What is the Difference Between Medicare and Medicaid?
It is a common mistake to confuse Medicare and Medicaid. While they are both government programs for healthcare, it is important to understand the difference between them.
A main difference between the two programs are the eligibility requirements and the coverage each provides in relation to long term care, which will be further discussed below.
Medicare is a federal health insurance for people that are 65 years old and older, for younger people with certain disabilities, and for people with End-Stage Renal Disease. Eligiblity for Medicare is not based on a person’s income or assets, but rather on a person’s work history, or premium payments, regardless of personal finances.
Medicaid is a joint federal-state program that also provides medical benefits, however, unlike Medicare, Medicaid eligibility is means tested, which means a person can only qualify for Medicaid based on strict income rules. For a person seeking long term care coverage, in addition to income requirements, a person must meet strict asset rules as well. The main reason why people seek Medicaid coverage even if they are already eligible for Medicare coverage is because Medicaid covers long term care, including nursing home care, unlike Medicare, which may only provide long term care in limited and temporary circumstances.
When would each pay for long term care?
Let’s review Medicare first. Original Medicare is divided into Parts A and B.
Medicare Part A provides coverage for inpatient hospital stays, hospice care, and some care in a skilled nursing facility and limited home health care. Medicare Part B covers traditional healthcare expenses, such as visits to a doctor, blood tests, and X-rays.
Medicare Part A will only cover care in a skilled nursing facility (i.e. nursing home care) if the following conditions apply:
- The nursing home care is preceded by a qualifying hospital stay of three days of inpatient care;
- The nursing home care is related to the hospital stay; and
- The patient entered the nursing home within a short time of the hospital stay (usually within 30 days).
Even if those conditions are met, only the first 20 days of nursing home care are fully covered by Medicare Part A. From Day 21 through 100, the patient will be responsible for a co-pay. (A patient may have supplemental insurance to cover this.) Any care beyond the 100th day is not paid at all by Medicare Part A.
For a temporary situation where a full recovery is expected, Medicare’s long term care coverage may suffice. However, when a person will need either a nursing home or home health aide for a long term duration, Medicare coverage will not pick up the bill. That’s where Medicaid comes in.
To be eligible for Medicaid benefits that would cover nursing home costs, an applicant cannot have more than a certain amount of assets when they apply for Medicaid long term care coverage. The asset and income requirements vary by state. In 2021, in New York, an applicant cannot have more than $15,900 in non-exempt assets.
In addition to income and asset rules regarding nursing home Medicaid benefits eligibility, there is a look-back period. Meaning, during the application process, it will not only be determined whether the applicant is presently below the asset limit, but there will also be a review of the applicant’s transactions for the 60 months preceding the application to determine whether the applicant transferred their assets for less than fair market value. If a person spent down their assets on their own expenses, that will be okay, but if the applicant gifted money to children or to a trust, Medicaid will impose a transfer penalty, and the applicant will have to cover their own cost of care for the duration of the penalty before Medicaid will begin coverage.
Applicants can seek the assistance of an elder law attorney to protect their assets while still qualifying for benefits. Because of the lookback period, it is best to be proactive and consult with an elder law attorney well before the need for care will arise. By doing proper planning, a person’s lifetime of savings can be preserved for their family and won’t have to be spent down on care.
Even if it’s too late for advance planning, there still may be strategies that can be utilized to preserve assets. An experienced elder law attorney can help you navigate the Medicaid long term care process and advise you of your best options.
