Key Takeaways

• Medicare doesn’t cover long-term care services like assisted living or nursing home care, which could lead to significant financial challenges as we age.
• You do have options to plan for long-term care, including Medicaid, private long-term care insurance, and alternative strategies like life insurance with long-term care riders.

What Exactly Is Long-Term Care—and Why Medicare Doesn’t Cover It

Let’s start by breaking down what long-term care actually is. When we talk about long-term care, we’re referring to a range of services that help people manage their daily activities over an extended period. This can include things like assistance with bathing, dressing, eating, using the bathroom, or even basic mobility. It could take place in various settings, such as in-home care, assisted living facilities, or nursing homes.

Here’s the catch: Medicare doesn’t cover long-term care. Surprising, right? Most people think that because Medicare is a comprehensive health program for seniors, it would cover everything they might need as they age. But when it comes to long-term care—like that nursing home stay or hiring someone to help you out at home—you’re mostly on your own.

Medicare will help if you’re recovering from an illness or surgery and need temporary rehab or skilled nursing services. For instance, Medicare might cover short stays in a skilled nursing facility after you’ve been hospitalized for at least three days. But if you’re looking at months or years of care in a facility, or even needing help at home long-term, you’re looking at out-of-pocket expenses. And those can add up quickly.

Why You Should Care About Medicare’s Long-Term Care Gap

You might be asking yourself, “So what? I’ll deal with it when I get there.” But here’s why you should start caring now. Long-term care can cost thousands of dollars a month, and many of us will need it at some point. According to various reports, 70% of people aged 65 and older will require long-term care services during their lifetimes. That’s a big chunk of the population!

And when you think about it, aging doesn’t come with a timeline. You might remain fully independent well into your 80s or 90s, or you might need help by the time you’re 70. The point is, you don’t know when you’ll need long-term care, or how long you’ll need it for, which makes it crucial to plan ahead.

Here’s another reason to take this seriously: Medicare’s lack of long-term care coverage could drain your savings faster than you think. With nursing home care averaging around $10,000 per month (depending on where you live), even a short stay could cost more than what you’ve set aside for retirement. And unless you’ve got piles of cash just sitting around, that’s not something most of us can afford.

So What Are Your Options for Long-Term Care?

The good news is you’re not completely out of luck. While Medicare may not cover long-term care, there are several other options to help you manage the costs.

1. Medicaid

Medicaid is the largest payer for long-term care services in the U.S., but there’s a catch: you have to meet very strict financial criteria to qualify. Medicaid is designed to assist low-income individuals, so you won’t be able to access it unless your assets fall below a certain threshold, which varies by state.

However, Medicaid does cover long-term care, including stays in nursing homes and some in-home care services. If you’re planning ahead, there are ways to protect some of your assets while still qualifying for Medicaid, such as through Medicaid planning or using trusts. But be careful—Medicaid has a “look-back” period of five years. This means if you transfer assets out of your name within five years before applying for Medicaid, you could face penalties.

2. Private Long-Term Care Insurance

Another option to consider is private long-term care insurance. This type of policy can help cover the costs of care you might need down the road, whether in your own home, an assisted living facility, or a nursing home.

The earlier you get it, the better. Most people who buy long-term care insurance do so in their 50s or 60s because premiums tend to rise sharply the older you get. And if you wait until you have a preexisting condition, like dementia or another chronic illness, you might not even qualify for coverage.

One thing to keep in mind: long-term care insurance premiums can be high, and they can also increase over time. So, you’ll want to weigh the cost of the premiums against your potential need for care down the line.

3. Life Insurance with Long-Term Care Riders

Another alternative is life insurance with a long-term care rider. These policies let you use some of the death benefit to pay for long-term care while you’re still alive. In other words, you get a sort of “advance” on your life insurance benefit to help cover your care costs.

The upside is you’re essentially killing two birds with one stone: life insurance to support your loved ones after you’re gone, and long-term care coverage if you need it. The downside? You’ll be reducing the amount of money your beneficiaries will get when you pass away, but if you need the care, it might be worth it.

4. Hybrid Policies

Hybrid policies combine the benefits of life insurance and long-term care insurance. These work by allowing you to use your life insurance death benefit to cover long-term care expenses. If you don’t end up needing long-term care, your beneficiaries still get the death benefit. These policies are appealing because they provide financial protection no matter what happens—either you use the long-term care coverage, or your heirs get a payout when you pass away.

Alternative Strategies: Self-Funding and Family Care

Beyond the formal insurance options, there are some other strategies to consider.

Self-Funding Your Long-Term Care

If you have significant savings, investments, or assets, you may be able to self-fund your long-term care. This means you set aside enough money now to cover future care costs. However, with costs rising every year, this can be a risky option unless you have a very large nest egg. Even then, unexpected medical events or longer-than-expected stays in care could wipe out your savings.

Family Care

Another approach, though not ideal for everyone, is relying on family members to provide care. This might mean moving in with a child or another relative, or having them take on caregiving duties in your home. While this can save money, it can also place a significant emotional and physical burden on your family members, especially if your care needs become more intensive over time. Plus, not everyone has family nearby or family members able to take on that role.

Timing Is Everything: When Should You Start Planning?

The earlier you start planning, the better off you’ll be. Waiting too long to figure out your long-term care plan could limit your options. For instance, if you wait until you’re already ill or in need of care, you might not be able to qualify for long-term care insurance.

Experts recommend starting to look into long-term care plans when you’re in your 50s or early 60s. This gives you time to explore your options, purchase insurance if that’s the route you choose, or make financial arrangements if you decide to self-fund your care. If you’re older, don’t worry—there are still options, but your choices might be more limited and costly.

Protecting Yourself from the High Costs of Long-Term Care

Medicare may not cover long-term care, but that doesn’t mean you have to be unprepared. Whether it’s Medicaid, long-term care insurance, hybrid policies, or relying on family, there are several strategies to help ease the financial burden of care.

By planning ahead, understanding your options, and making smart financial moves, you can ensure that you’ll have access to the care you need without completely draining your savings. Long-term care might not be on your mind right now, but trust me, it’s worth taking the time to figure out a strategy. You’ll thank yourself later when those unexpected medical needs pop up.