The Misnomers of Long Term Care

Surveys by organizations that support long term care planning, such as the AARP, consistently reveal that a majority of the American public thinks the government will provide long term care services when the time comes for needing those services.  Some of the statistics were shocking including 59% of respondents who think Medicare will pay for extended nursing home costs and 52% believe Medicare will cover assisted living costs.

Recent cost-of-care reports released by the government supports the thinking that the government provides the bulk of care. Presently, the majority of long term care services -- about 80 percent -- is paid for by governmental programs with private pay and long term care insurance making up the difference. In June 2007, according to the Centers for Medicare & Medicaid Services (CMS), which overseas nursing facility care, 65 percent of all nursing home residents relied on Medicaid and an additional 14 percent depended on Medicare for their care and services.

In reality, Medicare coverage for nursing homes is very short-term (the average is 27 days) and Medicare does not cover the cost of assisted living at all. It is no wonder that the public is confused. How can some sources claim that government provides little long term care if the government itself claims payment for 80% of long term care costs? The answer lies in the fact that the majority of long term care services in this country are provided free of charge by family members, friends or volunteers.

Because many family caregivers are in the workplace and have difficulty providing help for loved ones, Americans should realize that planning for long term care is an important issue when planning for retirement. The government does not provide the amount of care the public thinks it does.

Medicare and Medicaid contract directly with private providers who are certified to provide care on behalf of these agencies. These eldercare companies are reimbursed directly for the services they provide. Payments to providers from Medicare are based on performance of certain predetermined activities defined by Medicare. Each type of activity has a different reimbursement rate depending on the level of care required and the cost of care in the geographic area. Unlike Medicare, Medicaid typically provides an average per capita payment for each Medicaid recipient receiving long term care in a facility or in a community setting.

Both Medicare and Medicaid require evidence of certain services provided by doctors, nurses and aides and detailed logs of these completed services must be kept. Any services rendered by a Medicare or Medicaid approved provider that are not preauthorized by regulation are generally not covered.

The rigid reimbursement model from Medicare and Medicaid also limits freedom of choice for care recipients. Government long term care beneficiaries must choose a government-certified provider for their care. Government programs also favor nursing home care over other settings such as assisted living or home care. There are reasons for this bias and we will discuss these limitations in a future article. However, the result of a nursing home bias is that care recipients generally have little choice but to receive their care in a nursing home.

Government program directors are aware of the shortcomings in the system and an effort is being made to improve delivery and offer more choice, but it appears to be moving glacially slow. The fault really lies with the reimbursement model for care services and that needs to be changed in order to encourage innovation and provide more choice in care settings. 

A few weeks back (November 4-10), the US Congress declared the week as Long-Term Care Awareness Week hoping to urge Americans to use this as an opportunity to learn more about the potential risks and costs associated with long term care.  As a professional committed to helping my clients protect themselves against the risks of long term care, I encourage you to take this topic seriously and plan for your future today. 

Since I am not a registered insurance advisor, I do not sell nor obtain any benefit from any insurance products, but can put you in touch with some excellent people that can educate you as to your options and answer any of your concerns. Please contact me if you would like a referral.