Medicaid LTC Is Very Costly For States

Among people eligible for Medicaid but not Medicare, long-term care residents are most likely to be among the costliest beneficiaries for a state, according to a new report from the Government Accountability Office.

Senator Charles Grassley (R-IA) requested the report, noting that much research has focused on those eligible for both Medicaid and Medicare, but has largely overlooked the Medicaid-only group. The GAO findings are meant to guide policymakers’ efforts to manage spending, the report states.

People on Medicaid for payment of LTC services compose only 4.3% of Medicaid beneficiaries nationally, but account for 31.6% of state Medicaid spending in 2009, according to the report.  Dual eligible (those eligible for Medicaid and Medicare) were an even costlier group, accounting for 35.2% of spending.

The remaining third of Medicaid dollars were spent on the 81% of Medicaid recipients who were not receiving LTC services.  As you can see, LTC is the majority of Medicaid spending, both on those who are Medicare eligible and those not yet of that age.  Fully 40% of all LTC services delivered in the USA are used by people between the ages of 18 and 64.

Some articles suggest that one should not even consider LTC insurance until you are 65 years old.  By 65, fully one-fourth of us cannot qualify to purchase LTC insurance due to our medical record.  That leaves us with little choice but to spend down our life’s savings when the need for care arises.   While many do not believe they need to leave an inheritance for family, few people want to leave a spouse or dependents with little to live on.

I occasionally encounter financial pundits who tell clients that their $200,000 or $500,000 IRA or 401K balance will take care of any LTC needs out-of-pocket, no need to buy expensive insurance that may never be needed.  I feel the same way about my car insurance (not needed in the past 25 years) or homeowners insurance (have you seen a single house burn down in your entire neighborhood in the past 30 years?).

Nest eggs are often used in retirement, that is why people saved.  How many will not touch the money, saving it in case LTC is needed?  If the money does not grow significantly, but the costs of LTC do, will there be enough?  Thirty years ago a new car averaged $12,300, gasoline was $1.11 a gallon, gold was $384 an ounce and the DOW was at 3800.

If costs of LTC services only increase at the current rate of 5%, a nursing home will cost $17,000 a month in 15 years and $34,000 a month in 30 years.  Are you prepared to handle those costs out-of-pocket when you can no longer manage on your own any more?  If the assisted living facilities or home care are only half or a third of that, how long will your funds last?

Perhaps investigating LTC insurance might be prudent.  More information is available at

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