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Short Term Care vs Long Term Care Insurance

What is the difference between short term care vs long term care insurance?

Is Short Term Care Insurance worth it?

Observation Hospital Stay vs. Inpatient Hospital Stay: What you need to know

Lack of Awareness

If you are a Medicare beneficiary and are not admitted to the hospital for three full days before you are transferred to a rehab facility, it could cost you tens of thousands of dollars. Here’s why.

Hospital Inpatient vs. Outpatient (Observation Stay)

When a Medicare beneficiary has an accident or illness that requires them to go to a hospital, the doctor on duty must classify them as either inpatient or outpatient.

The Centers for Medicare & Medicaid Services (CMS) depends on the accurate admission of the person on Medicare on either an inpatient or outpatient basis. For a hospital to be reimbursed for your stay, the hospital must properly classify you as inpatient or outpatient.

What’s the problem? CMS pays for hospital stays under either Part A or Part B Medicare. Either way, CMS pays for your stay and care in the hospital.  

However, the percentage may be different, and you may be required to cover co-pays and deductibles. 

But that is not the problem. Here’s the problem — the BIG problem! 

The doctor on duty must decide that the patient’s condition requires them to stay in the hospital for at least three days and that the treatment being administered cannot be performed at an outpatient facility.

CMS also makes it mandatory for the attending physician to specify the exact reason for the patient’s admission as an “inpatient” to the hospital.

In order for Medicare beneficiaries to be considered inpatients, they must meet the three-day rule by staying three consecutive days in one or more hospital(s). Hospitals count the admission day, but not the discharge day. In addition, time spent in the ER or on outpatient observation before admission doesn’t count toward the three-day rule.

Independent auditors hired by CMS check for any discrepancies in beneficiary admission, and penalties are levied on hospitals with non-eligible admissions.

As a result, hospitals are increasingly assigning Observation Status to patients in an attempt to safeguard the hospitals against CMS penalties. This practice of assigning observation status to patients is an economical option for hospitals, but leads to a plethora of issues for patients.

The Big Problem!

The Big problem is this: Observation status patients do not have their skilled nursing facility stay paid for by CMS, meaning the patients must pay 100% of the cost of the skilled nursing facility themselves!

Although Medicare beneficiaries on observation status receive the same level of treatment as a person admitted as an inpatient, they do not qualify for skilled nursing treatment when discharged under the three-day rule (or three-midnight rule).

The three-day rule dictates that recipients be in a hospital for at least three days and admitted as an inpatient to qualify for paid care at a rehabilitation or skilled nursing facility.

The average daily cost for skilled nursing in Arizona is $267 per day.

This leaves the patients in a conundrum, with no possible solution in sight. The hospitals discharge them to recuperate at skilled nursing facilities, but patients cannot afford to pay for these services without Medicare coverage.

In addition, many nursing homes ask for upfront deposits prior to admission. Ultimately, many patients are forced to return home because they cannot afford the high cost of skilled nursing.

MOON

Most Medicare beneficiaries are unaware of the fact that staying overnight at a hospital does not guarantee them the inpatient status and the skilled nursing coverage that come with it. The hospital protects itself from this practice of assigning observation status coming back on them by using MOON.  

The hospital requires patients under observation status to sign a form called the Medicare Outpatient Observation Notice (MOON). By signing this form, they are acknowledging that they are not eligible for Medicare-paid services at a skilled nursing facility.

In cases where the beneficiaries refuse to sign this form, the attending hospital worker can ask another worker to serve as a witness, thereby completing the process without getting any written or verbal confirmation from the beneficiary.

The end result? The hospital is protected while the patient is not.

What Medicare Part A and Part B Does Not Cover

Services that Original Medicare does not cover include:

  • Original Medicare does not cover Dental – (Advantage Plans have limited coverage)
  • Original Medicare does not cover Eye exams (for prescription glasses) – (Advantage Plans have limited coverage)
  • Cosmetic surgery – Medicare rarely pays for cosmetic surgery, and it varies by state
  • Massage therapy
  • Routine physical exams – (Only an annual wellness exam and other cancer screening)
  • Hearing aids and exams for fitting them
  • Doctor services that do not accept Medicare are not covered.
  • Long-term care (1ʮ):(only skilled nursing after a 3-day hospital stay)

(1ʮ): Medicare and You Handbook 2022 (page 55)

What is Long Term Care Insurance?

Many don’t know what long-term care is until a loved one or friend suddenly needs it. The need usually arises because of an accident or illness, such as a chronic condition like Parkinson’s disease or dementia.

A loved one finds themselves in the hospital and then rehab because they need help with their activities of daily living (ADLs), such as bathing, transferring, continence, dressing, eating, toileting, and walking. They may also need medication management or a safe and secure environment due to behavior issues.

Long-term care insurance will pay for in-home care when the individual needs help with their ADLs.

Read about Long Term Care Insurance Arizona.

70% of People Over 65 Will Need Long-Term Care

short term care vs long term care insurance

Should You Buy Long-Term Care Insurance?

The quick answer to this question is YES!

If you can afford long-term care insurance and qualify medically, buy it before it gets too expensive or you lose your health and no longer qualify for coverage.

If, on the other hand, you are over 70, traditional long-term care insurance may be cost-prohibitive For some, even at age 65, the cost of traditional long-term care begins to steer individuals away from buying it.

One Solution: Short-Term Care Insurance Coverage

Most short-term care insurance plans from various insurance companies offer optional coverage called riders. Riders can cover:

  • Nursing facilities – skilled and intermediate care up to $300 per day for up to 360 days
  • Assisted living facilities – help with activities of daily living up to $300 per day for up to 360 days
  • Home care rider – help with activities of daily living in the home limited to a weekly dollar amount selected. (coverage up to $1200 weekly depending on the insurance company)
  • Hospital indemnity coverage up to $300 per day (pays up to 20 days per hospital stay)

For these benefits to be paid, you must be unable to perform two or more ADLs or have cognitive impairment requiring hands-on assistance. I hope I am helping you to understand about short term care vs long term care insurance.

Short-term care insurance coverage offers many additional benefits as well:

  • It is less expensive than long-term care coverage.
  • It is available for individuals up to age 89; most long-term care plans will not take someone after 80 years old.
  • Many short-term care insurance plans offer coverage for up to 12 months and up to $300 per day or more than $109,000 for nursing and assisted living costs.
  • Most plans also offer a Home Care rider that allows you to receive paid services in the home if the rider is selected.
  • Most plans are guaranteed renewable, meaning that your policy can not be canceled.

short term care vs long term care insurance

The Short-Term Care Insurance Advantage

Perhaps the biggest advantage of short-term care insurance is that it can be a great tool for Medicaid – ALTCS Planning or pre-planning and long-term care pre-crisis planning too.

Long-term care can wipe someone’s savings and their entire net worth while robbing their loved ones of their inheritance.

Although short-term care is for injury and sickness that the individual is expected to recover from within a year with proper therapy and treatment, a short-term care insurance plan can buy you time to get a Medicaid plan in place so you can qualify for Medicaid without spending all your assets to do so.

Short-term care insurance can allow you to move into a nice assisted living community that requires up to a year of private pay, meaning you must pay out of pocket for up to a year before the facility will accept Medicaid as payment for care.

Most places that take someone already on Medicaid are not as nice as the ones that require a period of private pay. Short-term care insurance will provide the funding necessary to cover the private pay period.

Read: Are all veterans eligible for VA Benefits?

If you are concerned about how you will pay for long-term care and are not already in a long-term care crisis, you may want to consider a short-term care Insurance plan. This coverage can be an important piece of a long-term care planning strategy, particularly for someone still healthy but over the age of 65. Now you got to know about short term care vs long term care insurance.

Ref:

CMS Medicare Learning Network; Skilled Nursing Facility 3-rule billing
https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/SNF3DayRule-MLN9730256.pdf

Forbes: Understanding Medicare Observation Status Jan 2, 2019

https://www.medicare.gov/what-medicare-covers/what-part-a-covers/inpatient-or-outpatient-hospital-status
42 CFR § 510.610 – Waiver of SNF 3-day rule