It is important to gain an understanding of the government health insurance programs that are relevant to senior citizens. In this post we will look at the difference between Medicare and Medicaid.
Medicare
Medicare is a government health insurance program. You are paying into the Medicare program when you pay your payroll or self-employment taxes throughout your working career.
Along the way you earn retirement credits. In 2014, you earn one retirement credit for every $1200 that you earn. You cannot earn more than four credits in a year. Once you have accumulated 40 retirement credits, you will be eligible for Medicare coverage when you reach the age of 65.
Medicare helps a great deal when you become eligible for the program, but it does not cover everything in its entirety. There are out-of-pocket expenses for covered services and treatment, and you should take this into consideration when you are budgeting for the future.
Another thing that you should understand about Medicare is the fact that it does not pay for long-term care. Medicare will pay for up to 100 days of convalescent care after surgery, but it won’t pay for custodial care. This is the type of care that you would receive if you were to need assistance with your activities of daily living.
This lack of coverage is a very big deal to many senior citizens, because long-term care is exorbitantly expensive. At the present time, the average annual charge for a private room in a nursing home in Western New York exceeds $130,000.
Medicaid
Medicaid is also a government health insurance program. One of the differences between Medicaid and Medicare is the fact that Medicaid is a need-based program. You do not earn credits to qualify for coverage. Medicaid coverage is given to people who can demonstrate significant financial need.
From an elder law perspective, the biggest difference between Medicare and Medicaid is the long-term care coverage. Medicaid will pay for long-term care.
Many people who were never financially needy ultimately apply for Medicaid to pay for long-term care. This could be done in one of two different ways. You could pay for long-term care out-of-pocket until you had virtually nothing left. You could then qualify for Medicaid.
A very high percentage of people go a different route. It is possible to divest yourself of assets in a measured and intelligent fashion in advance of applying for Medicaid coverage. This is called a Medicaid spend down.
It is challenging to create the ideal Medicaid plan, because there is a five year look back. You are penalized and your eligibility is delayed if you give away assets within five years of applying for Medicaid.
Special Report on Medicaid Planning
If you would like to obtain some in-depth information about Medicaid planning, download our special report. This report is yours absolutely free of charge, and you can obtain access through this link: Medicaid Planning Report.
Michael Robinson, Estate Planning Attorney
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