Confusion is common when it comes to deciphering Medicaid vs. Medicare. Read on to find out nine facts you need to know with regard to covering your assets with these government-sponsored programs, as well as how they differ from each other.
1) Medicaid covers the cost of long-term care indefinitely; Medicare covers up to 100 days.
While Medicaid and Medicare are both government-sponsored programs designed specifically to help cover the costs of healthcare for those who qualify, the two programs are entirely different, especially in terms of payment and finances.
2) Medicare is an entitlement program.
An entitlement program is a government-sponsored program that guarantees certain benefits to a particular group or segment of the population. This type of program does not depend upon assets or income. Everyone who turns a certain age qualifies for Medicare, and some qualify earlier due to disabilities. At the age of 66, everyone is eligible to receive Medicare, but it's not as great or as promising as it seems to be, since it only covers the costs of long-term care temporarily.
"If people think they're covered for long-term care because they receive Medicare, they're absolutely wrong," said founding partner of Mannion Copani Mr. Anthony F. Copani, Esq. "Medicare will not cover it past the 100th day under any circumstance."
3) Medicaid is a needs-based program.
With Medicaid, applicants must qualify financially. For those who want to use Medicaid as an option for covering the cost of long-term care, they will have to pay, and this payment is taken directly from their assets. When applicants worry about covering their assets, they often think that all is lost—but this is not necessarily the case, so long as the proper actions are taken ahead of time to plan for various eventualities.
4) What separates Medicare from Medicaid exactly?
What sets Medicaid apart is the fact that Medicare will cover up to 100 days of nursing home care, with typically up to 20 days covered at the full rate and the remaining 80 days at the co-pay rate. After 100 days, Medicare will no longer cover the cost of the nursing home. Medicaid covers the cost of long-term care for as long as the person is in the facility, so long as they qualify financially.
5) Know what you need to do to cover your assets.
"Medicaid says to you, 'Okay, whatever assets you have, you have to spend down, or you have to sell and then spend down whatever amount you sell your assets for, until you get to the point where you're at a financial level where they will step in and pay all of your costs for long-term care," said Mr. Terence A.J. Mannion, Esq., also a founding partner at Mannion & Copani.
What's often missed is that assets can be protected ahead of time with the right moves under the right guidance. Some people aren't quite sure as to what their assets may actually consist of, and others may worry that their assets are too small to protect—but this is not true. The biggest asset that many overlook is their home, which is generally the largest asset for most individuals and families. This major asset, as well as others, can be protected with the appropriate steps in order to preserve the family fortune, regardless of the size of it.
"There are ways that you can plan for that eventuality, which will ultimately protect, if not all of your assets, a very large percentage," said Mannion.
6) With Medicaid, it pays to be married.
Another main point to make with regard to Medicaid is that it absolutely pays to be married. Married couples' homes are exempt up to an equity value of $828,000, and in addition, the couple may keep between $74,820 and $119,220 in resources, as well as the first $2,980.50 in monthly income. The single person, on the other hand, can keep a maximum of $14,850 in resources to be eligible for Medicaid, with only $50 available for monthly income.
"A married couple gets to protect far more assets than a single person in the state of New York," said Copani.
One eventuality, however, that married couples often forget to account for is what happens when one spouse dies under Medicaid.
7) What happens when a spouse passes away under Medicaid?
It is common for the spouse who remains at home to pass away first, though it's not always anticipated. In this circumstance, the other spouse then becomes a single person. As a result, Medicaid attaches claims to the home as well as other assets, which is how many people end up losing their homes to Medicaid. Because of this, it is always best to plan for the single person situation, because sooner or later, this eventuality becomes a reality.
8) Protect your assets with a family trust.
Still, there are preventative measures that married couples can take to keep this result from occurring, and one major way is with a family trust.
"If a client comes in that is not in the nursing home, and a nursing home is not likely in the near future, family trusts are very valuable tools in protecting assets, but the family trust has to be in effect for five years prior to a person entering the nursing home," said Copani. "[A] family trust is an excellent tool to protect the family fortune."
With family trusts, assets can be moved so that a certain spouse is not the owner of the assets in the event that they must apply for Medicaid, thus protecting and preserving them as needed.
9) It always pays to plan ahead.
Government-sponsored programs are complex, moving targets at times, as these laws do change on a continual basis. Many people are often confused and frightened over what will happen financially to them in the future, and for this reason, it is best to plan in advance and with the right people in your corner.
Tony Copani has focused his practice on serving the needs of families for Medicaid Law and protecting the family fortune for over thirty years. As a founding partner at Mannion Copani, Tony immediately gives families peace of mind when they learn it's never too late to save your money and protect your assets.