Who Pays for Long Term Care?


What is the difference between health insurance, Disability Insurance and Long Term Care insurance?

Take this quick quiz:

  • Group and individual health insurance pay for Long Term Care. True or False?
  • Medicare pays for help at home when an elderly person can’t dress themselves because of arthritis. True or False?
  • Someone who has Disability Insurance breaks their back in a skiing accident. They are off work for eight months recuperating at home. Their Disability Insurance pays for a Home Care worker to feed, cloth and bath the injured person. True or False?

All of the above statements are false regarding who pays for Long Term Care costs.

It is a painful learning process for most people when they discover too late that existing health insurance policies, disability insurance or Medicare/Medicare Supplements do not cover Long Term Care costs. The reality is that unless someone has a Long Term care Insurance policy they are going to have to pay for their Long Term Care costs out of pocket until they run out of money. Poor people who need Long Term Care can get Medicaid (welfare) to pay for a bed in a nursing home that accepts welfare patients . Please note that welfare does not pay for Home Care or a room in an Assisted Living Facility.

The key concept for understanding who pays for Long Term Care is this:

Health Insurance (individual or group) and MediCare (health insurance from the federal government for people 65 and older) pay for what is called “Skilled Care” or “Curative Care”. Health insurance trys to “fix” or “cure” you. However, help at home with the Activities of Daily Living (ADLs) is considered “unskilled” or “custodial care” and are not covered by health insurance or MediCare.

Long Term Care does not try to “cure” you- it helps you live day to day with a chronic health condition buy assisting you with the Activities of Daily Living (ADLs). More information on the ADLs can be found in the What is Long Term Care page.

Here is information from the California Department of Aging publication called “Taking care of Tomorrow, A consumers Guide to Long Term Care”

Q: Will Medicare pay for Long Term Care? (Medicare is the federal health insurance program for people 65 and older)

A: ” Most long term care is furnished to people with chronic, long term illnesses or disabilities. The care they receive is personal care, often called custodial care. Medicare does not pay for custodial care. Medicare pays for less than 10% of all nursing home costs.

Q: Does Long Term Disability Insurance cover Long Term Care?

A: “No. Disability Income Insurance doesn’t pay for medical care, personal care or Long Term Care. The purpose of this type of insurance is to replaced earned income. Disability Income Insurance generally pays a percentage of an employed person’s earned income if they are disabled while still employed. Once you retire, you may no longer be eligible for disability income benefits. Unfortunately, because it’s called “long term” disability insurance, some people may assume they are also covered for long term care services.”

Q: Doesn’t Medicaid (called MediCal in California) pay for Long Term Care?

A: Medicaid is welfare, a joint federal-state program providing health coverage for people on welfare. Medicaid does paid for Long Term Care with two huge restrictions: 1) it does not pay for Home Care or Assisted Living Facilities 2) It only pays for Nursing Homes and you do not get to pick the Nursing Home. Nursing Homes are not required to take people on welfare. Some Nursing do accept patients on welfare they rarely get the level or care or setting that patients get who are paying the full rate.
Another major drawback to expecting welfare or Medicaid to pay for your Long Term care is that you need to be poor to get the benefit. If you have assets you will need to “spend down” your assets by paying for your care before welfare will pay for your Nursing Home.

Here are some examples explaining the difference between of Long Term Care and Medical Care and the difference between Long Term Care Insurance and Medical Insurance:

EXAMPLE ONE: A 35 year old man hits a tree while mountain biking one weekend and breaks his arms and legs. His Health Insurance pays for the ambulance to the hospital, surgery to put plates and screws into his arms and legs, three days in the hospital after surgery and putting him into a body cast.. This patient is then sent home for 9 months to heal in the body cast. All of the above services would be paid for by Health Insurance because they are curative in nature and provided by skilled personnel.

Will Health Insurance pay for someone to feed, cloth, bath and otherwise take care of the young man during his 9 months in a body cast? NO! Because having someone feed you, cloth you and bath you, while obviously needed to stay alive, is not in itself curative in nature. It is custodial so Health Insurance will not pay for it.

EXAMPLE TWO : A 25 year old woman is diagnosed with MS. She eventually loses the ability to feed, bath and dress herself. She has Health Insurance. Will her health insurance pay for someone to help her at home each day with feeding, clothing, bathing? NO! Because she needs custodial care not curative care.

Here are some examples explaining the difference between Long Term Care Insurance and Disability Insurance:

EXAMPLE ONE: A 35 year old man hits a tree while mountain biking one weekend and breaks his arms and legs. He has surgery to put plates and screws into his arms and legs, is put into a body cast and then sent home for 9 months to heal in the body cast. He will not be able to work for nine months.

If this man is fortunate enough to have Disability Insurance he will probably receive 60% of his usual salary while he is disabled and his Disability Insurance starts to pay. He is lucky to have a Disability Insurance policy.

Here is the problem. For the nine months that he is in a body cast the man will need someone to feed him, cloth and bath him. Will Health Insurance pay for someone to feed, cloth, bath and otherwise take care of the young man during his 9 months in a body cast? NO! Because having someone feed you, cloth you and bath you, while obviously needed to stay alive, is not in itself curative in nature. It is custodial so Health Insurance will not pay for it.

Will this man’s Disability Insurance pay extra, above the usual 60% of salary, to cover his extra expense of needing personal care? No! So even though the man is better off than most because he will be getting 60% of his usual pay from his Disability Insurance plan he is still going to be hurt financially because his has new costs he has to cover to pay for his Home Care.

EXAMPLE TWO: A 35 year old woman with MS. Her condition loses the ability to feed, bath and dress herself and cannot work. She has disability insurance which replaces 60% of her income while she cannot work. However, she needs help at home each day with feeding, clothing, bathing. Will her health insurance pay for that care? NO! Because she needs custodial care not curative care and her health insurance only pays for curative or skilled care.

Will her Disability Insurance provide her with extra benefit dollars to pay for someone to feed, cloth and bath her? No. She will have to pay for the Home Care out of her own pocket.