Medicare won't pay for long-term care. You'll need to pay for that out-of-pocket or rely on benefits from long-term care insurance. Your assets and/or income must be very low to qualify for Medicaid.
When you retire, you may focus more on health care than ever before. Staying healthy is your goal, and this can mean more visits to the doctor for preventive tests and routine checkups. There's also a chance that your health will decline as you grow older, increasing your need for costly prescription drugs or medical treatments. That's why having appropriate health insurance can be extremely important.
If you are 65 or older when you retire, you're most likely eligible for certain health benefits from Medicare. But if you retire before age 65, you'll need some way to pay for your health care until Medicare kicks in. Generous employers may offer health insurance to their retiring employees, but this is the exception rather than the rule. If your employer doesn't extend health benefits to you, you might need to consider other options, such as buying a private health insurance policy or extending your employer-sponsored coverage through COBRA, if that's a possibility.
Most Americans automatically become entitled to Medicare when they turn 65. In fact, if you're already receiving Social Security benefits at least four months before reaching age 65, you won't even have to apply — you'll be automatically enrolled in original Medicare. However, you will have to decide whether you need only Part A (hospital insurance) coverage or if you also want to purchase Part B (medical insurance) coverage. Along with hospital care, Part A can help pay for hospice care and some home health care. Part B helps cover other medical care such as physician care, laboratory tests, and physical therapy. In lieu of Parts A and B (Original Medicare), you may choose to enroll in a managed care plan or private fee-for-service plan under Medicare Part C (Medicare Advantage), which may have lower out-of-pocket costs. Many Medicare Advantage plans include prescription drug coverage, but Original Medicare does not. You can enroll in a Medicare Part D presecription drug plan offered in your area by a private company or insurer that has been approved by Medicare.
Unfortunately, Medicare won't cover all of your out-of-pocket costs. That's why you may want to purchase a supplemental Medigap policy from a private insurer if you have Original Medicare.
There are several standard Medigap policies available. These policies offer various combinations of benefits designed to cover certain out-of-pocket costs, including Medicare coinsurance and co-payment expenses. Although not all Medigap plans are available in every state, you should be able to find a plan that best meets your needs and your budget. If you're enrolled in a Medicare Advantage (Part C) plan, you don't need (and can't buy) a Medigap policy.
Long-term care and Medicaid
The possibility of a prolonged stay in a nursing home weighs heavily on the minds of many older Americans and their families. That's hardly surprising, especially considering the high cost of long-term care. Many people look into purchasing long-term care insurance (LTCI). A good LTCI policy can cover the cost of care in a nursing home, an assisted-living facility, or even your own home. But if you're interested, don't wait too long to buy it — you'll generally need to be in good health. In addition, the older you are, the higher the premium you'll pay. A complete statement of coverage, including exclusions, exceptions, and limitations, is found only in the insurance policy. Carriers have the discretion to raise rates and remove their products from the marketplace.
Many people assume that Medicaid will pay for long-term care costs. However, your assets and/or income must be very low to qualify for Medicaid benefits. Moreover, Medicaid eligibility rules are numerous and complicated, and vary from state to state. Talk to an attorney or financial professional who has experience with Medicaid before you make any assumptions about the role Medicaid might play in your overall plan.