For all practical purposes, in the United States, the only government operated “insurance” plan for long-term institutional care is Medicaid. Medicare only pays for approximately 20 percent of skilled nursing care in the United States. Private Insurance pays substantially less. The result is that most people pay out of their own pockets for long term care until they become eligible for Medicaid.
Medicaid and Medicare are often each confused for the other. Medicare is an entitlement which is paid into over the course of your working life through the Medicare Tax on your employment earnings. Every American is eligible for Medicare at age 65.
Medicaid is a form of welfare – or at least that’s how it began. To be eligible, you must become what the program’s guidelines consider to be “impoverished”. President Lyndon B. Johnson signed the Medicare Amendment to the Social Security Act in 1965. The amendment established both Medicare & Medicaid which LBJ promised would “improve a wide range of health and medical services for Americans of all ages”. Of course, politicians have been debating whether that is the case ever since.
Despite the costs, there are advantages to paying privately for nursing home care if you can afford to. The foremost is that by paying privately, an individual is more likely to gain entrance to a better-quality facility. The obvious, and potentially most prohibitive, disadvantage is the expense. In Massachusetts, privately paid nursing homes cost upwards of $14,000 per month. Without proper planning, nursing home residents can lose the bulk of their savings.
For most individuals, the object of long term care planning is to protect savings (by avoiding paying them to a nursing home) while simultaneously qualifying for nursing home Medicaid benefits. This can be done with good planning, following the rules of Medicaid eligibility.
Though Medicaid is a federal program, it is administered by the governments of each state, often with different rules. In order to qualify for federal reimbursement, state programs must comply with applicable federal statutes and regulations. In Massachusetts, Medicaid is known as MassHealth. Future blogs in this series will include explanations of both Massachusetts and federal laws as applicable. Stay tuned for a more in-depth explanation of Medicare in future blogs as well.
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