Medicare Vs. Medicaid
Medicare Made Easy
An Overview of Medicare vs. Medicaid:
While they sound similar, Medicaid and Medicare are two completely different programs. Both will help you pay for health care and medical expenses, however, Medicare is an age-based federal health insurance program guaranteeing coverage for individuals ages 65 and over and some younger people with disabilities. Contrastingly, Medicaid is a public assistance program for needy Americans of all ages. Here’s how to tell them apart and find out whether you qualify for either or both of them.
Medicare Vs. Medicaid
Medicare is like a health insurance policy offered to senior-citizens, along with people under 65 who have disabilities in certain ways. It is considered to be an entitlement: If you paid Medicare taxes on your earnings while working (they’re usually taken out of your paycheck automatically, just like your Social Security contributions), you are automatically eligible for Medicare at age 65. It is not income-based.
Medicare has four parts. Some parts require payment of a monthly premium just like private health insurance, but the program is not based on your financial need:
- Part A – covers hospital care: Covers the cost of being in a medical facility.
- Part B – covers doctors, medical tests, and procedures: Basically, anything that is done to you. There is a monthly premium for Part B coverage.
- Part C – Medicare Advantage: This is an alternative to traditional Medicare coverage. Coverage often includes Parts A, B, and D. Private insurance companies administer Medicare Advantage plans.
- Part D – Prescription drug coverage: Part D is administered by private insurance companies, and you are required to have it unless you have coverage from another source. Part D requires you to pay a monthly premium in most cases.
Medicare isn’t like a comprehensive health insurance plan. If you only have traditional Medicare, there are gaps in coverage. For example, Medicare doesn’t cover any long-term care, unless you purchase a Medicare Advantage Plan or a Medigap (Medicare Supplement) policy.
Even if you aren’t eligible for Medicaid, you may qualify for one of three Medicare Savings Programs (MSPs), administered by your state’s Medicaid program.
Federal income and resource limits listed below are for 2015. Limits for 2016, when released, will be slightly higher. Some states have more liberal allowances, so it might be worth applying even if you are over the limit.
- Qualified Medicare Beneficiary (QMB) Program: QMB helps pay for Medicare Part A premiums, Part B premiums, deductibles, co-insurance, and co-payments. Income limits are $1,001 for an individual and $1,348 for a couple. The value of assets (or “resources”) you can own are limited to $7,280 for a single person and $10,930 for a couple.
- Specified Low-Income Medicare Beneficiary (SLMB): SLMB helps pay for the cost of Medicare Part B premiums. SLMB income is limited to $1,197 for an individual and $1,613 for a couple. Resources limits are the same as for the QMB program.
- Qualifying Individual (QI) Program: QI helps pay the cost of Medicare Part B premiums only. Each year, you have to apply for QI benefits (or re-apply). These benefits are granted on a first-come, first-served basis; priority is given to those who received QI benefits the previous year. Income limits are $1,345 (individual) and $1,813 (couple). Resources allowed are the same as for QMB and SLMB. You may not receive QI benefits if you qualify for Medicaid.
If you qualify for a QMB, SLMB, or QI program, you will automatically qualify to get “Extra Help” paying for Medicare prescription drug (Part D) coverage. In determining the value of your resources, your checking and savings account balances, as well as the value of all stocks and bonds, are counted. Your home, one car, a burial plot plus $1,500 worth of burial expenses, furniture, and other household and personal items are not counted.
If someone qualifies for both Medicare and Medicaid, they are “dual eligible.” Under this status, most if not all, of your healthcare costs will be covered. Medicaid will pay for most of your Medicare Parts A and B premiums (if there are premiums), along with deductibles and co-payments you may have. It doesn’t matter if you get your Medicare coverage through a Medicare Advantage (MA) Part C plan or traditional (Original) Medicare.
If you are “dual eligible” and receive full Medicaid, your prescription drug coverage (Part D) will go through Medicare, but you will automatically qualify for Extra Help paying for your medicines. In addition, Medicaid may cover some drugs that Medicare does not.
As a taxpayer, you contribute to Medicare during your working years and will receive Part A coverage probably at no cost to you. Additional coverage, such as Part B and Part D, might be required and could come with a monthly premium. Because Medicare has gaps in coverage, you’ll likely need additional coverage that might come with an extra monthly premium on top of what you already pay.
Medicaid is a needs-based program. Although states have the option of charging out-of-pocket fees, certain groups, such as children and people living in institutions, are generally exempt from these costs.
Since life expectancies are getting longer, and retirement savings are falling short, more and more seniors might find themselves qualifying for Medicaid benefits, either in full or in part. In addition to helping with medical costs, Medicaid offers coverage not normally available through Medicare, such as extended nursing home care and custodial or personal care services. But since the income requirements are stringent and the program penalizes people who try to shed assets right before they apply, long-term planning is required to qualify.
Medicaid is a public assistance program based largely on financial need; it’s paid for with public funds collected through taxes. Unlike Medicare, a federal program, both state governments, and the federal government fund Medicaid. The program, which provides health insurance to low-income Americans of all ages, works differently in each state, although federal guidelines apply.
Provided there is some financial need, you would likely qualify for Medicaid if you fall into one of the following categories:
- You’re pregnant: Single or married, apply for Medicaid if you are pregnant. You and your child will be covered.
- Parent of a minor or a teenager living alone: If you have a child under 18 and you have a financial need, you may apply. Also, if your child is sick and needs skilled nursing, but could stay home with quality medical care, Medicaid may also be able to help. Lastly, Medicaid will cover teenagers living on their own. Some states even allow for coverage for “children” up to the age of 21 years old.
- Aged, blind, or disabled: Medicare comes with sometimes-sizable premium payments. If you are over 65 and can’t afford healthcare coverage, apply for Medicaid, as well. People with a medical need can apply regardless of age.
- No disabilities, no children under 18: The Affordable Care Act gives states the opportunity to provide Medicaid to low-income individuals under the age of 65 without a disability or minor children. Check with your state agency for more information. You may see whether your state is expanding its Medicaid coverage here.
Benefits will vary by state however, each state is required to cover certain types of care. Included are inpatient and outpatient hospital services, nursing home and home healthcare, laboratory and x-ray diagnostic services, transport to a medical facility, and tobacco-cessation counseling for pregnant women.
In addition to paying for Medicare-related expenses like hospitalization, doctors, and medicines, Medicaid also offers two additional types of care that Medicare does not:
- Custodial Care: Custodial care, or personal care, helps you with daily activities. These activities include eating, bathing, dressing, and using the bathroom. Custodial care can be provided in a skilled nursing facility if you’re there for a recuperative stay following a stroke or accident. It can also be provided at home, as a way to avoid being admitted to a nursing home, or for some period before a nursing home becomes the best option.
- Nursing Home Care: Medicaid is the primary provider of long-term nursing home care. (Medicare will pay for skilled nursing short-term, or rehabilitation in a skilled nursing facility; however, it will not cover extended care.) Nursing home care under Medicaid is a complex subject. Even if you qualify for it in general, you may have to pay some of the cost, depending on your income and tax deductions. The results of the application process will determine how much you have to pay if anything.
In addition, states may provide benefits beyond the mandatory requirements, including prescription drug coverage, physical and occupational therapy, optometry, chiropractic services, dental care, and more.
Application rules vary by state, but be aware that the process may take weeks or even months and could require a medical screening, as well as extensive documentation of past and present financial transactions.
Income standards for Medicaid are generally based on the Federal Poverty Level. Guidelines for your state Medicaid program will spell out the details for your situation. In a few cases involving especially high medical expenses, your income could exceed the guidelines and you could still qualify for help as someone who is “medically needy.”
Qualifying as “medically needy” involves a process through which you are allowed to subtract, or “spend down,” your medical expenses in order to get below a certain income level. Rules vary by state. The Medcaid.gov website will help link you to a regional office that can clarify whether this option is available to you.
In addition to income, certain of your assets will count toward determining if you are eligible for Medicaid. Countable assets include stocks and bonds, CDs, the funds within checking/savings accounts, property (other than your primary residence), and additional vehicles (if you have more than one). In most states, the amount of countable assets you can retain and still qualify for Medicaid is $2,000 for an individual and $3,000 for a couple. Some assets don’t count toward the total—a home, car, personal effects, home furnishings, and household goods, among others.
Since Medicare has very limited coverage for nursing homes, seniors who need it sometimes try to qualify for Medicaid, especially when they are trying to ensure they have enough money left over for a spouse who isn’t going into care.
People who have more than the allowable amount of assets have to spend down until they reach an income level that qualifies them for Medicaid. Spending down works differently depending on your state, but you may be able to pay off debts, prepay a mortgage and other loans, repair or renovate a home, prepay funeral expenses, and purchase certain investment products, depending on what your state allows.
If you fit into any of the above groups, you may be able to receive Medicaid benefits even if you’re above the income limits, providing your state has a Medicaid Excess Income Program. Similar to a deductible, you may be required to pay a certain amount of your expenses each month before Medicaid benefits take over. And if you are spending down, you have to spend down a certain number of years prior to applying.
This is because the authorities are aware of people who deplete assets just to try and qualify for Medicaid. When you apply, the state “looks back” for five years to determine if you transferred, sold below fair market value, or gave away assets that would have made you ineligible for the program. If so, you may be subject to what’s known as a transfer penalty. Typically, the penalty will be a so-called “timeout” period during which you cannot receive Medicaid benefits, even though you technically qualify now.
The process to determine the penalty involves denying benefits in proportion to the time you could have paid for a nursing home if you would have kept those assets. The look-back period starts when you apply for Medicaid. So even if the transfer was up to five years ago, it is possible to trigger the penalty.
Sarah began working in the healthcare industry in 2001, where she worked for many years with elderly Alzheimer and Dementia patients. From there she worked as a Group Benefits Administrator with a local healthcare company in the Human Resource Department for a period of 10 years. Since then, she has decided to work in the Medicare insurance industry full time and has joined the family business, Ashford Insurance, as a Medicare Insurance Agent.
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