Although their names are confusingly alike, Medicaid and Medicare are quite different programs. Both programs provide health coverage, but Medicare is an “entitlement” program, meaning that everyone who reaches age 65 and is entitled to receive Social Security benefits also receives Medicare (Medicare also covers people of any age who are permanently disabled or who have end-stage renal disease.) Medicaid, on the other hand, is a public assistance program that helps pay medical costs for individuals with limited income and assets.

There are strict income and asset guidelines that must be satisfied to be eligible for Medicaid coverage. While Medicare is solely a federal program, Medicaid is a joint state-federal program. Each state operates its own Medicaid system, but it must adhere to federal guidelines to receive federal funds. Federal money pays for half the state’s Medicaid costs, and the state pays the rest.

Long-Term Care Planning

A recent online article in Elder Law Answers responds to this common question: "What's the Difference Between Medicare and Medicaid in the Context of Long-Term Care?" The article answers, explaining that the big difference between Medicare and Medicaid comes down to long-term care planning. Medicaid covers nursing home care, while Medicare typically does not. Medicare Part A covers only up to 100 days of care in a “skilled nursing” facility per injury or illness, and this care must follow a stay of at least three days in a hospital. Although usually covered by "Medigap" insurance, for days 21 through 100, you will be responsible for a $152 daily copay. As the article notes, the definition of “skilled nursing” and the prerequisites for this coverage are quite stringent—few nursing home residents receive the full 100 days of coverage.  Because of this, Medicare pays for less than 25% of long-term care costs in the U.S.

Without other options like paying privately or being covered by a long-term care insurance policy, most individuals are forced to pay their own expenses for long-term care until they become eligible for Medicaid. Also, Medicaid does not offer much in the way of home care (except NY), but more states are providing Medicaid-covered services to those who remain in their homes as a less costly option.

Long-term care planning is a very underutilized and often overlooked part of retirement and estate planning. If you discuss your circumstances with an experienced estate and elder law attorney, he or she can ensure that you have the necessary insurance and/or a strategy that will meet your objectives.

For more information about medicaid & estate planning, please visit my estate planning website.

Reference: Elder Law Answers (August 22, 2014) "What's the Difference Between Medicare and Medicaid in the Context of Long-Term Care?"