The American population continues to age, and, in turn, the demand and costs for long-term care services are skyrocketing. According to LongTermCare.gov, someone turning 65 today has almost a 70% chance of needing some type of long-term care in their remaining years, and that care comes with a hefty price tag today. 

For example, if you need nursing home services, the average cost for a semi-private room in a nursing home is over $104,000 per year. The price for a private room in a nursing home is even higher, with an average price tag of over $117,000 annually. And, even less intensive care, like, homemaker services, can come at a high cost, with this option currently clocking in at over $63,000 per year today. With costs like these, it’s no surprise that many seniors are concerned about the affordability of long-term care costs. 

That said, many seniors or their family members may be counting on Medicare to help cover the cost of long-term care when the need arises. The reality is, though, that Medicare’s coverage can be limited — especially when it comes to long-term care. So, understanding exactly what is and isn’t covered is crucial for proper planning and ensuring you can afford the care you need as you age.

Find out how the right long-term care insurance policy could help you today.

Does Medicare cover long-term care costs?

Medicare generally does not cover the costs of long-term care services that assist with activities of daily living over an extended period of time. This includes the costs of non-medical care for things like bathing, dressing, eating, getting in and out of bed and using the bathroom.

Under original Medicare Part A (hospital insurance) and Part B (medical insurance), you’ll typically pay 100% out-of-pocket for most long-term care services that are considered custodial rather than skilled medical care. Medicare supplemental insurance policies generally (Medigap plans) also generally provide no coverage for long-term care.

According to Medicare.gov, there are only a few limited circumstances where Medicare may temporarily cover some types of long-term care costs, such as:

• Up to 100 days of skilled nursing home care per illness through Part A, but only after a qualifying 3-day inpatient hospital stay, and only for continued skilled medical care rather than custodial care
• Limited coverage through Part A for hospice care for terminally ill patients
• Some coverage through Part B for specific home health care services like intermittent skilled nursing care, physical therapy and occupational therapy, as long as it is considered medically necessary

So while traditional Medicare plans help cover medical costs for things like doctor visits, preventative care, hospital stays, lab tests and surgeries, they generally leave a major gap when it comes to long-term custodial care. As a result, many seniors exhaust their personal savings and assets paying out-of-pocket for long-term care before eventually qualifying for Medicaid to foot the bill.

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Other options for covering the costs of long-term care

Since Medicare provides little to no coverage for ongoing long-term care, most seniors need to make other arrangements. Other options to consider include:

Long-term care insurance

Long-term care insurance policies are often a smart option to consider because they help cover the costs of nursing homes, assisted living facilities, in-home care and other long-term care services. The premiums for these policies are based on age, health status and amount of coverage selected. 

If you want to take advantage of what long-term care insurance offers, though, it’s best to apply for coverage when relatively young and healthy to get lower rates. After all, premiums can increase over time and getting your application approved can be more difficult as you age and face more health issues.

Medicaid (if you qualify)

Medicaid, a joint federal-state program, may help pay for certain health services for those with limited income and assets. There are strict requirements to qualify, but once qualifiable financial criteria are met, Medicaid can cover nursing home care and some home and community-based long-term care services. However, you may have to “spend down” your assets paying for care before qualifying.

A life insurance policy 

Some whole life insurance policies allow you to receive a portion of the death benefit early as an accelerated benefit, which can be used to cover long-term care costs. Other hybrid products combine a life insurance benefit with a long-term care rider. Both of these options let you access funds for care while still leaving some death benefits to your heirs.

Personal savings and income

Self-funding long-term care from retirement accounts, social security, home equity or other types of funds can work if you have substantial assets. However, paying out-of-pocket at $100,000 or more each year for things like nursing home care can quickly deplete the savings you intended for other expenses and legacies.

A reverse mortgage

For homeowners age 62 and older, reverse mortgages allow you to access a portion of your home’s equity to cover long-term care and other retirement expenses without having to make monthly mortgage payments. However, the loan balance grows over time and the loan ultimately has to be repaid to the lender when you move out of the home or die. 

A health savings account

If you’re enrolled in an eligible high-deductible health plan, you can contribute pre-tax dollars to a health savings account (HSA). Money contributed to an HSA is not taxed, grows tax-deferred and can be withdrawn tax-free to pay for qualified long-term care premiums and out-of-pocket expenses.

The bottom line

With long-term care costs continuing their upward trajectory, being prepared is essential to maintain your independence and ensure access to quality care as you age. Since Medicare leaves such a large gap, considering options like long-term care insurance, Medicaid eligibility planning or hybrid insurance products can provide crucial protection and peace of mind. Just make sure you fully understand what you’re getting into before choosing a route so you can make the most informed decision for your unique needs.