Many People Get Medicare's Long-Term Care Coverage Wrong, New Survey Finds

Medicare helps millions of seniors save money in retirement while receiving the health care they need. Unfortunately, many people have an expensive misconception about Medicare's long-term care coverage, and they may be in for an expensive surprise if they ever need long-term care. A new survey reveals how widespread that misconception is, highlighting the importance of fully understanding your health insurance before you need to use it.

Let's break down the details of Medicare's long-term care coverage and what you should know about funding long-term care.

The common misconception about Medicare and long-term care

A survey by the American Council of Life Insurers, a trade group, reveals that 39% of middle-class households expect to rely on Medicare to pay for long-term care costs. Unfortunately, Medicare usually doesn't cover long-term care costs, such as the medical or nonmedical care that enrollees might require.

That misconception means that Medicare enrollees could be in a very tough financial spot if they need care and then find out that Medicare doesn't cover those costs. The stakes are particularly high given that 2020 data from the Department of Health and Human Services indicates that an individual turning 65 has nearly a 70% chance of needing some type of long-term care.

The types of care that Medicare does cover

Medicare may cover short-term care after a qualifying hospital stay, capping care at 100 days in a skilled nursing facility. Though Medicare technically covers the care, days 21 through 100 are subject to a $217 coinsurance payment per day in 2026, so costs for enrollees may quickly add up.

Care not following a qualifying hospital stay, like long-term nursing facility care, isn't covered.

Medicaid's coverage of long-term care

It's possible that some of the people polled confused Medicare with Medicaid, which is a different federal program that covers nursing home care. 

Medicaid is designed for low-income households, and to qualify, households must meet an income and asset test, which requires them to spend down nearly all of their assets.

The cost of long-term care

The American Council of Life Insurers survey found that approximately 18% of middle-class households plan to self-fund their long-term care, but the growing costs of care mean that some households might discover it's a cost they simply can't afford.

According to a March report by AARP, home care costs have increased by 39% since 2021, outpacing the inflation rate over that same period of time. From 2019 to 2024, median long-term care costs increased significantly, with adult day services climbing by 33% and nursing home costs increasing by 25%. Factors like increasing hourly wages for care workers and increasing intensity of older adults' care needs are prompting those higher prices.

A CareScout Cost of Care Survey revealed that long-term care costs nationally ranged from $25,000 per year for adult day services to almost $130,000 for a private nursing room home. In contrast, adults aged 65 and older have a median household income of about $60,000 per year, suggesting many households simply cannot afford the full cost of long-term care and must seek out alternative funding routes.

Medicaid coverage

Medicaid may be a funding option for low-income households. Households must meet strict asset eligibility requirements and rules, and if Medicaid funding is cut in the future, those cuts may affect the care available to enrollees.

Medicaid benefits and eligibility vary by state, and enrollees may have limited options in terms of where they may receive care.

Long-term care insurance

Long-term care insurance policies may help cover the costs of care that beneficiaries eventually need. Beneficiaries must pay premiums to keep the policy active, and may make a claim if they need covered services.

Premiums for these policies may increase over time. Some policies may limit covered conditions, such as by denying care coverage for alcoholism, drug addiction, or war injuries. Policies may not cover care related to preexisting conditions, like heart disease. 

Additionally, coverage is often capped at a certain daily or monthly amount, and a policy may pay out up to a lifetime maximum or a maximum number of years, so it's important to thoroughly read and understand a policy before deciding if it's right for you.

Self-funding long-term care

Some households may decide to self-fund long-term care needs, but it's important to ensure that they have adequate funding to keep up with increasing care costs. Given the rapid rise in long-term care expenses over the past few years, it's possible that costs could increase significantly again over the coming years, and a household's savings might not be enough to keep up.

If you're considering self-funding long-term care, consider putting your savings in an account where they will grow, like an investment account or a high-yield savings account. Just make sure you'll be able to access the funds when you need them, especially if you suddenly need care sooner than anticipated.

Bottom line

As you explore options to fund long-term care, be sure to check your state's Medicaid rules. If you're considering long-term care insurance, try to gather quotes from several providers while you're in your fifties; it's often most cost-effective to start a policy when you're between age 50 and 55 before premiums climb. Carefully and thoroughly read any policy that you're considering and ask questions until you completely understand the coverage, its limitations, and whether it's a good fit for your needs.

Taking the time to develop a plan to pay for long-term care may give you valuable peace of mind, and it may also be reassuring to your children, who otherwise might also need to contribute to your care costs. Consider making long-term care expenses a part of your retirement plan to ensure you're prepared for any costs that might come up.

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