When you are positioning yourself financially for the future, you are naturally going to have questions about government programs that you have heard about. These would typically include Medicaid and Medicare.
Because the names are similar, understanding what each respective program accomplishes can be confusing. With this in mind let’s look at the differences.
American income earners pay into the Medicare program via taxation. If you pay into it sufficiently you become eligible for Medicare federal health insurance coverage when you reach the age of 65.
It doesn’t matter if you are the richest person in America. If you paid into the program sufficiently, you are eligible for enrollment. This is not a program that is based on financial need.
While the current age of eligibility is 65, you should pay attention to the ongoing debates about the best ways to shave down the federal deficit. There are those who want to increase the age of Medicare eligibility to save money. When you’re planning for retirement, you have to know when you will become eligible, so this is something that is relevant.
Medicare has several different portions. Part A is the portion that is applicable to hospital stays. Part B covers outpatient visits and visits to physicians. You have to pay a monthly premium for Part B coverage, and there are deductibles and potential co-payments for Part A.
Part C allows you to streamline everything by going through a private insurer, and Part D is a prescription drug plan that is not mandatory.
Medicaid is not in any way embedded into the Medicare program. Medicaid and Medicare are two separate programs. Medicaid is not solely for senior citizens. It provides government funded health insurance for people with very limited financial resources.
This program is jointly administered by both the state government and the federal government. Each state has some leeway with regard to the exact parameters so the program has a somewhat unique identity state-by-state. The program is called Medicaid in most of the states, but in Minnesota it is formally called Medical Assistance.
Medicare doesn’t pay for an extended stay in a long-term care facility, but Medicaid or Minnesota Medical Assistance will assist with these costs if you can qualify. There are very low upper resource limits, however, because the program is intended for people who are essentially “poor” for want of a better word.
So, if you were on Medicare and you went broke paying for long-term care, Medicaid would start to pay for it.
However, it is possible to plan ahead in advance with Medicaid eligibility in mind. You could divest yourself of assets in advance of applying, as long as you do so at least five years prior to submitting an application.This is called “spending down.”