What Long-Term Care Costs; Who Pays?

What Long-Term Care Costs; Who Pays

Like most things in our American capitalistic society, if you can pay for it, you can get what you want. It’s no different with long-term care, and LTC can be expensive, spending in 2004 reached over $158 billion. Costs vary depending on the type of services purchased and where these services are delivered. The following overview will put you in the ballpark:

• Home health care — $56 per day (according to the American Association of Homes and Services for the Aging, AAHSA)
• Independent Senior Living — $500 – $4,000 per month (Helpguide.org)
• Assisted Living — $2,500 – $4,000 per month (National Investment Center, NIC)
• Skilled Nursing — $3,000 – $8,000 per month (NIC)
• Continuing Care Retirement Communities — $2,672 per month for a nonprofit CCRC (AAHSA)

LTC typically is paid for by a combination of public (government) and private funds. Medicaid is the federal government’s health insurance program for the low-income elderly, poor and the disabled. It — not Medicare as commonly thought — is the largest financier of long-term care services by far. In 2004 Medicaid (called Medi-Cal in California) paid for 42% of all long-term care services and 43% of all nursing home care.

The regulations and funding come from Congress, but the program is administered by the states which often add their own funding and rules. Medicaid is not available to everyone who needs long-term care; it is available only to those who meet both financial and functional eligibility criteria. Income thresholds for Medicaid eligibility are low, and many seniors “spend down” their assets and income in order to qualify.

Medicaid provides coverage primarily in skilled nursing facilities, which are directed by doctors and have licensed nurses on staff. Many seniors become resident of nursing homes, not because they need medical care but because they are unable to pay for long-term care. Congress’ recent health care legislation is an effort by policy makers to provide greater access to community-based services (including assisted living communities) under Medicaid.

Medicare is another federal program for the nation’s seniors and those with disabilities. It helps seniors pay doctors and other health care providers. It also covers much of the hospitalization costs for seniors, and has limited benefits for skilled nursing, rehabilitation and home health care.

Direct out-of-pocket spending comprises the second largest payer of long-term care, accounting for 23% of total spending. Individuals can use private long-term care insurance to help cover these costs. But currently there is not widespread use of these policies, only 6.3 million total policies were in effect in 2002, because they can be expensive. But if invested in early they might only cost 3% to 8% of the actual amount the policy would pay for a three-year stay. That’s a lot less expensive than paying 100% out-of-pocket.

For Assisted Living
Most residents pay regular monthly rent, which include meals and some services. Individualized, health-related care costs are likely to be added to the basic rent. In smaller facilities, the entire cost may include room and board as well as care. A rule of thumb is that assisted living costs about 60% of the cost of a nursing home.

In 2002, Medicaid helped pay for services for approximately 11% of assisted living residents in 41 states. Medicaid typically only pays for care in assisted living and does not pay for room and board. Based on care costs alone, Medicaid might cover only 5% of the total cost of assisted living. Medicare pays for almost no assisted living care. A limited, state program for those with very low-income, SSI (supplemental security income), pays for about 14% care — but most of that does not go to seniors. It is paid to specialized units for individuals with developmental disabilities. About 2% of assisted living is covered by long-term care insurance. This means that seniors and their families pay for about 90% of costs of assisted living care. Another way to look how assisted living is paid for is as follows:

Insurance   2%
Other   4%
Medicaid   5%
SSI 14%
Individual out of pocket 75%