It’s pretty easy to confuse Medicare and Medicaid, especially since they’re both government sponsored programs that pay for health care, nursing homes and long-term care costs. Often, the terms “Medicare” and “Medicaid” are used interchangeably, but it’s important to understand that these two programs are not the same. Generally speaking, Medicare is a health program for older people (65+), while Medicaid is for any person of any age who has limited income or resources. Read on to learn more about these two programs, why they’re needed, and what you need to do now to start planning for your future.
What is Medicare?
Medicare is federally funded health insurance for people who are 65 years of age and older or have been on Social Security Disability for at least two years. Coverage is divided into four categories, or “parts”:
- Part A pertains to hospital coverage. It helps pay for the cost of inpatient care at a hospital or nursing facility for up to 100 days. It also provides coverage for some home health care, as well as hospice care.
- Part B pertains to medical coverage. It helps pay for other types of medical services besides hospital stays- doctor’s visits, outpatient care, home health care, and certain types of medical equipment.
- Part C, or “Medicare Advantage.” Under Part C, recipients of Medicare can choose to receive their benefits through private health insurance plans, rather than through Medicare Parts A and/or B.
- Part D pertains to prescription drug coverage. It helps to cover the cost of prescription medications.
It’s important to understand that while Medicare does cover many types of health care expenses, it does not provide complete coverage, especially for long term continuing care such as that found in nursing homes. Many people often discover the gaps in the program’s coverage when it’s too late. Be sure to speak with a skilled Medicaid/Medicare attorney about your needs in order to better understand the planning that may be necessary for you and/or your family.
What is Medicaid?
Medicaid is a joint federal-state program that covers certain healthcare costs. Medicaid is the only government program that can provide coverage for benefits not covered under Medicare, under certain circumstances. Each state receives varying amounts of matching funds and grants from the federal government, and each state has its own Medicaid laws and regulations. Medicaid rules and regulations are pretty complicated and change frequently.
Who Needs Medicaid?
Medicaid was founded with the goal to provide health care to people with limited income and assets such as low-income seniors, children and people with disabilities. Many middle-class seniors rely on Medicaid to pay for their long-term care because of Medicaid’s comprehensive long-term care coverage. One of the most common myths surrounding Medicaid is that you have to bankrupt yourself and your family in order to qualify for long-term care coverage. In actuality, Medicaid guidelines were put into place to help you protect certain assets as well as allow your spouse, who does not need nursing home care, to retain a portion of his or her income.
What Factors Determine my Medicaid Coverage?
If you are a U.S. citizen or eligible alien, Maryland resident and at least 65-years-old or disabled, eligibility for Medicaid is based on your income and assets. Income includes, but is not limited to: wages, Social Security benefits, pension and Veteran’s benefits. Assets include, but are not limited to: bank accounts, stocks, bonds, trusts, annuities, property and life insurance.
- Income Limits: In Maryland, Medicaid eligibility requires that the applicant’s available income (after deductions) must be less than the cost of care at the nursing home. Nursing home residents must pay all of their income, minus deductions, to the nursing home once they have qualified for Medicaid. Deductions include: a personal needs allowance, medical insurance, premiums (such as Medicare), and an allowance for the minor child and/or spouse living at home if he or she is married and their spouse needs income support.
- Countable vs. Exempt Assets: Your assets are grouped into two categories: countable and exempt. All countable assets are tallied and cannot be worth more than $2,500. If married, your spouse’s countable assets are factored in together with yours. Your spouse at home can keep all assets that are not counted toward the asset limit. The remainder is attributed to you and is compared to the Medicaid asset level for one person.
- The following assets are exempt and not counted in determining whether you fall within the $2,500 asset limit:
- Your home, if your spouse, or a dependent relative who lives in it, or if you express an intent to return to it;
- Ordinary household goods and personal effects;
- Any car owned by you or your spouse;
- Life insurance with an original face value (the amount payable at death) of $1,500 or less. If the face value is more, the full current cash value is counted;
- Burial spaces for yourself and immediate family members;
- Term life insurance that has no cash value;
- A burial account of $1,500 or less; and
- An irrevocable or revocable burial or funeral plan of any value with a funeral home.
- The “Look-Back Rule”: It is vital to understand when applying for Medicaid that there are strict penalties when it comes to transferring assets without receiving fair market value in return. It is not a monetary penalty, but rather a period of time during which the applicant who has transferred his or her assets will be ineligible to receive Medicaid and must therefore privately pay for the care themselves. Transfers made during the 60-month, or 5-year period preceding the application for Medicaid may be subject to the penalty. This period of time for which financial records must be provided is referred to as the “look-back rule.” Consult a knowledgeable attorney prior to gifting any assets if you think you might need to apply for Medicaid in the next 5 years.
Medicaid and Your Home: Will I lose my house?
Many people applying for Medicaid worry that the state or nursing home will try and “take” their house. On the contrary, your home is considered an exempt asset as long as your spouse or certain dependent or disabled relatives reside there. If you are single and applying for Medicaid, you don’t need to worry either! You can still qualify for Medicaid and keep your home as long as the value of your home does not exceed state-imposed limits. The most the state will do is put a lien on your house. Even so, it can only do so after proving that the institutionalized individual cannot reasonably return to his or her home. When the property is sold or if you pass away, the state will try to collect on its lien. The amount collected cannot exceed the net proceeds from the sale of your home OR the amount paid by the state toward your long-term care (whichever is less).
Why You Need to Plan NOW
Imagine if the unfortunate circumstance arrives and you find yourself needing long-term care in a nursing home facility and you don’t meet the basic criteria for Medicaid. What options are you left with then? If entering a nursing home is unavoidable, you may be forced to pay for your long-term care out of pocket each month until you have spent enough of your hard-earned assets to qualify for coverage.
In Maryland, the cost of nursing home care ranges from $189 to $368 per day, with the state-wide average landing at $278. At $278 per day, many residents blow through their life savings in a matter of months, leaving their loved ones with no financial cushion.
But what if you didn’t have to spend most or even all of your assets on nursing home care before you can qualify for Medicaid coverage? The Medicaid guidelines have built-in “safe harbor” provisions that allow you to plan ahead and protect your assets.
The rules and guidelines are complicated and can be a lot to handle on your own. Many people who do not seek expert help end up making one of two big mistakes: they either spend more than they should; or they misinterpret the rules and subject themselves to harsh penalties. Let the skilled and knowledgeable Estate Planning and Elder Law attorneys at Ferrante and Dill, LLC help you with all of your Medicaid planning needs. Don’t wait another minute, call or email us today! (410) 535-6100 or firstname.lastname@example.org.
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