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Insurance and protection, Health and aging August 7, 2017

Long-term care and government benefits: What you need to know

Americans are now living longer compared to 40 years ago1. Living longer means you’re able to spend more time with people you love — but it’s also raising a new question: how to pay for long-term care if you need it.

As you approach retirement, it’s important to evaluate your options and develop a strategy to pay for long-term care, so you aren’t caught off-guard by the costs of needing help as you age.

The U.S. government currently offers several programs that provide varying long-term care benefits, which can serve as a starting point for many Americans — but, because you may not be eligible, or they may not cover all your expenses, it’s important to understand what benefits they provide to ensure your long-term care needs can be met.

Comparing government benefit programs

Medicare, Medicaid and Veterans Affairs (VA) benefits are government health programs that may come to mind when you think of long-term care.

Although these programs may provide some benefits to pay for skilled and rehabilitative care, there are significant differences between them, which could impact your ability to use them to pay for your long-term care costs. Get to know these programs and the benefits they can — and cannot — provide to help ensure you’re adequately covered before you need long-term care.

U.S. government benefit programs

 

 Medicare Medicaid VA benefits
Program eligibility Entitlement program based on age and Social Security Means-tested (based on your income and assets) Entitlement program for previous U.S. military service members; recipients receive care based on a priority level system
Funding U.S. federal government Joint program between U.S. state and federal governments U.S. federal government
Management U.S. federal government State governments Veterans Administration, in conjunction with U.S. federal government
Care benefits Does not cover custodial care (care needed when chronically ill) Covers custodial care, almost exclusively in skilled nursing facilities only Covers some custodial care, almost exclusively in an approved VA facility

Medicare

Medicare is the federal medical insurance program for retirees in the United States.

Medicare eligibility

Most Americans receive Medicare coverage as a companion to Social Security benefits. If you receive Social Security or Railroad Retirement Board (RRB) benefits, you are eligible for Medicare Parts A and B starting the first day of the month you turn 65.

If you are not receiving Social Security or RRB benefits, you are still eligible for Medicare if you meet one of the following criteria:

  • If you do not receive Social Security benefits, you may sign up for Medicare within 3 months of turning 65.
  • If you are under 65 and disabled, you will automatically get Medicare Parts A and B after you get disability benefits from Social Security or the RRB for 24 months.
  • If you have ALS (Amyotrophic Lateral Sclerosis, also referred to as Lou Gehrig’s disease), you will get Parts A and B automatically the month your Social Security disability benefits begin.

What Medicare covers

Much like medical insurance while you are employed, Medicare pays for medical expenses such as hospital visits, doctor’s office visits, diagnosis and medications. Medicare does not pay for custodial care — the care needed when one becomes chronically ill.2

Medicare has four parts with varying degrees of coverage:

 

 Part A Part B Part C (Medicare Advantage) Part D
Type of coverage Hospital insurance “Doctor’s office” medical insurance coverage associated with an attending physician “All-in-one” individual insurance plans offered by private insurance carriers, approved by Medicare Prescription drug coverage
What it covers

Inpatient hospital care, limited short-term skilled nursing facility care for rehabilitative purposes, hospice care, home health care (by exception only)

Outpatient care, durable medical equipment, many preventive services

 Replaces the need for Medicare Parts A and B, and often Part D Helps cover prescription drug costs not covered by Part B
Enrollment3 Automatic enrollment process if receiving Social Security benefits (see eligibility) Automatic enrollment process if enrolled in Part A and receiving Social Security benefits Voluntary; must apply for Medicare Advantage programs independently Automatic enrollment process
Out-of-pocket costs Deductibles for services, no out-of-pocket premiums for most people Deductibles for services, premiums generally deducted from monthly Social Security benefits Premiums and deductibles paid out of pocket Limited out-of-pocket costs for most veterans

Medicare supplement plans

Medicare supplement plans are not part of the Medicare program. 

These plans are individual private insurance plans designed to help cover the co-payments of benefits paid for through Medicare. They:

  • Do not provide extended benefits outside of what Medicare will cover
  • Help offset some of the costs for benefits for which a co-pay may be required
  • Do not cover expenses associated with custodial care

Medicaid

Medicaid is a joint federal and state program for people who do not have the financial means to afford other health insurance coverage independently.4

Medicaid eligibility

To qualify for Medicaid, your assets must be spent down to a minimal amount. You must pass a financial “means test” on an annual basis to show that your income and assets are below a specific level.

Asset criteria

You must have less than a specified amount of countable assets to qualify for Medicaid benefits, which varies by state. Your assets fall into three categories.5

  Countable/non-exempt assets Non-countable/exempt assets Inaccessible assets
Definition Assets considered available to be used to cover your cost of care Assets you are allowed to keep and not required to use them to pay for care Assets that may have been considered countable and available to pay for care, but to which you no longer have access
Examples Checking & savings accounts, investments, deferred annuity cash value, real property other than your primary residence, additional motor vehicles if you have more than one, life insurance cash value in excess of $1,500, tax-qualified pension plans, all residences/property other than primary residence, assets in a revocable (living) trust Your primary residence (subject to state caps), personal property & household belongings, one motor vehicle, cash equal to or less than $3,000, prepaid burial account, term life insurance, business assets (if livelihood is derived from them) Prior to applying for Medicaid, using cash to: Pay down or pay off the mortgage of the family home, purchase a car for the spouse not receiving care, prepay burial expenses

Income criteria

To receive Medicaid, your income must also fall below certain levels set by your state of residence.

The government considers all income — regardless of the source — as available for spending on care, but excludes the following:

  1. Personal monthly needs allowance: A set amount each month used to cover expenses such as food, housing and transportation
  2. Medicare Part B and Medicare Supplemental Insurance Premiums (if you are eligible)
  3. Other small deductions permitted by a state’s specific parameters

Marriage and Medicaid

For married couples where only one spouse is receiving care, the Medicaid financial means test could leave the independent spouse with little to no income or resources.

To help ensure that the spouse who remains in the community can live independently and with dignity, Congress enacted a provision called the Spousal Impoverishment Act. This act protects a certain amount of the couple's combined resources for the spouse living independently.

To qualify, the spouse living independently must meet several conditions:

  1. They must be legally married to the spouse receiving care.
  2. The spouse receiving care must reside in a medical institution or nursing facility and be likely to remain there for at least 30 consecutive days.
  3. They cannot also be receiving long-term care in a medical institution or nursing facility.

What Medicaid covers

Medicaid coverage varies by state, but typically provides a broad level of health insurance coverage, including doctor visits, hospital expenses, and many other medical expenses and forms of care. Medicaid also typically covers long-term care costs, including nursing home care and home health care.

Veterans Affairs benefits

The U.S. Department of Veterans Affairs provides benefits to previously active members of the U.S. military. Today’s veterans have a comprehensive medical benefits package, which the VA administers through an annual patient enrollment system. 

What VA benefits cover

Benefits provided for custodial care are awarded through a priority system, with those assigned a higher priority category, such as someone injured through an act of war on active duty, receiving the first available care.

Those assigned lower priority categories may have access to custodial care depending on the availability of resources in their geographic location; however, it is not a guaranteed benefit, and individuals may be asked to cover their own expenses.

The VA’s Geriatrics and Extended Care program provides services for those who are elderly and have complex needs and veterans of any age who need daily support and assistance.

Veterans can receive care at home, at VA medical centers or in the community. If you are eligible to receive care, this program may pay for the following:

  • 24/7 nursing and medical care
  • Physical therapy
  • Help with daily tasks of living
  • Comfort care and help managing pain
  • Support for caregivers who may need skilled help or a break so they can work, travel or run errands

Develop your long-term care strategy

While government programs can provide a certain level of coverage under the right conditions, you may want to consider a long-term care insurance option. A financial professional can help you determine a strategy that best fits your needs.

ICC20-1208371

Insurance products issued by MINNESOTA LIFE INSURANCE COMPANY.

1. Living longer: historical and projected life expectancy in the United States, 1960 to 2060. United States Census Bureau. 2020.

2. Nursing home care, U.S. Centers for Medicare and Medicaid Services. 2020.

3. Original Medicare (Part A and B) Eligibility and Enrollment. U.S. Centers for Medicare and Medicaid Services. 2020.

4. Medicaid and CHIP coverage. U.S. Centers for Medicare and Medicaid Services. 2020.

5. Financial requirements – assets. U.S. Department of Health and Human Services. 2017.

Please keep in mind that the primary reason to purchase a life insurance product is the death benefit. Life insurance products contain fees, such as mortality and expense charges (which may increase over time), and may contain restrictions, such as surrender periods.

Insurance policy guarantees are subject to the financial strength and claims-paying ability of the issuing insurance company.

Long-term care agreements and policies have exclusions and limitations. For costs and complete details of coverage, please contact your financial professional.

The purpose of this material is the solicitation of insurance. An insurance agent or company may contact you.

CA Residents:  This is a life insurance benefit that also gives you the option to accelerate some or all of the death benefit in the event that you meet the criteria for a qualifying event described in the policy. This policy or certificate does not provide long-term care insurance subject to California long-term care insurance law. This policy or certificate is not a California Partnership for Long-Term Care program policy. This policy or certificate is not a Medicare supplement policy.

Additional articles

DOFU 9-2020

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