Page Reviewed / Updated - January 04, 2020
Prior to a discussion of who pays for long-term care, it is helpful to clarify how we define long-term care. For the purposes of this article, we are focused on care provided for the aging, elderly, and individuals with disabilities. In order to live independently, persons must be able to perform what are called “activities of daily living” (ADLs), which includes dressing, grooming, bathing, mobility, and toiletry. The need for personal assistance with these activities, which are non-medical in nature, and formally called non-skilled care, is commonly defined as long-term care. That said, long-term care can also be medical in nature. This type of care is also skilled care.
The reason long-term care is required varies, but may be due to the natural process of aging, a serious injury, such as a broken hip, or cognitive issues associated with Alzheimer’s disease or a related dementia. Often times, family members serve as unpaid in-home caregivers. However, assistance with the ADLs are also commonly provided by non-medical professionals, such as personal care assistants and home aides. Medical professionals (home healthcare aides, therapists, nurses, and doctors) also provide long-term care. Long-term care can be provided at home, in an assisted living facility, in an adult foster home, in a nursing home, or in an adult day care center.
Unfortunately, there is not a simple answer to this question. Who pays largely depends on the financial (income and assets) means of the individual in need of care and the severity of the care required. It is perhaps easiest to address this question by breaking it down into the smaller questions that follow. It is also helpful to understand that very rarely does a single source pay for care; it is much more common for the cost of care to paid for by multiple sources.
For low income elderly individuals and families with limited assets, the cost of medical care is largely covered by Medicare, or Medicaid for those who meet the Medicaid eligibility limits. Often times, the poor do without medical care, forego their prescription drugs, or simply receive medical services in the emergency room and are unable to pay their medical bills. In fact, many medical bills resulting in bankruptcy filings are discharged.
However, Medicare does not pay for personal care, also called custodial care, in long-term care situations. That said, some Medicare Advantage plans might cover the cost of this type of care. State Medicaid programs will pay for personal care when it is provided in a skilled nursing facility (or nursing home). Depending on one's state, personal care assistance might also be provided by a state’s Medicaid program in other settings. There are also HCBS (home and community based services) Medicaid waiver programs available that provide assistance for personal care outside of nursing homes. Using a waiver, or potentially a state’s regular Medicaid program, one can receive care at home, in adult day care, in an adult foster care home, or in assisted living residences.
There are also several veterans' long-term care assistance programs and some state assistance programs for individuals that do not qualify for Medicaid. Despite these programs, very often families with limited means bear the full burden of providing personal care themselves.
For medical care, Medicare is the primary source of funds. Low and middle income families often have Medicare Supplemental insurance, which provides additional assistance for Medicare co-payments and other gaps.
Personal care is not covered by Medicare, but may be covered by Medicare Advantage. Veterans' benefits do provide some assistance for low to middle income families, such as the Aid and Attendance Program and the Veteran-Directed Care Program. Medicaid, however, is not as much of a factor, as the vast majority of families in this income level do not qualify. Many states provide assistance to individuals that do not qualify for Medicaid with the objective of keeping them out of the program. Since Medicaid is a very expensive program, states offer personal care or financial assistance programs designed to prevent or delay Medicaid enrollment. In the long term, this can be less expensive for the states.
Middle to higher income families typically can afford better health insurance. Therefore, a higher percentage of their medical care is paid for by their insurance programs. This might include Medicare, Medigap, or another type of Supplemental Insurance, as well as other private insurance. Individuals with middle or higher incomes do not qualify for Medicaid.
Most of the state-based or veterans’ programs that provide personal care assistance have income limits and / or asset limits. Therefore, higher income families rarely have personal care paid for by these programs. However, many middle and higher income individuals have long-term care (LTC) insurance. Most LTC insurances provide a daily allowance for personal care. Those without LTC insurance often pay out of pocket for home care aides, assisted living, or nursing home care.