Understanding Medicare and Medicaid

Medicare is a health insurance system run by the federal government for people age 65 or older as well as some people with disabilities. Typically people who are receiving full retirement benefits, those who have attained age 65 with reduced benefits and those who qualify for Social Security disability benefits are eligible for Medicare.

Medicaid, on the other hand, is the health insurance system for those people with low income and limited assets; it is a joint federal-state program that provides health care and nursing home care to low-income children and seniors and to the disabled.

Medicare

Medicare is composed of four parts:

Part A provides hospital insurance – inpatient hospital care, skilled nursing facility care, home health care, hospice care and certain follow-up services.

Part B provides medical insurance to pay for doctor services, outpatient hospital care, home health visits, diagnostic X-ray, laboratory and other tests, ambulances and transportation for medical purposes, and certain other medical services and supplies. Part B is available for anyone over 65, whether or not they are eligible for regular Social Security benefits. Medicare Part B does not pay for all of the listed services in full. Seniors have to pay, via their Social Security checks, certain portions of the cost some services, and many obtain insurance policies, often called Medigap policies, to pay some or all of these costs.

Part C allows Medicare beneficiaries the choice of other options for health coverage than the usual fee-for-service approach under Part B. This includes HMOs, preferred provider organizations (PPOs), private fee-for-service plans (PFFS), and medical savings account plans (MSAs).

Part D allows enrollees to buy a separate plan that helps pay the costs of prescription drugs. Plans change annually, as well as what drugs are covered.

Medicare does not pay for:

(1) custodial care

(2) dentures and routine dental care

(3) eyeglasses, hearing aids and examinations to prescribe and fit them

(4) nursing home care other than skilled nursing care

(5) prescription drugs

(6) routine physical check-ups and related tests

Certain private insurance and health maintenance organization programs are available which provide “wrap-around” coverage for care, services and things which Medicare does not pay for.

Medicaid

Medicaid is a program to provide a wide range of both health and custodial care for children, seniors, and the disabled. It is sometimes called by other names in particular states, like Medi-Cal in California and Mass-Health in Massachusetts. Medicaid eligibility is based on a sometimes complicated formula of assets and allowable income, that sets aside sufficient assets and income for a spouse who is not in need of care. For example, a wife whose husband needs nursing home care would be able to keep a certain amount of assets and income that would not be counted against her husband in determining Medicaid eligibility. Her husband would also be allowed $60 a month as a personal needs allowance. He may be required to pay the rest of his income to the nursing home before Medicaid will pick up the tab for the rest of his expenses.

To qualify for Medicaid benefits, the person must have few assets, usually less than $2,000. In most cases this doesn’t include at least the first $500,000 of that person’s equity in a home. The allowed assets, income, and provisions for a spouse all differ from state to state, since Medicaid is administered and partly funded by the states.

Because Medicaid has become the default health coverage to provide nursing home care, there are efforts to encourage people to find other alternatives. California, Connecticut, Indiana, and New York pioneered a plan where people may obtain long-term care insurance to pay for their own nursing home or long-term care costs. These policies usually last for a specified period. When a qualified plan ends, the purchaser in these states can become eligible for long-term care benefits from the state Medicaid program without having to meet the asset and income requirements. The federal government has endorsed and encouraged this approach.

Case Studies: Medicare and Medicaid

Case Study 1: Medicare Coverage and Medigap Policies

John, a 68-year-old retiree, recently enrolled in Medicare after reaching the age of 65. While Medicare Part A covers his hospital expenses, he realizes that Medicare Part B does not fully cover his doctor visits and medical services. Concerned about the potential out-of-pocket costs, John decides to explore his options.

After consulting with an insurance agent, he decides to purchase a Medigap policy that helps cover the gaps in his Medicare coverage. This additional insurance gives John peace of mind and ensures he can receive the necessary medical care without breaking his budget.

Case Study 2: Medicaid Eligibility and Asset Protection

Mary, a 75-year-old widow, requires nursing home care due to her declining health. Her limited income and assets make her eligible for Medicaid benefits. However, she is worried about the financial impact on her husband, who is not in need of care. Mary seeks legal assistance to protect her husband’s assets and income while ensuring she qualifies for Medicaid.

With the help of an attorney specializing in Medicaid planning, Mary’s husband’s assets are preserved, allowing her to receive the necessary care without jeopardizing their financial security.

Case Study 3: Long-Term Care Insurance and Medicaid Benefits

Sarah, a 55-year-old professional, decides to plan ahead for her future healthcare needs. Aware of the potential costs associated with long-term care, she purchases a long-term care insurance policy. The policy covers a range of services, including nursing home care, and provides financial protection in the event Sarah needs long-term care in the future.

As Sarah’s qualified plan ends, she becomes eligible for Medicaid benefits without needing to meet the traditional asset and income requirements. This allows her to access necessary care without depleting her savings.