Long Term Care

When it comes to long term health care, many Americans incorrectly assume that Medicare, supplemental policies or standard health insurance policies will cover the expenses. Consequently, many people do not plan ahead financially to provide for their care in the event of infirmity or extended illness. Costs of services provided by a nursing facility can exceed $50,000 annually, or more than $4,000 per month. Costs for residing in an assisted living facility average $24,000 annually, but can cost much more in urban settings or if a resident needs a high level of services.

As these figures show, paying for long term care calls for financial planning for your health needs, especially as you approach retirement. The following information is designed to give you a better sense of the financial programs and options available, as well as the benefits you can expect. Long term care insurance can protect personal assets and inheritance for the family, provide greater choice in the selection of long term care settings (nursing and assisted living facilities) and generally provide for financial security. Recently enacted federal health insurance legislation has helped make private long term care insurance a more viable option for paying for long term care costs while preserving personal savings, choice and dignity.

The recently enacted Health Insurance Reform Act includes consumer protections for purchasers of long term care insurance as well as clarifications that make treatment of private long term care insurance identical to that of health insurance coverage. Starting January 1, 1997, individuals are able to include out-of-pocket expenses for long term care and long term care insurance premiums with their other itemized medical expenses on their annual tax returns. Long term care and other medical expenses are deductible, to the extent that they exceed the federal government's 7.5 percent threshold of adjusted gross income. Also, the insurance benefits consumers receive, for the most part, will not be taxable as income. Medicare is a federal health insurance program for people age 65 and over and certain disabled people under 65. It does not provide a comprehensive long term care component and generally does not cover assisted living costs but may pay for short term services (e.g. physical and other therapies) contracted through a home health care agency and provided to the resident at the assisted living facility. Medicare covers only those skilled nursing facility services rendered to help a beneficiary recover from an acute illness or injury. Medicare is administered by the federal government's Centers for Medicare and Medicaid Services (CMS) and is divided into two parts: Hospital Insurance (Part A); and Medical Insurance (Part B).

Nursing facility coverage falls under Part A of Medicare and is very limited. If certain conditions are met, Medicare only pays fully for the first 20 days of care in a skilled nursing facility (SNF).

For the 21st through the 100th day, the patient must share, or co-pay, for the cost of care by paying a daily coinsurance rate, which changes yearly. In 2002 the coinsurance payment is just over $101 per day.

1. The nursing home is a skilled nursing facility (SNF). SNFs provide 24-hour nursing care to convalescent patients.
2. Continuous skilled nursing care or skilled rehabilitation services (as defined by the federal government) are required on a daily basis.
3. The patient has spent at least three consecutive days in a hospital and if the admission to the SNF occurs within 30 days after discharge from the hospital.
4. A physician certifies that SNF services are needed for the same or related illness for which the person was hospitalized.

Services Covered by Medicare

• A semi-private room
• Meals, including special diets
• Regular nursing services
• Rehabilitation services
• Drugs furnished by the faciliy
• Medical supplies

Services Not Covered by Medicare

• Personal convenience items
• Private duty nurses
• Extra charges for a private room

Medicare Part B may help pay for covered services you receive from your doctor in a SNF, if you choose to participate in the Part B medical insurance program. If you have used up your Part A coverage for a spell of illness, Part B also covers a portion of services received in a SNF, such as physical and occupational therapy. Under the Part B program, you must pay an annual premium and a deductible for all Part B services, including physician services, after which Medicare pays 80 percent of the reasonable charges for covered services.

• Services Not Included Under Medicare Part B
• Routine physical examinations and tests
• Routine foot care
• Eye or hearing exams for prescribing or fitting eyeglasses or hearing aids
• Immunizations other than for the flu or pneumonia