Social Security was created to provide retirement benefits to older Americans, but may also provide benefits to eligible dependents of recipients. Eligible dependents may include: spouses age 62 or older; former spouses age 62 or older from marriages of at least 10 years; spouses who care for a recipient’s dependent child; children & grandchildren.
Medicare is a federal program providing medical coverage to the elderly & disabled. It helps those 65 & older or the disabled for kidney failure, ALS, or for persons who have received Social Security disability payments for at least three years.
Medicare coverage contains Four Parts. Parts A & B are “traditional Medicare,” also commonly known as “Fee-For Service Medicare” because each provider is paid for services on a piecemeal basis.
Part A – is commonly known as “hospital insurance,” although that is a bit of a misnomer as it primarily covers nursing care, including not only the services of nurses while treating inpatient at a hospital, but also skilled nursing facilities for short-term stays, home health services or hospice care in one’s own home (if one qualifies), semi-private rooms & other services such as lab tests, prescription drugs, medical appliances, & rehabilitation therapy in hospitals or nursing facilities. If one qualifies, it may cover all services by a home health agency or for persons with a terminal illness in a hospice program.
Part B – commonly known as “medical insurance,” includes ambulance services; approved surgical & medical services from doctors who accept Medicare patients; lab tests done outside hospitals & nursing facilities; some medical equipment & supplies & outpatient hospital treatments & inpatient care if one has not be formally admitted to a hospital; preventative services (often free) such as flu shots; outpatient mental health care; & free counseling for obesity & additions.
Part C – also called Medicare Advantage, are operated through private insurers through HMO or PPO managed care organizations. They provide at a minimum all of the care provided in Parts A & B, but may cover additional benefits for vision, hearing, dental, & usually prescriptions.
Part D – insurance for outpatient prescription drugs.
Medicare Advantage plans & Part D drug plans may be compared at http://www.medicare.gov/plan-compare
Things Medicare Does Not Cover
Unless a service is optionally covered by one’s HMO or PPO under Part C, routine care for hearing, vision, dental & footcare are not covered by Medicare. There are some exceptions. Emergency care & care that is considered medically necessary (such as cataract surgeries or ear treatments related to diseases or foot care related to diabetes).
Medicare also usually does not cover medical services abroad, elective surgery.
Critically, while Medicare may cover short-term care in nursing homes in certain instances, it does not cover nursing homes for long-term care. Short-term stays are most likely to be covered if they occur after leaving the hospital. While Medicare will pay for certain medical care in a nursing home, it does not cover nursing home rooms, food, or “custodial care” meaning care associated with help to conduct daily life activities. For qualified persons, nursing home care may be covered, however, by Medicaid.
Medicaid is a national law, but whereas Medicare is administered nationally, Medicaid covered is administered by the various states & eligibility varies by state. Medicaid in California is known as Medi-Cal.
Medicaid fills certain gaps in coverage & in California strives to use a holistic approach to help those who are seriously ill or in need of healthcare by improving improving health or decreasing long-term costs of chronic illness. One of the most important things Medicaid covers for those who require it is long term nursing care.
Income standards: some states use the same income & asset limits set by the federal Supplemental Security Income (SSI) program. Others establish their own limits. In most states, you can automatically receive SSI if you qualify for SSI. In addition, you can’t possess more than about $2K in counted assets for an individual or $3K for a couple. However, not all assets are counted.
In most states, one may be eligible even if their income/assets above a certain amount also depends on being medically needy, meaning that your income is about the limit for the state, but your current or expected medical expenses mean you are nevertheless eligible.
Income or assets of children, relatives or friends, even if you live with them, usually are not considered in deciding if one is Medicaid eligible. However, if one receives from relatives or friends regular financial support (whether it is cash or other types of support, e.g. free rent or food), some state Medicaid programs may consider this as part of your income.
In addition to paying for many of the same types of hospital & medical expenses that Medicare covers, it also cover things Medicare does not cover. It may cover ADLs (activities of daily living), medical deductibles & co-pays, and Part B medical insurance premiums.
Some of the things Medicaid covers are covered in every state as a matter of federal law, including: nursing home care in approved facilities; in patient hospital or hospital or skilled nursing facility care; outpatient hospital or clinical treatment; lab or X-ray services; physicians’ services; home health care; ambulance & other transportation to & from medical service locations.
Most states may cover additional Optional services that are not required to be covered under federal law. These include prescription drugs, routine eye & dental care (such as eye glasses, cleanings & dentures), physical therapy, & prosthetics.
Person who qualify for both Medicaid & Medicare are called “dual eligible.”
In order to be paid by Medicaid, a service or treatment must generally be prescribed by a doctor, administered by a provider who participates in Medicaid, & determined to be medically necessary.
Prescribed by a doctor – for example, if a doctor prescribes physical therapy or a chiropractic visit, it might be covered. However, if a person pursues such treatment without a prescription, it won’t be.
Medicaid participating provider – providers who accept Medicaid patients must agreed to accept the amount total amount paid by Medicaid & Medicare for the treatment & many will not. In addition, this amount must be the total cost of treatment. Providers are prohibited from making up the difference with additional charges to the patient for such care.
Federal law permits states to charge some small fees to people who qualify for Medicaid as “medically needy.” If one qualifies as medically needy, states can only charge a fee for optional covered services. These charges to “medically needy” person may take the form of an enrollment fee, a monthly premium, or copays. For persons who are covered as “categorically needy,” copays may be allowed for optional services only, but enrollment fees & monthly premiums are prohibited.
Almost all Medicaid covered care is free. Medicaid also pays Medicare premiums, deductibles & copays for dual-eligible persons.
Denial of Coverage
A person may appeal denial of Medicaid coverage. Appeal rules differ by state. If a person receives a notice that Medicaid eligibility is ending, filing a appeal quickly, such as within 10 days, may keep coverage in affect until the appeal hearing decision. At an appeal hearing, one may present documents & other evidence, such as proof of income, assets, & medical bills, to support the appeal. If a bills were denied as not medically necessary, a letter from the physician explaining the condition, cost of treatment, & why it is necessary would be extremely useful. Most states will allow non-lawyers, such as friends, help at the appeal hearing. Generally a decision will be made within 90 days of the appeal hearing.
Because of the way California determines if a person is entitled to Medicaid, Miller trusts are not used in applying to Medi-Cal. In about half of the states, however, Miller trusts, also called income-cap or income-assignment are created specifically to preserve eligibility to apply for Medicaid, & may be used in about half of the States. The Settlor assigns the right to receive some or all Social Security & pension benefits to the Miller trust. In states that allow them, a Miller trust is not a long-range estate planning tool. Instead, it is created a few months prior to applying for Medicaid.
Other State Programs
If your income are a bit too high for Medicaid, you may be eligible for state benefits programs that meet costs Medicare does not cover such as a Qualified Medical Beneficiary (QMB), Specified Low-Income Medicare Beneficiary (SLMB), or Qualifying Individual (QI) benefits.
California’s Medicaid — Medi-Cal
To be California Medicaid eligible, one must be legal California resident (that is either a US citizen, permanent resident, or legal alien) in need of health care & in a very low income household. In addition, one must be either:
- Pregnant, or
- Be responsible for a child 21 years of age or younger, or
- Blind, or
- Have a disability or a family member in your household with a disability, or
- Be 65 years of age or older.
The current California maximum household income for a single person household is $17,131 before taxes (about 135 % of the national poverty line) & increases by about $6,000 per additional member of the household members.
Medicaid also has a general $2,000 asset cap for single persons; however, certain assets may be exempt, such as one’s home & car. One way to address the cap is to transfer assets into an irrevocable trust. Another is to purchase long-term care insurance.
Advantage Asset Protection strategies may also be used not only to protect assets from creditors but also to preserve entitlement to Medicaid & Social Security, which may be lost if a person is the beneficiary of a trust or has merely settled a revocable trust. Even if the Settlor is not a beneficiary, because revocable trusts may be revoked, assets & income of such trusts are treated as assets & income of the Settlor & generally will destroy Medicaid eligibility.
If preservation of Medicaid & Social Security eligibility is a goal, the five-year look-back provision for gifts (2.5 years in California) is important & applies to transfer to trusts. HCFA Transmittal 64 to Medicaid officials concerns trust provisions of 1993’s OBRA & social security. SSI provides different treatment to potential income in self-settled versus third-party trusts. 42 USC 1396p, subsections (c) & (d), contains important federal transfer of asset rules.