Long-Term Care Insurance and Generic Drug Coverage in Nursing Homes: What You Really Need to Know

Many people assume that if they have long-term care insurance, it will pay for everything that comes with nursing home life-room, meals, physical therapy, and yes, even their daily pills. But here’s the hard truth: long-term care insurance does not cover prescription drugs, not even generic ones. That’s not a loophole. It’s by design.

What Long-Term Care Insurance Actually Covers

Long-term care insurance is meant to pay for help with everyday tasks when you can’t do them on your own. That means bathing, dressing, eating, moving from bed to chair, or using the toilet. It covers the cost of a nursing home room, assisted living services, or in-home care. But it draws a clear line at medical care. Medications? That’s not custodial care. That’s medical treatment. And medical treatment falls under health insurance, not long-term care insurance.

If you’re in a nursing home and your policy says it covers "all care," read the fine print. Most policies explicitly exclude drugs, doctor visits, hospital stays, and diagnostic tests. Even if you’re in a facility paid for by your long-term care policy, your blood pressure pill, your diabetes medication, your antibiotic-those are not included. You’ll need something else to pay for them.

Who Pays for Generic Drugs in Nursing Homes?

The real answer is Medicare Part D. Since it launched in 2006, Medicare Part D has become the primary payer for prescription drugs in nursing homes. According to data from a 2020 study, 82.4% of all drug costs for long-stay Medicare residents are covered by Part D plans. That’s more than eight out of every ten pills taken in a nursing home.

Part D plans cover both brand-name and generic drugs-but they pay less for generics. That’s by design. Generic drugs are cheaper, so the plans encourage their use. Most Part D formularies list generics as Tier 1 drugs, meaning the lowest copay. A typical copay for a 30-day supply of a generic blood pressure pill might be $5 or less. The same brand-name drug could cost $40 or more.

For residents who qualify for both Medicare and Medicaid (called "dual eligibles"), Part D still pays for drugs. Medicaid steps in only if the person isn’t enrolled in Part D-which is rare now. In fact, most nursing homes bill Medicare Part D directly for drugs, not Medicaid.

What About Medicaid and Private Insurance?

Medicaid pays for drugs for residents who don’t qualify for Medicare. In those cases, Medicaid covers the cost of the drug at its acquisition price, plus a small dispensing fee. But this only applies to a small group. Most nursing home residents are on Medicare, not Medicaid.

Private insurance? It’s a footnote. Only 8.5% of nursing home drug costs are covered by private plans. That’s because most people who have long-term care insurance also have Medicare. And Medicare Part D is cheaper and more comprehensive than most private drug plans.

Here’s the kicker: about 8.9% of long-stay Medicare residents in nursing homes have no drug coverage at all. They pay out of pocket-or rely on charity programs, family help, or temporary assistance. That’s nearly one in eleven people.

The Formulary Problem: Not All Generics Are Covered

Just because a drug is generic doesn’t mean it’s automatically covered. Every Part D plan has a formulary-a list of approved drugs. And not every generic is on every list.

Some plans exclude certain generics because they’re not on the national preferred list, or because they’re newer and the plan hasn’t negotiated a price yet. Others might cover the brand-name version but not the generic, if the brand has a special rebate deal. That’s rare, but it happens.

Nursing homes have to check each resident’s Part D plan before starting a new medication. They need to know:

• Which plan the resident is enrolled in
• Whether their pharmacy works with that plan
• What drugs are on the formulary
• How to request an exception if the needed drug isn’t covered

This isn’t simple. A 2019 survey found that nursing homes spend 10 to 15 hours a week just managing drug coverage issues. That’s over $28,000 a year in staff time for an average facility.

And if a drug isn’t on the formulary? You can request an exception. But it can take days-or even weeks-to get approved. For someone in pain, with an infection, or struggling with dementia, that delay matters.

What’s Changing? The $2,000 Cap and New Rules

Good news: starting in 2025, Medicare Part D beneficiaries won’t pay more than $2,000 out of pocket for drugs in a year. That’s thanks to the Inflation Reduction Act. For people on fixed incomes, this will be a huge relief.

Also, as of 2021, CMS requires Part D plans to cover all drugs on the official Medicare Part D formulary for nursing home residents. And they must approve non-formulary drug requests within 72 hours for residents in long-term care. That’s faster than the old 14-day rule.

Still, problems remain. Rural nursing homes often struggle to find pharmacies that contract with all major Part D plans. One in five rural facilities say they can’t get certain drugs quickly because their local pharmacy doesn’t work with their resident’s plan.

What Should You Do?

If you or a loved one is moving into a nursing home:

• Don’t assume long-term care insurance covers drugs. It doesn’t.
• Confirm enrollment in Medicare Part D. If they’re not enrolled, sign up immediately.
• Ask the facility which pharmacy they use and whether it works with the resident’s Part D plan.
• Get a copy of the drug formulary. Ask if the resident’s current medications are covered.
• If a needed drug isn’t covered, ask about the exception process. Don’t wait.
• Consider a Medicare Advantage plan with Part D included. Some offer better drug coverage than stand-alone Part D plans.

And if you’re thinking about buying long-term care insurance? Understand exactly what it does and doesn’t cover. Don’t buy it hoping it will pay for pills. Buy it because you want help with daily care when you can’t do it yourself.

Why This Matters

Generic drugs make up 90% of prescriptions in nursing homes but only 25% of drug spending. That’s because they’re cheap. When a plan covers generics, residents get their meds on time and at low cost. When they don’t? People go without. They skip doses. They get sicker. They end up back in the hospital.

The system isn’t perfect. But Medicare Part D has done more than any other program to ensure nursing home residents get the medications they need. The real issue isn’t whether long-term care insurance covers drugs-it’s whether we’re doing enough to make sure everyone has access to the right formulary, the right pharmacy, and the right support when they need it most.