I am a lawyer, not a healthcare professional.
I mean, I did alright in chemistry, but I also don’t know my own blood type. So I am usually not the best person to ask about health-related issues. Nevertheless, I get the same question about once a week:
“What’s the difference between Medicare and Medicaid?”
Healthcare is confusing even under ordinary circumstances. But navigating federal programs like Medicare and Medicaid can feel overwhelming. Surprisingly, though, estate planning and other legal techniques can help with the process. (I will discuss some of those techniques in a forthcoming article.)
For now, however, let’s answer the question posed above and begin with a brief rundown of the differences between these two programs.
What is Medicare?
Medicare is a health insurance program administered by the federal government through the Center for Medicare & Medicaid Services (CMS). It primarily serves people over 65, regardless of income, but it is also available to younger individuals with certain disabilities or illnesses.
The program is very similar to normal, private health insurance. Beneficiaries usually pay premiums, deductibles, and co-pays. Medicare then pays your approved healthcare provider for the costs of service.
Medicare consists of four different “Parts,” each covering different categories of healthcare costs:
Medicare Part A - Covers inpatient medical services and supplies (e.g. hospital care).
Medicare Part B - Covers outpatient medical services and supplies (e.g. doctor visit).
Medicare Part C - A private alternative to the original version of Medicare also called Medicare Advantage. These plans must cover all costs that are covered by Part A and Part B. For a comprehensive explanation of Medicare Part C, visit the Medicare Plans Patient Resource Center website.
Medicare Part D - Prescription drug coverage. However, like normal health insurance, drugs must be purchased through approved providers.
Like Social Security, we all pay into Medicare. You may have even noticed that a small part of each paycheck is withheld for Medicare. This tax is usually labeled FICA (which stands for the Federal Insurance Contributions Act) and goes toward Medicare and Social Security. In 2019, the FICA tax rate is 7.65%, or 1.45% for Medicare and 6.2% for Social Security. (Individuals earning over $200,000 a year pay an extra 0.9% Medicare tax on earnings over $200,000; the FICA rate is different for self-employed individuals.)
What is Medicaid?
Medicaid is a health insurance program jointly administered by federal and state governments. The federal government (through CMS) provides funding and guidance, and state governments actually run the program.
Medicaid is geared primarily toward “needy” individuals and is therefore means-tested, i.e., you must meet certain criteria to qualify for the program. Eligibility is generally based on:
Income
Assets/resources
Disability
Age
Pregnancy
Household size
Generally speaking, Medicaid is a free program; patients do not need to pay any part of the costs of covered expenses. However, sometimes a small co-payment is required. Every state offers Medicaid, but eligibility and program administration vary from state-to-state.
One of the most common reasons individuals apply for Medicaid is to pay for long-term care such as a nursing home. The annual cost of institutional care can easily reach $90,000-100,000. Therefore, individuals often employ estate planning attorneys to assist them with qualifying for Medicaid in order to protect their own assets.
As described by the U.S. Department of Health & Human Services, “At its core, Medicaid is meant to provide a health care safety net for those who would otherwise go uninsured because of a lack of means.”
How does Medicare/Medicaid play into your estate plan?
These programs are very complicated. The overview provided above merely gives you a glimpse inside the purpose of Medicare and Medicaid. If you need to apply for either program, or if you have questions about coverage or benefits under the programs, you should talk with a care planner or care provider.
Medicare and Medicaid are vital parts of our social safety net. To best take advantage of these opportunities — and to best protect your assets — contact the experienced Oklahoma City estate planning attorneys at Postic & Bates for a free, no-obligation consultation appointment.
David M. Postic is an attorney at Postic & Bates, P.C. His practice focuses on estate planning, probate, real estate, trust administration, business planning, and adoption.
You can email David through our Contact Us page or by calling our office at (405) 691-5080.
[As with all our blog posts and other publications and resources, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]
