Making these false assumptions about Medicare coverage could drain retirement savings fast.

3 minute read

Around 70% of people turning age 65 will need long-term care at some point and 48% will receive some type of paid care over their lifetime, according to the U.S. Department of Health & Human Services. Are you counting on Medicare to foot the bill if you ever need long-term care? If so, that could be a costly mistake.

The national annual median cost for an assisted living facility is about $51,000 a year and a whopping $105,000 for a private room in a nursing home, according to the 2020 Genworth Cost of Care Survey. The national annual median cost for home health aide services is around $55,000. Want to be better prepared for potential long-term care costs in retirement?

Below are common Medicare myths around long-term care.

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1. Medicare is free

Medicare Part A is free for most people but also has a large deductible per benefit period. Part A generally pays for inpatient care in a hospital, short-term skilled nursing facility or nursing home care after a hospital stay for a limited time, hospice care and some short-term home health services.

If you want prescription drug coverage or additional coverage with Part B or a Medicare Advantage Plan, you must pay a premium for those plans.

Find out: 8 Things to Know About Medicare Open Enrollment

2. Medicare will pay all my healthcare expenses

While Medicare Part A is free, it also has a $1,484 deductible per benefit period in 2021, so you must still pay at least some of your medical and other healthcare expenses.

Medicare Part B, which has a standard premium of $149 a month in 2021, pays for medically necessary services, preventive services, ambulance services, mental health services, medical equipment and a limited number of outpatient prescription drugs. However, Medicare Part B covers only a limited number of outpatient prescription drugs.

If you want prescription drug coverage, you’ll need to purchase a Medicare Part D prescription drug plan or Part C, which are Medicare Advantage Plans (MA Plan) that include Medicare parts A, B, and D and are sold only through private insurers. You can shop for Medicare Advantage and Part D plans on the Medicare Plan Finder or the websites of private insurance companies offering those plans.

Find out: 5 Big Expenses to Prepare for in Retirement

3. Medicare pays for long-term in-home care

Most people hope to keep living at home as they age, but if you remain at home and need in-home care for an extended period or permanently, Medicare pays for those services only temporarily. For example, Medicare Part A and Part B cover part-time or intermittent nursing care – skilled nursing care needed for less than seven days a week or less than eight hours each day – for up to only 21 days.

If you’re expected to improve and a doctor orders physical, occupational or speech therapy temporarily, you must still pay a 20% deductible if you have only Part A or Part B and no additional insurance.

Medicare doesn’t pay for 24-hour-a-day care at home, meals delivered to your home, homemaker services such as shopping, cleaning and laundry (when those are the only services needed), or help with personal care such as bathing, dressing or using the bathroom.

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4. Medicare pays for long-term nursing home costs

Medicare doesn’t pay for long-term “custodial care” in a skilled nursing facility (nursing home) if that’s the only type of care you need. You must pay 100% for non-covered services, including most long-term care. Most long-term care isn’t medical care but instead helps with daily living activities such as bathing, dressing, grooming, and using the bathroom.

For 2021, if you are in a skilled nursing facility under a doctor’s orders for longer than 20 days, you must pay $185 coinsurance per day for days 21-100 and all costs after 101 days. Many people purchase a Medigap policy, which is additional insurance that covers the “gaps” that Original Medicare won’t pay such as copayments, coinsurance, and deductibles. To shop for a Medigap plan, visit Medicare Plan Finder.

Note: During the COVID-19 pandemic, some people may be able to get renewed skilled nursing facility coverage without first having to start a new benefit period. If you’re unable to stay in your home due to the pandemic or are otherwise affected by the pandemic, you can receive skilled nursing facility care without a qualifying hospital stay, according to Medicare.

Find out: 8 Questions to As Before Relocating for Retirement

5. I don’t need long-term care insurance if I have Medicare

Since Medicare doesn’t cover long-term care expenses, consider purchasing a long-term care insurance policy to avoid wiping out retirement savings to pay for long-term care.

Policies vary widely, with some covering only nursing home care and others covering services that may include adult day care, assisted living, in-home skilled nursing and help at home with daily living activities. Some may also cover meal preparation or housekeeping if those services are in conjunction for medical care needed.

Long-term care insurance can be expensive, especially if you are over age 60, so it’s best to sign up when you’re younger. To find the right long-term insurance policy for you, consult a private insurance company or insurance broker who specializes in long-term care insurance.

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About the Author

Deb Hipp

Deb Hipp

Deb Hipp is a full-time freelance writer based in Kansas City, Mo. Deb went from being unable to get approved for a credit card or loan 20 years ago to having excellent credit today and becoming a homeowner. Deb learned her lessons about money the hard way. Now she wants to share them to help you pay down debt, fix your credit and quit being broke all the time. Deb's personal finance and credit articles have been published at Credit Karma and The Huffington Post.

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