Americans are fortunate enough to have a significantly longer expected life span today than they did even a couple of generations ago. A longer life, however, also frequently means the need for quality medical care and treatment which can be expensive. For older Americans who do not have private health insurance, or whose private insurance falls short of covering all of their healthcare expenses, there are two government funded options – Medicare and Medicaid. Understanding the difference between the two programs is essential.
The Medicare program is both funded and administered by the federal government. Most individuals are automatically enrolled in Medicare when they reach age 65. Medicare is an entitlement program, meaning that you do not have to qualify for benefits. Medicare has four parts – A,B,C, and D. Automatic enrollment applies to parts A and B. You must sign up for parts C or D which provide additional coverage and prescription drugs coverage. Medicare is not free with the premiums typically deducted from a participant’s Social Security retirement benefits each month.
Medicaid is jointly funded by the federal and state governments and is administered by the individual states. For this reason, eligibility requirements as well as benefits may vary from one state to the next. Medicaid is a means test program, meaning that you must qualify for participation. Medicaid has both an income cap and a resources limit. Participation in the Medicaid program is free in most cases or may require a very small ($10-30 usually) monthly premium. Medicaid covers many of the same services that Medicare does with one exception—long-term care. Medicare does not cover long-term care expenses whereas Medicaid does.
Because Medicaid covers long-term care many older Americans will need to qualify for the program at some time. Long-term care costs average around $75,000 a year with an average stay running at about two and a half years. A stay in a long-term care facility can quickly deplete your life savings if you are forced to pay out of pocket. Those same life savings, however, can disqualify you for Medicaid benefits because of the resources limit. Without careful Medicaid planning you could be forced to use up all of your savings before finally being approved for Medicaid benefits. The good news is that you can plan ahead to ensure that both your lifesavings is protected and you qualify for much needed assistance when the time comes. There are perfectly legal strategies than can be used to shelter your assets and put you in a position where you will qualify for benefits from the Medicaid program.
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