It's amazing how many advisors don't clearly understand the difference between Medicare and Medicaid. Maybe you're one of them, or maybe you just think you know the difference. If you get confused sometimes, imagine how your clients must feel.
Every advisor dealing with retirees should have a good understanding of the difference between the two if for no other reason than to be able to properly guide your clients.
Medicare and Medicaid both sound alike and both are government programs that provide health services to the elderly. Both programs also pay for some portion of a nursing home stay, but most people can’t tell you which one pays for what portion.
Here are the basics every advisor should know about Medicare:
- Medicare is an automatic primary health insurance for seniors age 65 and over.
- Medicare also provides primary health insurance for some people under age 65 who become automatically eligible because of their disability.
- Medicare does not pay all of a covered person's medical expenses. The gap between the cost of services and the coverage is known as the Medigap and, as many of you already know, a private Medigap insurance plan helps cover the difference.
- Medicare now has a prescription drug coverage plan which is known as Part D with a separate premium, supported by the government and separate co-pays.
When it comes to a nursing home, most people think Medicare covers long-term care
. They get a rude awakening when they learn that the most Medicare covers is 100 days in a skilled nursing facility. And even then, it’s not a full 100 days. Medicare pays full price for the first 20 days. For the remaining 80 days, the patient has to pay the first $144.50 (2012 amount; figure adjusted annually). To even qualify for that, the patient must have spent at least three days in the hospital first and transfer to the nursing home within a limited period of time after discharge from the hospital.
In short, Medicare is not a solution to nursing home expenses like most seniors think it will be.
Medicaid, on the other hand, is the biggest payer of nursing home expenses. But unlike Medicare, you don’t automatically qualify for coverage.
Why no automatic coverage? Because the laws state that patients must dramatically spend down assets in order to qualify for coverage. For individuals, the amount of “countable” assets they can own and still qualify is approximately $2,000 (which sounds crazy to most people).
Countable assets include IRAs, stocks, mutual funds, bonds, CDs, etc. These assets must be repositioned using proper Medicaid planning techniques
or spent on nursing home care before Medicaid will pay for expenses. And if you think clients can just give their assets away and immediately quality for aid, that’s not going to happen. Improper gifting coupled with an ill-timed Medicaid application can cause a waiting period of in excess of five years before being able to qualify for aid.
The state can put a lien on any assets they let the patient keep and take them when the patient (or the patient’s spouse) dies through estate recovery.
Growing your business
There are 7,000 people turning 65 every day and with life expectancies now longer than ever, the number of those who will need Medicaid planning to preserve assets is greater than ever. If you are looking to grow your business and earn significant money in the process, you need to look into Medicaid planning