A lot of people think that long-term care insurance is unnecessary retirement planning because Medicaid or even Medicare will provide the financial help they need to pay for either a nursing home stay or other personal care.
Just to set the record straight: Medicare pays 100 percent of up to 20 days of medically necessary skilled nursing care following a hospital stay of three days or more. It pays significantly less after 20 days and none after 100 days. It also will pay for some doctor-ordered skilled nursing care and physical therapy, as well as hospice care for your final days.
That's just about it. After that, if you can't afford to pay for nursing services on your own and you're not a military veteran, your answer is to qualify for Medicaid, the federal and state partnership program that provides health care for those who have little or no financial resources.
"Medically needy" Medicaid not universal
Some 33 states and the District of Columbia offer a modified Medicaid plan that makes it easier for elderly residents of nursing homes who run out of money to qualify for "medically needy" Medicaid. In 16 states, there is no such thing as medically needy coverage, and qualifying for Medicaid when you run out of money to pay for nursing care is more complex.
Many of us think we'll never find ourselves in this retirement predicament, but it happens more often than you might think. The center's calculations show that even among higher-income people, about 10 percent qualify for Medicaid beginning in their mid-80s and 20 percent qualify in their 90s. The center also points out that people who have more economic resources tend to live longer than those who don't.
The center's research suggests that in states where this safety net exists, people are more inclined to spend up their savings. Before you embrace this attitude, consider that many of the best facilities don't accept Medicaid, and Medicaid may not pay for the in-home care you need. Plus, after you and your spouse are dead, Medicaid will take back what it has spent to care for you from any estate you may leave behind.
If you can figure out a better solution, it might be worth what it costs.
The chart below, courtesy of Kaiser Family Foundation, shows which states offer medically needy Medicaid programs. In 16 states, the median medically needy income limit was below 50 percent of the federal poverty level, or about $447 per month in 2009.