As you approach retirement, it’s understandable to ask what Medicare and Medicaid cover. There’s good reason for that question, as both Medicare and Medicaid cover quite a few types of healthcare costs. It’s imperative to understand how Medicare and Medicaid cover long-term care. This is especially true once your or a loved one’s ability to perform activities of daily living declines, at which point you may consider how a nursing home can help. For help with your full estate plan, consider working with a financial advisor.
Activities of Daily Living and Nursing Homes
Before looking at what Medicare and Medicaid cover, it’s helpful to review the situations in which they offer their distinct services. One of the most common situations arises when someone gets to a point where it’s difficult or impossible to perform some activities of daily living (ADLs). ADLs are tasks that people must do every day to remain independent, and they include:
- Getting in and out of a bed or a chair
- Walking around (ambulating)
- Using the bathroom
- Brushing teeth or combing hair
- Dressing and undressing
- Feeding oneself
Once a person cannot perform one or more ADLs, they may choose to go to a nursing home. Nursing home is a general term describing a broad category of homes that provide care to residents, but the National Institute on Aging puts it the most succinctly: “A nursing home is a place for people who don’t need to be in a hospital but can’t be cared for at home.”
Generally, nursing homes provide long-term care for people who struggle with ADLs, but they can provide much more. Nursing homes can hire skilled nursing staff or other staff to help accommodate residents with ADLs as well as provide room, board and recreational events or outings.
Does Medicare Cover Nursing Homes?
Medicare doesn’t typically cover nursing homes and for two reasons. One is that Medicare seldom pays for room and board. Another is that Medicare doesn’t cover custodial care (another way to say “care for ADLs”) if the individual doesn’t specifically require attention from a medically trained specialist.
However, Medicare would cover any medical needs that might arise while a person is in a nursing home, such as needing hip surgery after a fall (if surgery were medically necessary).
Additionally, if the care needed was above the level of a nursing home, Medicare might cover it. For example, if a Medicare-enrolled person needed rehabilitation after surgery, Medicare Part A would pay for treatment in a skilled nursing facility (SNF). Treatment in an SNF could include a semi-private room, meals, physical therapy and more – supposing the patient has enough days left on their benefit period. See everything Medicare Part A covers here.
Does Medicaid Cover Nursing Homes?
Yes, Medicaid covers the cost of nursing homes, though coverage varies from state to state. Also, Medicaid should cover the cost of a nursing home once a person receiving Medicare coverage falls below a specified resource level.
A nursing home that meets the federal standards set by Medicaid will provide the following free of charge to Medicaid-eligible residents:
- Semi-private room
- Food specific to the needs of the resident
- Nursing care
- Activities to promote well-being
- Basic grooming and hygiene services
- Medications
Medicaid doesn’t include any extras (things like a TV, clothing, books or magazines, a private room, etc. – the “non-essentials”). Items or services such as these will be charged to the resident.
To check your eligibility for Medicaid or ask questions about your state’s Medicaid program, see this Medicaid.gov hub of state sites.
What Is Medicaid?
Medicare is a state and federal program healthcare program that gives financial assistance to low-income people who are 65 and up or who have qualifying disabilities.
Medicaid is somewhat standardized by the federal government, but every state can make its own rules on who is and isn’t included. Since coverage varies, be sure to investigate your own state’s Medicaid qualification rules to see if you qualify and what it can pay for in your circumstances.
However, one consistent rule in every state is that, unlike Medicare, Medicaid will pay for custodial care (care that helps with ADLs). Of course, it only helps you if you can qualify for Medicaid.
There is good news in all of this: if you tried to qualify for Medicaid in the past but didn’t because your resource level was too high, you may be able to qualify if you need to be in a nursing home. Many state Medicaid programs allow people with higher incomes or resource levels to be eligible for nursing home care, so it’s worth trying again if you can.
What Are My Options to Pay for a Nursing Home?
Nursing homes can get costly. If you enter into a nursing home and have to pay for it yourself, there are several options:
- “Spending down” resources, then qualifying for Medicaid: Know that if you ever run out of money while in a nursing home, Medicaid coverage will kick in once your resources fall below a level specified by your state’s Medicaid program. Many Medicare beneficiaries who require nursing home care spend their own money until Medicaid coverage begins.
- Using life insurance to pay for long-term care: If you have a life insurance policy with living benefits, you may be able to take out your death benefit early and use it to help pay for nursing home expenses, supposing you qualify according to your policy’s provisions. If you have a permanent policy, you may also be able to borrow from the cash value to help pay for expenses. Keep in mind, any money borrowed from a life insurance policy will likely be subtracted from your beneficiary’s inheritance.
- Long-term care insurance: You may be able to get a long-term care insurance policy to help pay for your stay in a nursing home. Every policy is different, however, so read the fine print to see exactly what the policy will cover before you fork over your hard-earned money.
The Bottom Line
In general, Medicare doesn’t pay for nursing home care while Medicaid does – for qualified people. To qualify for Medicaid coverage one must, speaking generally, have resources below a certain level and be 65 or older. There are some situations when Medicare will cover nursing home care, for example, when a person is recovering from surgery and needs SNF. Other options for funding nursing home care include life insurance, long-term care insurance or spending down your own money until your resources fall below a level specified by your state’s Medicaid program.
Tips for Long-Term Care Planning
- Consider talking to a financial advisor about using Medicare or Medicaid to cover nursing home expenses. Finding the right financial advisor who fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- As you plan for long-term care, you’ll want to know what it covers. Also, consider reading if you would like information about when to apply for long-term care insurance.
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