pathology, medical social services, and medical supplies and durable medical equipment. Once again, custodial services aren't covered.
"Medicare focuses on medically necessary acute care. Most long-term care costs are custodial - and custodial care is not covered."
Why this gap matters
Are you depending on Medicare to be your long-term care plan? If so, you may want to revisit your plan.
Plan ahead with Becker Retirement
If Medicare is your only plan for long-term care, it is worth revisiting. Becker Retirement can help you look at income, insurance, and legacy decisions together. Call (888) 791-8448 or email support@beckerretirement.com.
