Is Medicaid a good option? Avoid the misconceptions

Misconceptions about who pays for long-term care have led many families down a dangerous path of poor and inadequate planning. One of the points of confusion is what the term long-term care means and who pays for it. Many people assume Medicare will take care of most long-term care needs, which is not the case. Let’s take a look at the reality of care as you age and why Medicaid, although a valuable resource, has some drawbacks.

Long-term care planning

What is long-term care exactly? It is estimated that over half of people turning 65 today will develop a disability where they need help with daily living activities. Most people assume that Medicare will pay for the help they need. Let’s take a closer look at what Medicare pays for and what the consumer must pay for out of pocket.

• Medicare. Medicare pays for your doctor’s visits, hospitalization, and other services depending on the plan you have. Medicare does not pay for long-term nursing home care. It only covers short-term skilled rehab if you have been three nights in the hospital. After discharge from skilled rehab, you will either go home to assisted living or a nursing home. Medicare will pay for time-limited home health at home or in assisted living if you meet the criteria.
• Nursing home care. Nursing home care is the most expensive and intensive care available outside of a hospital setting. The median cost for nursing home care in 2019 was $7,513 per month for a shared room. Unless or until you qualify for Medicaid, those costs are your responsibility.
• Assisted living. Medicare and Medicaid do not pay for assisted living. You are responsible for those costs. The median price for assisted living was $4,051 a month. It is not unusual for residents of assisted living to augment care with home care, adding to the cost.
• Home care. Home care is non-medical care for people who need assistance with activities of daily living. The cost will vary depending on where you live and the number of hours required. Expect to pay between $20-$40 an hour. Medicaid will pay for some home care services if you meet the eligibility criteria.

Reasons why Medicaid is not the preferred option

Many people think, especially when it comes to nursing home care, that they have the option of Medicaid to pay for a loved one. Medicaid is the primary payor source for nursing home care, but there are some critical factors to consider before relying on Medicaid to pay for care.

• You have to deplete your assets. Medicaid is a federal/state program for people who have very low income. The eligibility requirement is complicated and state-specific, but in general, you can’t have an income of over $2,349 a month (varies by state). Assets must not exceed $2,000.
• Inheritance issues. If you qualify for Medicaid, you will have no estate to leave your children. Medicaid has a five-year “look back” period, which means you can’t transfer assets to a family member within five years of qualifying for Medicaid.
• Nursing home problems. Most people hope to avoid going to a nursing home, and the expense isn’t the only reason. Nursing home problems have existed for years but have recently been exposed due to the COVID-19 pandemic. Nursing homes account for at least 40% of COVID deaths in the U.S. Here are some reasons why:
  • Nursing homes are chronically understaffed. One reason for this is that most nursing homes are for-profit, and Medicaid reimbursement is low. Many nursing homes cut costs by cutting staff. The work in nursing homes is complex and challenging, resulting in high staff turnover.
  • Nursing homes have had long-standing infection control issues before COVID-19.
  • The in-house physician will oversee your care along with scores of other residents. You will probably have to give up the services of your primary care physician.
  • Poor state and federal oversight of nursing home infractions has allowed these homes to continue to operate without significant consequences.
  • Most nursing homes were put under quarantine due to COVID. This means no family visitations, making it hard to advocate or manage your loved one’s care.

Hybrid life insurance policies and other options

So, how to avoid Medicaid and pay for long-term care? One way is to start saving and save a lot while you are younger. For years, people have also purchased long-term care insurance policies, but many companies have gotten out of the business due to high payout costs. The more significant issue with these policies is what happens if you don’t use the benefit. Once you die, all of the premiums you have paid through the years are gone. Also, premiums for traditional long-term care policies have skyrocketed for many beneficiaries.

Many companies are now offering hybrid life insurance policies that include long-term care coverage to address these issues. These policies can be used to pay for long-term care costs, and when you die, they pay out a death benefit to your heirs. You can also lock in your premium payments, unlike traditional policies. The different types include linked benefit, long-term care rider on a life insurance policy and chronic illness or critical illness rider. An accelerated death benefit is a feature included in some life insurance policies that allows you to receive a tax-free advance on your life insurance death benefit while you are still alive. You may have to meet specific criteria to receive this benefit.

A stand-alone long-term care policy might still be the best option for some people, especially if purchased when you are younger. Meet with a financial professional to evaluate your options and pick the best plan.

Planning for the future

Financial planning for care as you age and taking care of your health are the two best things you can do starting now. It is never too late to start. Relying on Medicaid may not be the preferred option. Consider your choices carefully by assuming that you will need some financial cushion as you get older, and you and your family will be happy you did.

Alliance America can help

Alliance America is an insurance and financial services company. Our financial professionals can assist you in maximizing your retirement resources and achieving your future goals. We have access to an array of products and services, all focused on helping you enjoy the retirement lifestyle you want and deserve. You can request a no-cost, no-obligation consultation by calling 833-219-6884 today.