Most people who work in healthcare may recognize the acronym LASA, which stands for “look-alike-sound-alike” and is usually seen when referencing medications. When it comes to federal programs, Medicaid and Medicare, in written form, look alike and they do sound alike but work very differently.
Both Medicare and Medicaid were started in 1965 under Lyndon B. Johnson's administration in response to the inability of older and low-income people to purchase private insurance. Medicaid is an assistance program, funded federally and at the state level, that provides coverage for health care to low-income individuals regardless of age. It is governed federally with each state administering its own plan, which can vary from one state to the next. Medicare is a federal insurance program that provides health coverage for people aged 65 and over or to those under age 65 with a severe disability such as end-stage renal disease or Lou Gehrig's disease, also known as ALS-amyotrophic lateral sclerosis. Dependents are not typically covered.
Medicaid eligibility is needs-based, meaning both income and assets are counted when determining eligibility. Both Medicare and Medicaid will cover a broad range of health care services, including hospital stays and physician office visits, yet Medicaid will cover nursing home care, in-home care services, long term care, and transportation to receive medical care which Medicare will not pay for. It is possible to qualify for dual coverage, which means both Medicare and Medicaid will work together to provide health care coverage and lower costs.
Regarding cost, except for one exception, Medicaid in most instances is free of cost though a small copay may be required depending on the plan. The exception is for nursing home residents. A single person receiving Medicaid nursing home benefits will have to pay most of his or her Social Security and pension to the nursing home as a co-pay, called the patient pay amount, with Medicaid then paying the rest of the nursing home bill. For a married person receiving Medicaid, his or her spouse may be able to keep some or all of the nursing home spouse's income, which is called the community spouse income allowance, which can reduce or eliminate the patient pay amount. Medicaid can also recover against assets in a recipient's estate after the death of the recipient. This is called estate recovery and usually the home is the asset at risk to estate recovery. Medicare is not free in that premiums and co-payments may be required for some parts of Medicare and may be larger for those with a higher income, but eligibility is not otherwise income or asset-based.
With Medicare, one has to work and pay into the system (this makes up part of the FICA withholdings from your paycheck) for about 10 years (40 qualifying quarters), at which point no premiums are required for Part A, which covers hospitalizations. Premiums may be necessary if you sign up for a Medicare Advantage plan, which is different from Original Medicare where you are permitted to purchase supplemental coverage for out of pocket costs. Because Medicare is not administered by each state, a Medicare recipient will usually have the same coverage and pay the same copays and deductibles regardless of the state of residence. Co-pays and deductibles are required for Medicare's Part B (outpatient services) and Part D (medication) plans. Also, a financial penalty can be assessed if one does not sign up for Medicare Part B when you first become eligible (typically when you turn age 65), and there may be a delay in getting coverage.
People and politicians complain about the cost of Medicare and, with the rules being set by the federal government, including forced contributions through FICA taxes, there is an element of socialism to it that can make many of us uncomfortable. That being said, Medicare has substantially helped deal with the problem of retired, older people not being able to get hospital and health insurance coverage, and the program is popular. Perhaps the existence of Medicare has contributed to people living longer since the program came into being in the 1960's. After all, charity has its limits, and Medicare provides a way for doctors and hospitals to be paid for the medical services they provide to seniors. The program has been in place for over 50 years now, so it is hard to know if a different way of dealing with the lack of healthcare coverage for seniors would have been better over the long-run.
Medicaid is very helpful in paying for expensive nursing home care, which costs $10,000.00 or more per month in the metro-Detroit area. Some people object to elder law attorneys helping their clients restructure their affairs to become eligible for Medicaid before spending down all or most of their savings. While we have to consider carefully when that is appropriate, it seems appropriate to me for middle class seniors who have worked and paid into the system, through taxes, for these programs when their savings will be substantially depleted or exhausted by the cost of long-term care. This is especially so when compared to the person who has not worked or saved, making them immediately eligible for Medicaid coverage.
Though basic differences are covered here, there is much more information to know regarding both plans, so research is encouraged before you hit the age of eligibility for Medicare to determine which Medicare plan may be right for you. Medicaid plans and coverage differ from state to state, so you must consult an elder law attorney in your state about Medicaid questions.
In regard to Medicare, I find my clients only need my help with that if they are having trouble getting physical therapy and rehab under Medicare's limited nursing home coverage. With Medicaid, clients very frequently need my help in legally restructuring their assets and income to qualify for Medicaid, preparing the Medicaid application and seeing to its approval by the state, and taking steps to avoid estate recovery.
Andrew Byers is an elder law attorney in Troy, Michigan who assists seniors and their families to prevent the devastating financial effects of long-term care.