Most people never worry about nursing home costs because they assume that someone else - maybe Medicare, maybe private insurance - will pick up the tab. If you are in charge of handling the finances for a relative in a nursing home, this concern becomes yours. Chances are that no person, no government program, and no insurance coverage will step in and help you shoulder the financial burden of a nursing home stay for your loved one.

     Nursing homes are a big business. When a loved one enters a nursing home, someone has to pay the bill. But who that someone will be is often misunderstood. People often expect that one or more of the following resources will take care of the payments:

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     Let's explode a dangerous myth right now: Medicare will not pay for most nursing-home costs! It can't be said any more clearly. Do not count on Medicare to pay for a nursing home. Of all those persons receiving Medicare benefits, only one-tenth of 1 percent of them are covered for nursing-home care. Yet people assume otherwise. An AARP survey indicates that 80 percent of Medicare beneficiaries believed that they were adequately protected from the high costs of long-term care by Medicare and their private policies.

     Even if you or a loved one should qualify, Uncle Sam generally won't give you VA benefits for any more than six months unless you are suffering from a service-related disability.

     Authorized under Title XIX of the Social Security Act, Medical Assistance is a means-tested entitlement program financed by the state and federal governments and administered by the states for coverage of specific groups of people and benefits through federal matching payments based on the state's per capita income. The federal share ranges from 50 to 80 percent of Medical Assistance expenditures.

     Who is Covered by Medical Assistance?  Being poor does not automatically qualify an individual for Medical Assistance. Only persons who fall into particular "categories" such as low-income children, pregnant women, the elderly and people with disabilities are eligible. Under the new welfare program, Temporary Aid to Needy Families (TAN), Medical Assistance eligibility is no longer automatic for families who receive cash assistance. Within federal guidelines, states set their own income and asset eligibility criteria for Medical Assistance. As a result, there are large state variations in coverage. Although Medical Assistance has increasingly been used to expand coverage to the low- income population, it covers only half of poor Americans. While the new State Child Health Insurance Program will expand coverage to low-income uninsured children either through Medical Assistance or a separate program, millions of low-income people will remain uninsured.

Although adults and children in low-income families make up nearly three-fourths of beneficiaries, they account for only 28 percent of Medical Assistance spending. The elderly and the disabled account for the majority (60 percent) of spending because of their intensive use of acute and long-term care services.

What Services are Covered Under Medical Assistance?

     Medical Assistance covers a broad range of services to meet the complex needs of beneficiaries. Because of the limited financial resources of beneficiaries, cost-sharing requirements are nominal. Of the $152.4 billion Medical Assistance spent in 1995, long term care services accounted for 35.4 percent of expenditures. Medical Assistance pays for half of total nursing home care (47 percent) and 14 percent of A home health spending in the United States.

     Long-term care is a major component of Medical Assistance. While over three-fourths of Medical Assistance spending for long-term care is on institutional services, Home-and Community- Based Service (HCBS) waivers are often used by states to deliver community-based care. Although all states have HCBS waivers, the population served remains small. States also now have the option to provide dual eligibles (Medical Assistance/Medicare) with acute and community-based long term care services under the Program for All-Inclusive Care for the Elderly (PACE).

     As the primary source of financial assistance for long-term care, Medical Assistance has been consistently shown to improve access to health care for the population it serves. Low-income people without insurance coverage use care at considerably lower levels than those with Medical Assistance coverage. As Medical Assistance struggles to meet multiple responsibilities under continued fiscal pressure, the program plays a critical role in providing acute and long term care services to our nation's most vulnerable people.

     Most older citizens have annual incomes of less than $13,000. When you compare this figure with average annual cost of nursing home care in Pennsylvania in 2000 - over $55,000.00 - you can see that older Americans have a real problem.

     If a person starts early in life, can he or she save enough to avoid impoverishment? That would be the ideal solution. Unfortunately, it's not very realistic. Let's say that starting at age forty, your father and mother put $1,000 each year into an interest-bearing account. Sound good to you? Well, it's not good enough. Twenty-five years later, they wouldn't have saved enough to pay for even one year in a nursing home!

     As you can see, a family's life savings is at serious risk when a love one enters a nursing home. Insurance carriers have just within the last 3 years started to work on creating an equitable and affordable safety net to protect the average American - long term care insurance. However, this won't help those in their 70's or 80's. This means that you will have to develop your own plan of action, unless you don't mind playing the dangerous game of nursing home "Russian Roulette."