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Long-Term Care and Medicare versus Medicaid

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Do you know the difference between Medicare and Medicaid and what happens when you need Long-Term Care (LTC)?

Allison Payne, CLTC with ACSIA Partners, highlighted some of this information at her presentation last night at our Empowered Women Smart Money series. We often get questions about Medicare covering your LTC expenses and the fact is that Medicare generally does not pay for LTC expenses. Medicare provides health coverage for people age 65 and older, (and for those under age 65 with certain disabilities). Medicare only pays for LTC in very specific situations and only for a very limited period of time. In other words, Medicare will likely not cover your LTC expenses or it will be extremely limited.

By contrast, Medicaid provides medical coverage for people meeting the low-income definition, as determined by the state in which you live. Interestingly, if you meet the definitions and tests established for Medicaid coverage, and you are over age 65, your LTC expenses will likely be covered under Medicaid. Consider though that you must spend down most of your assets to be deemed impoverished. There is also an income test in addition to the asset test. If you do qualify, most of your income will be dedicated to covering the cost of care. Your state Medicaid guidelines also determine what services will be covered. In addition, Medicaid doesn’t provide you with any assurances that you will be placed in the facility you prefer. As of July 2014, Alaska allows the Medicaid recipient to keep $2,000 in assets and $75 as a monthly need allowance. If you are married, your spouse is allowed to keep $115,920 in assets and $2,898 in monthly income, a primary residence, car and small burial fund. In addition, under the Deficit Reduction Act of 2005, equity in your home in excess of $543,000 ($814,000 in some states) is not exempt and must be counted as an asset to qualify under the asset test. These equity limits will start increasing due to inflation in the future. This rule does not apply if the Medicaid applicant’s spouse or another dependent relative lives in the home. These are very basic values as there are more rules and allotments under the Community Spouse Resource Allowances. Basically though, much of your life savings must spent down until you reach these levels to qualify.

If you are thinking about giving all of your assets away to qualify for Medicaid, beware that there are “look-back” rules for that as well at each state and it is typically 60 months. That translates into a penalty against the cost of your care that you must cover before Medicaid kicks in. As noted above, there are protections for your spouse and there are planning tools available to help navigate these rules. We typically recommend meeting with an attorney in your state specializing in elder care and Medicaid planning if you feel you might be in a position to apply for Medicaid coverage in the future.

This comparison of Medicare versus Medicaid is touching on the financial aspect. To qualify for the limited LTC exceptions under Medicare or for LTC coverage under Medicaid, you must also meet the minimum level of care to qualify, often referred to as your ability to independently manage activities of daily living. In summary, the difference between Medicare and Medicaid is that Medicare will likely NOT cover LTC and Medicaid will likely cover only if you are broke.

To help you never confuse these two programs, picture the last four letters of Medicare…CARE and then think of the last three letters in Medicaid…A-I-D “All Investments Depleted”.

Cathie Straub, CPA, CFP®
Director, APCM Wealth Management for Individuals

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