The Reality of Medicare and Medicaid

by Beth Donner, CRPC


Older adults and their families are often faced with difficult, life-altering decisions when it comes to their choices about health care, especially when their health status alters to the point that family can no longer manage the care needs of their loved one at home and facility placement is required. The Department of Health and Human Services (DHHS) reports that people turning age 65 have a 70 percent chance of using some form of long-term care during their lives.

In this situation, families frequently do not understand how little Medicare pays for skilled care (registered nurse, physical/occupational/speech therapists), nursing home costs, custodial and dementia care. Under the best of circumstances, Medicare only pays a portion of the first 100 days of long-term skilled or custodial care. Beginning on day 101 and continuously thereafter, there is absolutely no coverage at all to pay for skilled or custodial care, meaning you are 100 percent financially responsible for the nursing home costs.

With North Carolina’s annual nursing home costs averaging $82,000 per year for skilled and dementia care in a facility, and due to the cost of living and healthcare costs increasing, the same care in two decades is projected to double. A person can easily spend their life savings on healthcare-associated costs, which makes planning for a potential long-term care event all the more important.

The most recent 2012 numbers from the National Health Policy Forum report that older adults in the U.S. are spending approximately $50 billion annually out of their own pockets for long-term care costs. These dollars represent the dwindling life savings now being spent on long-term health care.

Without a plan for long-term care, the alternative is Medicaid, which follows the following process:

  1. You reach age 65 and enroll in Medicare (the government program for all retirees).
  2. As you age, you experience some health concerns, and have a significant healthcare event that results in the inability of your family to handle the demands of your care and thus seek placement in a facility that provides skilled or dementia care. Medicare may pay a portion of the first 100 days of care at the facility.
  3. Day 101 of care arrives, and the financial burden is now your responsibility.
  4. You have spent down all your assets except the last $2,000 dollars.
  5. You can now apply to Medicaid, because your assets have been depleted to $2,000 along with one home and one car.
  6. At some point in the future, you pass away.
  7. Although your will stated that your adult children would have your home passed down to them, a process called “Estate Recovery” occurs, and Medicaid places a claim on the home and forces it to be sold so your accumulated Medicaid bills can be reimbursed to the Medicaid government program.

These are the realities of how Medicare and Medicaid works. Planning ahead for a long-term care event can protect your life savings and assets.

Donner is a Chartered Retirement Planning Counselor and can be reached at 919-601-0501 or