Medicare and Medicaid

No book on aging would be complete without some discussion on government benefits. Medicare is health coverage for those older than 65 and certain other individuals who may be eligible. Generally, those who are eligible to receive Social Security are eligible for Medicare, but not until age 65 (it may be 66 by the time your read this). You can elect to receive Social Security, but not Medicare, at age 62.

Medicare covers three parts: hospital care, doctors fees, and prescription drugs. The prescription drug benefit is fairly new, but does not appear to help many people because of the deductibles, co-pays, and premiums. Part “A” is automatic. It covers trips to the hospital and procedures done in a hospital. Part “B” covers doctor’s visits and treatments outside of a hospital. Almost everyone elects to participate in part “B,” but it is optional.

The most important thing to know about Medicare is that it does not pay for nursing home stays beyond the first 100 days. After that, you’re on your own. In addition, it covers only the first 100 days if you were in a hospital immediately prior to going into a nursing home, meaning you can’t just show up and ask for your free 100 days.

Medicaid is a federally funded program that is administered at the state level. Medicaid covers health care and custodial care for the indigent (defined by assets and income and varies from state to state). Medicaid is available to anyone in the United States who is destitute, regardless of their age. For purposes of this book, only Medicaid’s relevance to a senior and his or her family will be discussed. The subject comes up when someone is unable to pay for nursing home care or is on the verge of needing nursing home care and has a limited income or assets.

Although Medicaid laws vary from state to state, several issues are consistent. Medicaid pays for nursing home care when a person is determined to be essentially without assets. For example, someone with a home worth $150,000 that has been paid off and another $200,000 in various assets will not qualify for Medicaid. They must “spend down” their assets before qualifying for Medicaid. There is a spousal impoverishment provision that allows the non-ailing spouse to keep certain assets while the ailing spouse is in a Medicaid-paid nursing home.

Medicaid laws vary from state to state, and this book is not intended as a substitute for competent legal advice. However, once a senior citizen has depleted his or her assets and qualifies for Medicaid, they will be eligible for free nursing care if it is warranted. Bear in mind, nursing homes are not all created equally.

In future chapters we’ll deal with the emotional elements of telling someone they are going into a nursing home. For now, I want to address the reasons a Medicaid nursing home should be regarded as a last resort. Some nursing homes have chefs, well-trained and attentive staff, on-site case managers, etc. Others resemble poorly run prisons where its difficult to tell the inmates from the staff.

Medicaid beds are located in either one of two places: in a Medicaid wing of a private nursing home or in a Medicaid facility. In other words, some private nursing homes have a certain allocation of beds for Medicaid recipients, while other nursing homes are 100 percent Medicaid-sponsored. As you can imagine, there are great differences in the facilities, activities, grounds, and staff.

If your parent qualifies for Medicaid and you are unable to pay the $60,000-plus annual cost of private nursing care, you don’t have much choice about where they will go. It may not even be in your city.

After a lifetime of independence, it’s difficult to view the specter of nursing homes as pleasant. However, certain financial tools can make the process slightly more palatable. Generally, a person must deplete their own assets before using the government’s. This also means depleting your inheritance, but there are several exceptions.

For example, a senior does not have to sell their home if their spouse or a child younger than 21 is living in it. In addition, any assets transferred three years or more before applying for Medicaid are not counted. Therefore, it is possible to give away substantial assets to be used later. If the transfer occurs less than three years prior to applying for Medicaid, a prorated formula is used. There are obvious potential pitfalls to giving assets to family members such as divorce, spending problems, investment issues, lawsuits, etc. Under the right circumstances it is a valuable planning tool.

The bottom line is this: If your parent has a modest estate which may be eaten up by nursing home costs, careful planning may allow you to preserve some assets to pay for “comfort” items later.