HOW IS LONG TERM CARE DEFINED?
At the federal level, long-term care is defined primarily through functional incapacity, not diagnosis. An individual is considered to need long-term care if they require substantial assistance with Activities of Daily Living (ADLs): Bathing, dressing, eating, transferring (moving from place to place), toileting, continence, or severe cognitive impairment (e.g. Alzheimer’s, dementia). Insurance companies intentionally mirror the federal definition, but apply it contractually.
The Federal Government considers the following as LTC Services: Custodial care (non-medical assistance), nursing homes, assisted living facilities, adult day care, and non-skilled home health care.
Key Federal Reality (Often Missed):
- Medicare does NOT cover long-term custodial care
- Only short-term skilled care (generally under 100 days, with conditions)
- Medicaid does cover LTC, but only after:
- Asset spend-down
- Income qualification
- Estate recovery exposure
Alternative Protection
Life insurance
Traditional life insurance policies generally do not provide coverage for long-term care expenses. However, some newer types of life insurance policies, such as “linked-benefit” or “hybrid” policies, may offer a combination of life insurance and long-term care benefits.
Linked-benefit or hybrid life insurance policies allow policyholders to use a portion of their death benefit to pay for long-term care expenses if they become chronically ill or require long-term care services. The amount of long-term care benefits available will depend on the specific policy and may be limited to a percentage of the death benefit.
The premiums for linked-benefit or hybrid policies tend to be higher than those for traditional life insurance policies, but they may offer more comprehensive coverage and flexibility. However, it’s important to carefully review the terms of the policy and understand how the benefits will be paid out, as some policies may have restrictions or limitations on when and how the long-term care benefits can be used.
Understanding Medicaid
Medicaid is a joint federal and state program that provides health insurance for people with limited income and resources. Medicaid may pay for long-term care services for eligible individuals who meet certain criteria.
The specifics of how Medicaid pays for long-term care vary by state, but generally, Medicaid pays for long-term care in a nursing home or other facility that provides skilled nursing care. In some cases, Medicaid may also cover care in an assisted living facility or in the person’s own home through a home health care program.
To be eligible for Medicaid coverage of long-term care, an individual must meet certain income and asset requirements, which vary by state. Additionally, the person must have a medical need for the long-term care services, as determined by a doctor.
Once a person is approved for Medicaid coverage of long-term care, Medicaid pays for the cost of the care up to a certain amount, which varies by state. If the cost of care exceeds this amount, the person may be responsible for paying the remaining amount out of pocket, or they may be able to qualify for other programs or services to help cover the costs.
It’s important to note that Medicaid planning for long-term care can be complex, and it’s recommended that individuals and families consult with an experienced attorney or financial advisor to ensure they understand the options and requirements for Medicaid coverage.
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