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 care - including medications. But that’s not true. Long-term care insurance doesn’t cover prescription drugs, not even generic ones. This is one of the biggest misunderstandings people have when planning for aging care.

If you or a loved one is in a nursing home, the drugs you take every day - whether it’s a $3 generic blood pressure pill or a $50 brand-name medication - are paid for by something else entirely. And that something else is almost always Medicare Part D. In fact, nearly 8 out of 10 nursing home residents rely on Part D to cover their prescriptions. That’s not a small detail. It’s the main system keeping people alive and stable in long-term care.

Why Long-Term Care Insurance Doesn’t Cover Drugs

Long-term care insurance was never meant to be health insurance. It was built to pay for help with daily living - bathing, dressing, eating, moving around - when you can’t do it yourself anymore. Think of it as coverage for the cost of a caregiver, not a doctor’s visit or a prescription.

California’s Department of Insurance says it clearly: long-term care policies cover custodial care, not medical care. That means room and board in a nursing home, help with hygiene, supervision. But not drugs. Not lab tests. Not doctor appointments. Even if you’re living in a facility paid for by your long-term care policy, the pills you take are handled by a completely different system.

This separation isn’t new. It’s been this way since the 1970s. But things got even clearer in 2006, when Medicare Part D launched. Before then, many nursing home residents paid for drugs out of pocket - or not at all. Now, Part D is the default. And it’s the only thing standing between thousands of people and being unable to afford their medications.

Who Pays for Generic Drugs in Nursing Homes?

Generic drugs make up about 90% of all prescriptions written in nursing homes. They’re cheaper, just as effective, and often preferred by doctors and pharmacists. But who pays for them?

Medicare Part D covers them - and usually at a lower copay than brand-name drugs. For example, a generic diabetes pill might cost $5 a month under Part D, while the brand version could be $40. That difference adds up fast. In 2021, Medicare Part D paid $35.1 billion for nursing home drugs. Medicaid paid $4.8 billion. And out-of-pocket payments? $3.8 billion. That last number? That’s the people who don’t have coverage - or didn’t enroll in Part D.

Here’s the scary part: nearly 9% of long-stay Medicare residents in nursing homes had no detectable drug coverage at all. They were paying for everything themselves, or getting temporary help from charities or state programs. That’s 29,000 people in one year - just in the Medicare population.

And here’s something most families don’t realize: 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. If your medication isn’t on that list, you might have to wait, appeal, or pay full price. Some plans will cover a non-formulary drug for up to 180 days, but they’re not required to. And many don’t.

The Role of Medicare Part D and Formularies

Medicare Part D is run by private companies - UnitedHealthcare, Humana, CVS/Aetna, Cigna, and WellCare. These are the big five. Together, they cover 78% of all nursing home drug plans. Each one has its own rules. One plan might cover a generic version of a heart medication. Another might not. One might require prior authorization. Another might have a step therapy rule - you have to try a cheaper drug first.

Nursing homes have to keep track of all of this. When a new resident arrives, staff must figure out:

• Which Part D plan they’re enrolled in
• Whether that plan works with the facility’s pharmacy
• What drugs are covered - and which aren’t
• How to file an exception request if the needed drug isn’t on the formulary

This isn’t a one-time task. It’s constant. 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 per facility. And that’s not counting the delays in getting meds to residents. On average, it took 3.2 days to get a new prescription filled. Facilities with good systems - like electronic links to Part D formularies - cut that down to under a day.

And here’s the kicker: if a resident switches plans, or if the plan changes its formulary mid-year, the facility has to scramble again. A drug that was covered last month might be dropped tomorrow. No warning. No grace period. Just a note from the pharmacy: “We can’t fill this anymore.”

What Happens When a Drug Isn’t Covered?

Let’s say your mom takes a generic version of a cholesterol-lowering drug. It’s been working fine. Then, the Part D plan she’s on drops it from their formulary. Now, the pharmacy won’t fill it. What happens next?

Her doctor has to choose a new drug - one that’s on the plan’s list. But not all alternatives are equal. Maybe the substitute causes dizziness. Maybe it interacts with another medication. Maybe it’s not as effective. And if the new drug isn’t covered either? The family has to file an exception request. That’s a formal appeal. It can take days. And during that time, your mom might go without her meds.

Part D plans are required to respond to exceptions for nursing home residents within 72 hours. But that doesn’t mean they always do. Some delay. Some deny. Some say “no” and make you go through a second-level appeal. And if you don’t have someone fighting for you - a family member, a social worker, a patient advocate - you might just go without.

Dr. David Grabowski from Harvard Medical School says this is a real problem. “The lack of standardization across plans creates confusion for both facilities and residents,” he says. “And when you’re 85 and confused, you don’t fight the system. You just stop taking the pill.”

What About Medicaid and Dual Eligibility?

If you’re on Medicaid - or qualify for both Medicare and Medicaid - the rules change a little. For Medicaid-only residents, the state pays for drugs directly, usually at cost plus a small fee. But if you’re dually eligible (on both Medicare and Medicaid), you’re enrolled in Medicare Part D. Medicaid doesn’t pay for your drugs - Part D does. And Medicaid only steps in to cover your copayments.

This dual system is messy. People don’t understand it. Nurses don’t always know it. Pharmacies get confused. And the result? People fall through the cracks.

There’s also a growing number of “dual eligibles” - people who are poor enough to qualify for Medicaid and old enough to get Medicare. By 2028, Medicare Part D’s share of nursing home drug spending is expected to rise to 85%. That means more people are relying on Part D. And more people are at risk if formularies change.

What’s Changing in 2025?

Good news: the Inflation Reduction Act of 2022 is making things better. Starting in 2025, Medicare Part D beneficiaries will never pay more than $2,000 out of pocket for drugs in a year. That’s huge. It ends the “donut hole” - that gap where you had to pay full price after hitting a certain spending limit.

Also, vaccines will be free. And CMS now requires Part D plans to cover all drugs on the official Medicare formulary for nursing home residents. That means fewer surprises. Fewer denials. More consistency.

But here’s the catch: even with these changes, formularies still vary. Plans can still require step therapy. They can still limit quantities. And they can still refuse to cover a drug if they think it’s not medically necessary - even if your doctor says otherwise.

What Families Should Do Now

If you’re helping someone in a nursing home, here’s what you need to do - right now:

1. Find out which Part D plan they’re enrolled in. Ask the facility’s social worker or pharmacist.
2. Get a copy of that plan’s formulary. Most plans have it online. Call customer service if you can’t find it.
3. Check every medication your loved one takes. Is it covered? Is there a generic version? Is there a step therapy rule?
4. If a drug isn’t covered, ask about an exception. Fill out the form. Get the doctor to write a letter of medical necessity.
5. Keep a binder or digital file with all this info. Update it every time there’s a change.
6. Don’t assume anything. Even if a drug was covered last month, it might not be today.

And if you’re considering long-term care insurance? Understand this: it won’t cover drugs. You’ll still need Medicare Part D - or another drug plan - to pay for them. Don’t buy a policy thinking it’ll handle everything. It won’t.

The Bottom Line

Long-term care insurance pays for help with daily life. It doesn’t pay for pills. Medicare Part D does. And while Part D has improved access to generic drugs for millions, it’s still a patchwork system. Formularies change. Appeals take time. Coverage gaps still exist. And the people who suffer most are those who don’t know how to navigate it.

Don’t wait until someone is in a nursing home to figure this out. Learn the rules now. Know the plans. Ask questions. Keep records. Because when it comes to medications in long-term care, the system doesn’t work for you - you have to work for the system.