We elder law estate planners often hear people talk about someone that they believe is receiving nursing home assistance from Medicare. In reality, it is Medicaid. It is very important for seniors and their advisors to understand the difference between these programs.
Created in 1965, the Medicare program was designed to “keep seniors from being financially devastated by the cost of healthcare.” The two primary killers of seniors at that point in time were heart attacks and cancer. Medicare has been very successful, which has resulted in millions of Americans living into their 80s and beyond. The new problem is long-term health care expenses. Medicare was not designed to provide in-home care, assisted living care, nor nursing home care. These expenses are the biggest threat to the lifestyle of the healthier spouse and to a family legacy.
Elder law estate planners know the rules which allow gifts to children or grandchildren with disabilities; children who have provided caregiving in the family home; and a little-known Medicaid-compliant annuity strategy.
Medicare is the federal health insurance program for almost everyone 65 or older, regardless of income (or for those under 65 who have been receiving SSDI for at least two years due to a disability). It is our experience that most seniors do not know what is included within their Medicare benefits.
- Medicare Part A – hospital insurance – inpatient care in hospitals, skilled nursing care for acute care health concerns, hospice care, and home health care.
- Medicare Part B – medical insurance – services from doctors and other healthcare providers, outpatient care, home health care, durable medical equipment and some preventive services.
- Medicare Part C – Medicare Advantage – run by Medicare-approved private insurance companies. Includes all benefits and services covered under Part A and Part B, and usually includes Medicare prescription drug coverage.
- Medicare Part D – prescription drug coverage – run by Medicare-approved private insurance companies to help cover the cost of prescription drugs, may help lower prescription drug costs and protects against higher drug costs in the future.
- Medigap, or supplemental insurance –insurance provided by private insurance companies which can help pay some of the health care costs that original Medicare does not cover. These costs include co-payments, coinsurance, and deductibles.
- Post-acute care rehab – Medicare covers up to 20 days in a skilled nursing facility after a qualified hospital stay of three or more midnights. Medicare can cover an additional 80 days with a coinsurance payment of $140 a day, which may be covered by supplemental insurance. Most seniors are unaware of the amount of coverage that Medicare will cover in skilled nursing facility rehab. It is important for them to understand the difference between post-rehab rehabilitation care under Medicare Advantage versus post-hospital stay rehabilitation under original Medicare.
Medicaid, on the other hand, is a medical assistance program that helps many people who cannot afford medical care. Medicaid cares about your medical expenses only if you are poor. Medicaid is a needs-based program. Medicaid is administered by each state in conjunction with the federal government. It is a combination of both state and federal tax money.
Most states have long-term care Medicaid programs that include both community care programs and nursing home Medicaid (long-term Medicaid). Illinois is unusual in that care in assisted living facilities (those legally termed Supportive Living Facilities, or SLF) may be covered by Medicaid.
The community care services program is a Medicaid waiver program that provides community-based social, health, and supportive services as an alternative to institutional placement in a nursing facility. In our experience in Illinois, we can often get an individual care for up to 80 hours per month. (The maximum number of hours available is 115 hours, but that usually includes coverage of an elder day program.)
Every senior should have a working understanding of the differences between Medicare and Medicaid. Unfortunately, many seniors believe the myth that Medicare will cover their long-term care costs.
Another myth that causes problems for seniors is believing that they can qualify for nursing home Medicaid even though they have followed the IRS rules that allow them to give away up to $14,000 per year. Unfortunately, nursing home Medicaid does not usually allow for gifting of any kind. Medicaid rules are not the same as the Internal Revenue Services rules! Medicaid has a lookback period of five years. If there is gifting during that period of time, individuals can be penalized for the non-payment of nursing home services. The state wields a big club in this area. Elder law estate planners know the rules which allow gifts to children or grandchildren with disabilities; children who have provided caregiving in the family home; and a little-known Medicaid-compliant annuity strategy.
Elder law estate planning attorneys can help financial advisors to assist their clients in working through the ins and outs of both Medicare and Medicaid. When a senior needs nursing home services, it is wise to review the situation with an elder care attorney. There are many issues relative to long-term care that require a team approach between the financial advisor and an experienced elder law estate planning attorney.
New to the industry? Start here: Medicare Basics for New Senior Market Insurance Agents
