Medicare Compliance & Reimbursement

Pair of solutions might help fix tight budgets and poor planning.

Medicaid and the majority of the country's elderly have something in common: Neither has the money to pay for nursing-home stays or home-health services.

Although a significant portion of Baby Boomers will need long-term care, few have the savings or the insurance to pay for it. And with states cutting budgets, Medicaid's already saying it can't foot the bill. But while the problem is complex, the solution may be as simple as consumers knowing how to plan for the future.

"There are more options available for quality long-term care than ever before, and more Americans will need it at some point in their lives than ever before," said Centers for Medicare and Medicaid Services Administrator Mark McClellan when his agency launched the second phase of a demonstration project to educate people on long-term care. "Planning for how to get the support you and your loved ones may need in retirement is an essential part of planning for retirement."

Medicaid pays about half of the nation's nursing home bill, which was $111 billion in 2003. Often, patients who begin paying for a facility stay with savings quickly run out of money and turn to Medicaid, McClellan said.

One alternative is for consumers to educate themselves about what kind of long-term-care insurance might work for them. Many consumers avoid this insurance because of the expense and the risk. For instance, those who hold long-term-care policies can pay premiums for a lifetime but, in the end, never need the insurance.

However, recent studies suggest that most policyholders should purchase modest policies that help pay for a nursing-home stay, but which don't cover all expenses. In these cases, consumers should be ready to foot the bill for the remaining costs.

Reverse Mortgages Provide Safety Net

The problem with this method is that the U.S. is increasingly becoming an in-debt nation, with most families saving only two or three percent of their incomes, not 10 percent like generations past. So, instead of saving, people might need to rely on reverse mortgages. A recent study by The National Council on the Aging shows that more than 13 million senior citizens could use reverse mortgages to pay for long-term care at home.

The mortgages are loans that allow homeowners aged 62 and over to convert home equity into cash while they live at home. Seniors can both retain home ownership and delay loan payments. They can receive the funds in a lump sum, as a line of credit or in monthly payments (for life). Payment on the loans is due when the last borrower moves out, dies or sells the home.