As seniors age, the need for long-term care increases, particularly when a they cannot do the activities of daily living (ADL), such as getting dressed, bathing, or preparing meals. For these older adults, care in a nursing home or skilled-nursing facility (SNF) may be appropriate. But it’s one of the biggest expenses Medicare beneficiaries are likely to face. The median monthly cost to live in a nursing home is $7,908 for a semiprivate room, according to the AARP. The options for paying for such care are limited, says Lori Smetanka, executive director of the National Consumer Voice for Quality Long-Term Care, a nonprofit consumer advocacy group in Washington, D.C.

Limited nursing home coverage under Medicare

Medicare will not pay for nursing-home care—except for some stays under specific conditions. Medicare will pay for a nursing-home stay if it is determined that the patient needs skilled nursing services, such as help recovering after a medical issue like surgery or a stroke, but for not more than 100 days. 

“For the first 20 days, Medicare will cover 100% of the cost,” Smetanka notes. After that, Medicare pays 80%, and the member pays the remaining 20%.

To qualify for such coverage, the Medicare member would need to have at least a three-day stay as a hospital inpatient before the agency would approve payment for nursing-home care for rehabilitation or skilled-nursing care, she adds.

“Getting three days as an inpatient in a hospital is challenging because hospitals are discharging patients quicker,” Smetanka explains. “They’re usually not staying for three nights.”

In addition, hospitals frequently tend to use what’s called observation status, in which a patient is technically not admitted to the hospital. “That trend has affected beneficiaries’ ability to access Medicare coverage for rehabilitation or skilled-nursing care in a nursing home,” Smetanka says.

Observation status gives doctors and other staff 24 to 48 hours or to assess whether a patient should be admitted for inpatient care or discharged, according to the Society of Hospital Medicine.

Observation status can be costly for Medicare patients because the agency classifies it as outpatient care, meaning beneficiaries may be required to pay for their share of that cost as a deductible, coinsurance, or a copayment, the society noted in a 2017 report, “The Hospital Observation Care Problem.”

What’s more, some patients remain in observation status for longer than the typical 24 to 48 hours, says Toby Edelman, a senior policy attorney for the Center for Medicare Advocacy, a national, nonprofit law organization.

To address the problem of long observation stays, Medicare implemented the two-midnight rule, which says that when a doctor expects a patient to require hospital care for at least two midnights, the physician should admit them as an inpatient, Edelman says. 

The rule, however, means that two midnights spent under observation do not count toward the three-day inpatient stay that patients need to qualify for coverage in a nursing home or SNF. “It’s not just a matter of the time spent in the hospital, it’s how the patient is classified,” Smetanka says. “If the patient is classified as being under ‘observation,’ then the time spent—no matter how long—may not count toward the three days needed for Medicare to cover skilled nursing facility care.” 

To be classified as an inpatient, the patient actually needs to be formally admitted as an inpatient, Edelman says. It’s important for patients to ask their doctors, nurses or hospital staffers if they’ve been admitted.

Long-term care insurance or Medicaid

One way to cover the costs of a nursing home or stay in a similar setting is to purchase long-term care (LTC) insurance. According to AARP, most people buy LTC insurance when they are aged 55 to 65. In 2021, the average annual premium for LTC insurance ranged from $2,220 for a single man aged 55 to $5,265 for a single woman aged 65, assuming that both applicants had some health issues, AARP noted.

Another way to pay for nursing-home care is to apply to the Medicaid program in your state, Smetanka explains. Since Medicaid is a federal-state partnership, the federal government issues some rules and the states issue rules as well.

Each state sets the eligibility requirements for nursing home care. Part of that process involves reviewing each applicant’s assets. “To qualify, you’ll have to spend down to certain financial levels and you’ll need to meet eligibility requirements, which means you’ll need to show that you need help with a certain number of activities of daily living,” Smetanka adds. 

Since each state regulates Medicaid eligibility differently, it’s best to hire an attorney familiar with elder law to guide you through the process and to help you find the best long-term care option, Smetanka advises.

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