As we age, most of us need additional medical care and treatment. The cost of that care can become prohibitive. Fortunately, both the Medicare and Medicaid program may be available to help defray the costs of healthcare during your senior years. In order to benefit from what the two programs have to offer you first need to understand the difference between the two.
The Medicare program is funded and administered by the federal government. Medicare is paid for out of payroll taxes and Social Security. Almost everyone is automatically enrolled in in Medicare when they reach age 65. There are no income or resource limits for participation in Medicare, meaning anyone over the age of 65 (and some people under age 65 with a qualifying disability) can qualify for Medicare. Medicare comes in four parts – Part A, B, C, and D. Parts A and B, which everyone is enrolled in at age 65, covers hospitalization and medical insurance. Part C is a supplemental plan that covers additional costs over and above those covered by Parts A and B. Part D covers prescription costs. There is an additional cost for enrollment in Parts C and D.
The Medicaid program is partially funded by the federal government with the other part paid for by the individual states. Each state administers its own Medicaid program. Because Medicaid is state administered there are some differences with regard to eligibility and coverage among the states. All states, however, have income and resource limits for participants because Medicaid is intended to cover low income individuals and families. There may be a small co-pay for Medicaid participation though many Medicaid programs are free for eligible participants. Medicaid covers things like hospitalization, doctor visits and prescription drugs.
One important coverage related difference between Medicare and Medicaid that seniors should know about is that Medicare does not cover long-term care costs. Medicaid, on the other hand, will cover some of the costs of long-term care if the individual qualifies for benefits. Because of the income and resource limits for Medicaid participation, this puts many seniors in need of long-term care in a quandary. Getting approved for Medicaid could be difficult if you have equity in a home or a retirement account with more than a few thousand dollars in it. This is why many seniors include Medicaid planning in their estate plan. There are legal strategies that can be used to ensure you will qualify for Medicaid benefits if the need arises without losing everything you have worked your entire life to have.
Be sure to discuss how Medicare and Medicaid fit into your estate plan with your estate planning attorney. If you believe you may need assistance from the Medicaid program, the sooner you start planning the better off you will be.
Stephen A. Mendel, Estate Planning Attorney
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