Alternative to LTC: Medicare, Medicaid
Having long-term care insurance can be greatly beneficial, but its high cost has led many people to look into alternatives when it comes to funding their long-term care. Even if you are planning on purchasing a long-term care insurance policy, it is still worth taking a look at the other options available to you, especially since not all of them have to be mutually exclusive with LTC insurance.
In part one of this series, we discussed hybrid life insurance/long-term care insurance policies. Part two explored short-term care insurance and the idea of paying for your care out-of-pocket. Here, we take a look at Social Security, Medicare, Supplemental Security Income, and Medicaid.
Social Security is a federal program that provides retirement income for seniors. Anyone who has paid into the program for more than 10 years is eligible. Because anyone working legally in the United States pays into the program directly through their paychecks, the vast majority of American citizens are part of this program. Unlike Supplemental Security Income, which is discussed below, this program has no health or disability requirements and the amount of benefits you receive will not vary based on income or location. Social Security benefits come in the form of checks received directly from the government. There are no restrictions on how these checks may be spent, and many people choose to use them to help cover the cost of long-term care as well as day-to-day expenses.
The amount that you receive will vary based on the total amount that you paid into the system, the number of years that you paid into it, and the age at which you decide to start receiving benefits. The minimum age at which you can collect benefits is 62, but if you choose to put your benefits off for a few years, the amount you receive in each check will be higher. You can continue to do this up until the age of 70, after which no more increases in benefits are offered. While Social Security checks can be a great way to help cover the costs of long-term care, the average benefit for a single person is only around $1,350, which is not enough to comfortably cover all LTC-related costs. Because of this, you should plan on using these benefits as a supplementary source of income and not rely on them entirely. It is also worth noting that it can take up to three months to start receiving checks even after you are qualified and have completed the application.
Depending on the type of care you require, Medicare may also be an option. Medicare pays healthcare-related costs for people who fall into any of the following categories:
- Those 65 years and older
- Those under 65 but are receiving Social Security Disability benefits
- Those who have been diagnosed with certain medical issues
Medicare covers medical necessities such as medications and visits to the doctor or hospital. Most long-term care is more related to assistance in daily activities (commonly known as custodial care) than actual medical care. Because of this, most forms of long-term care are not covered under Medicare. Services that are covered include skilled nursing care in a nursing facility, hospice and respite care, care in a long-term hospital, and certain home health services. However, there are still specific requirements that must be met under each of these categories in order to qualify for Medicare coverage.
Overall, Medicare is a valid option in specific situations, but the help it offers is highly limited and thus it is not a good idea to plan on relying on it entirely.
If you can’t afford to purchase a long-term care insurance policy or many of the other options discussed in this series, you can also turn to Medicaid, the federal and state health insurance program for people with lower incomes. Unlike Medicare, Medicaid can cover the costs of both the medical and custodial aspects of long-term care. Services covered by Medicaid include nursing homes and in-home care services such as visiting nurses. However, while broader than Medicare, the services covered by Medicaid are still more limited than what you would be able to get if you were paying for things through other means. Additionally, the requirements for accessing these services may differ from state to state and from service to service. For example, someone who qualifies for nursing home care may not meet all of the requirements for in-home care. Some services may not be covered at all in certain states.
It is also worth noting that relying on Medicaid could negatively impact your heirs. After someone receiving long-term care assistance through Medicaid passes away, the federal government requires the state to recover as much of the cost of that care as possible from the person’s estate. This means that proceeds from something like the sale of your home could be given to the state rather than your heirs.
Supplemental Security Income (SSI)
Supplemental Security Income is a needs-based program for people who are elderly, blind, or disabled and have limited income and assets. Benefits distributed through this program come in the form of monthly checks. Unlike Social Security, this program is paid for by general tax revenue and is not related to employment or your Social Security trust fund. Applicants must be at least 65 years of age to apply. The amount of benefits that you can receive through this program will vary depending on your income, location, and the people you share your household with. In some states, being eligible for SSI automatically makes one eligible for Medicaid, and the application form may even go towards both. Other states have separate rules for eligibility for SSI and Medicaid.
Supplemental Security Income should be just that – supplemental. In most cases it will not be enough to cover all of your long-term-care expenses, and thus you should plan to pay for care through other methods in addition to the checks received through this program.
Annuities, Pensions, Life Settlements, & More