WHAT ARE THE DIFFERENCES BETWEEN MEDICARE AND MEDICAID? What Are the Differences Between Medicare and Medicaid?
A Look at the Differences Between the Two Government Programs Relevant to Seniors – Medicare and Medicaid
By Larry Parman OKLAHOMA ESTATE PLANNING ATTORNEY
When you are planning ahead for retirement
you
need
to
gain
an
understanding of government programs that are relevant to senior citizens. Medicare is certainly one of these programs. However, Medicaid is also something that you should understand if you are looking ahead toward your golden years and the twilight years that will follow. In this report we would like to explain the differences between these two programs.
THE MEDICARE PROGRAM Medicare is the government health insurance program that you are paying into as you pay taxes on your income. If you have paid into the program sufficiently throughout
your
working
career, you will be eligible for Medicare coverage when you reach the age of 65 under currently existing laws. There is a formula that is utilized to determine your eligibility for Medicare. You accumulate credits as you are working and paying taxes. If you earn $1,160 in 2013 you are awarded one Medicare credit.
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You get one credit for each $1,160 you earn. However, you can only earn four credits in a year. Over the course of your lifetime you must earn at least 40 credits to qualify for Medicare. As long as you qualify, you get the same level of coverage as the next person regardless of your contributions into the program. There out-of-pocket expenses that you must account for if you are budgeting for the future. Medicare Part A pays for inpatient hospital stays. There is a deductible for each benefit period, and co-payments may be necessary depending on the length of stay. Medicare Part B covers outpatient care and visits to doctors. There is a relatively modest deductible of $147 per year, but there is also a monthly premium that must be paid. Most people are paying just under $105 per month in 2013, and it is generally deducted from your Social Security direct deposit. If you need to reside in a nursing home or assisted living community later in your life, Medicare will not assist with these expenses.
MEDICAID ASSISTANCE Now
let's
get
into
differences
the
between
Medicaid and Medicare. Unlike Medicare, Medicaid is a need-based program. If you paid
into
program
the
Medicare
sufficiently,
you
could be a billionaire and
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still qualify for coverage. To qualify for Medicaid your countable assets cannot exceed $2,000. People pay into the Medicare program throughout their lives while they are working. On the other hand, Medicaid has no requirements with regard to accumulating credits while you are working. You can qualify for Medicaid even if you did not earn enough credits to qualify for Medicare. In addition, Medicare is a program that is available to people who have reached the age of 65 as we have stated previously. Medicaid is available to people of all ages, even children. Another difference is the fact that Medicaid will pay for long-term care if you become eligible for the program
MEDICAID PLANNING Long-term care is very expensive, with the average nursing home stay of just over two years coming with a price tag that is in the vicinity of $200,000 using current costs. This is more than many Americans have saved for retirement. Since Medicare will not pay for long-term care, Medicaid winds up filling this void in many cases. If you don't plan ahead, you could potentially spend all of your resources paying for long-term care. Once you have exhausted your savings, you could then qualify for Medicaid to pay for the long-term care that
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you are receiving. It is possible to take steps in advance of applying for Medicaid to keep a maximum store of resources in the family. You can divest yourself of assets, giving them to people who would otherwise be inheriting them. However, you have to be cognizant of the 60 month look back period. If you give away assets within five years of applying for Medicaid coverage your eligibility will be delayed. The duration of the period of ineligibility would be determined based on the amount of your divestitures as compared to the cost of long-term care in the state of your
It is possible to take steps in advance of applying for Medicaid to keep a maximum store of resources in the family.
residence. The Medicaid evaluators don't count the value of your home up to $536,000 of equity in 2013, but it is possible for Medicaid to seek to attach the value of the house after you pass away. With the correct type of planning you can take steps to prevent future Medicaid recovery.
CONCLUSION Medicare will not pay for long-term care. Medicaid will pay for living assistance, but there are very low upper asset limits. It is possible to qualify for Medicaid without losing everything if you plan ahead effectively. To get good information about Medicaid planning, discuss the details with a licensed elder law attorney.
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REFERENCES Social Security Administration http://www.ssa.gov/retire2/credits1.htm Medicaid http://www.medicaid.gov/
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About the Author Larry Parman After helping his own family deal with a lengthy probate and a battle with the IRS following his father’s death in a farm accident, Larry made a decision to help families create effective estate plans designed to reduce taxes, and minimize legal interference with the transfer of assets to one’s heirs, and protect his clients’ assets from predators and creditors. Following a dozen years in the investment banking and financial services business, in the mid-1980s Mr. Parman formed a law firm that gives families the peace of mind that comes from having created a premier estate and financial plan. After forming his law firm in 1984, he offered a series of public and private seminars to inform the public about using a Living Trust as the foundation of a family’s estate plan. Today, Parman & Easterday is one of the leading business and estate planning law firms in the Midwest. The firm’s primary focus is on business and estate planning, elder law, asset protection, and providing effective estate planning solutions for clients. Today, the firm’s premier estate plan design is referred to as a Legacy Wealth Plan. Mr. Parman is a frequent guest on the radio and can be seen on television talk shows explaining the importance of proper estate planning. Prosperity Productions selected Mr. Parman as a featured speaker in a nationally-recognized educational video on Living Trusts. He is the author of numerous published articles on financial and estate planning matters and the co-author of two books, Estate Planning Basics: A Crash Course in Safeguarding Your Legacy and Guiding Those Left Behind in Oklahoma: Settling the Affairs of Your Loved Ones. Mr. Parman is a member and Fellow of the American Academy of Estate Planning Attorneys. He is also a member of the Oklahoma and Missouri Bar Associations, the American Bar Association, and the Oklahoma City Estate Planning Council.
www.ParmanLaw.com OVERLAND PARK, KS 10740 Nall Avenue, Suite 160 Overland Park, KS 66211 Phone: (913) 385-9400 Fax: (913) 385-9422 What Are the Differences Between Medicare and Medicaid?
OKLAHOMA CITY, OK 13913-B Quail Pointe Drive Oklahoma City, OK 73134 Phone: (405) 843-6100 Fax: (405) 917-7018 www.ParmanLaw.com
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