Health insurance is mandatory under the Affordable Care Act, but not everyone has a job that offers health care benefits. Those who are not eligible for employer-based insurance or who don’t earn enough to buy…
Health insurance is mandatory under the Affordable Care Act, but not everyone has a job that offers health care benefits. Those who are not eligible for employer-based insurance or who don’t earn enough to buy an individual policy may be able to find coverage through one of two government programs: Medicare and Medicaid.
Each program targets different populations and offers unique perks for beneficiaries. While there are many differences between Medicare and Medicaid, what the programs do share is a reputation for being complex.
“I understand why people get confused,” says Fran Soistman, executive vice president and head of government services for the health insurer Aetna. The programs have been expanded and enhanced throughout the years and while those changes were all made with good intentions, they have created a long list of regulations that can be difficult for consumers to understand, Soistman says.
With that in mind, here’s a primer on the key differences between Medicare and Medicaid and a rundown of how each health insurance program works.
Medicare beneficiaries are primarily seniors. Everyone who has paid into the Medicare system becomes eligible for Medicare coverage at age 65. “It’s not dependent on income,” says Elizabeth Kelly, senior vice president of operations for online advisory firm United Income. Those who have received Social Security disability benefits for two years or who have certain conditions, such as ALS, are also eligible. Medicare is run by the federal government, and costs are paid from Medicare trust funds.
What is covered?
Original Medicare includes Part A and Part B. Part A pays for expenses related to hospitalizations, while Part B covers outpatient care. Beneficiaries can also purchase a separate Part D plan for prescription drugs. There can be deductible and copayment costs associated with these plans.
Beneficiaries who would rather receive benefits from a private insurer than directly from the government can opt for what is known as a Medicare Advantage, or Part C, plan. These plans are required to cover everything provided by Medicare Parts A and B, and many also provide Part D coverage along with other benefits such as dental or vision care. Medicare Advantage plans vary in their deductibles and out-of-pocket costs.
“With original Medicare, a lot of times you have more choice in hospitals and physicians,” says Jennifer L. FitzPatrick, author of “Cruising Through Caregiving: Reducing The Stress of Caring For Your Loved One .” Medicare Advantage plans, on the other hand, may limit participants to using a network of approved providers. Along with costs, network considerations should be part of selecting the right Medicare coverage.
Who is eligible?
Medicaid is the government health insurance program for people in low to moderate income households. People can also qualify if they have physical, intellectual or behavioral disabilities. “It’s for people with very limited income and resources,” says John Hill, president of independent insurance agency Gateway Retirement Inc. in Rock Hill, South Carolina. Income and asset limits can vary significantly by state, but 138 percent of the federal poverty limit is the median eligibility requirement for adults. Applicants can typically have no more than $2,000 to $3,000 in liquid assets. States run the Medicaid program, but they have to work within certain parameters to get federal funding. For example, states must provide dental coverage for children, says Jenn Stoll, chief commercial officer at DentalPlans.com. However, states can choose whether to extend that coverage to adults as well.
Medicaid coverage includes hospitalizations, outpatient care and prescription drugs. Some states also cover additional services such as adult dental and hearing care. Long-term care is also a benefit of Medicaid. And for many enrollees, there are little or no out-of-pocket costs for Medicaid coverage.
Many states contract with private insurers to provide coverage to Medicaid recipients. When more than one company provides services in a geographic region, people may be able to choose their insurer. “If they don’t make a choice, there is an auto-assignment,” Soistman says.
As with Medicare Advantage, Medicaid plans may have a network of participating providers. In some areas, this network can be limited. Since Medicaid reimbursement to physicians and health care facilities can be lower than the payments made by commercial or Medicare health insurance plans, many providers don’t accept Medicaid patients.
Can Medicare and Medicaid coverage be combined?
About 17 percent of Medicaid enrollees also receive Medicare, according to 2018 data from the Centers for Medicare & Medicaid Services. Many of these people are seniors receiving long-term care.
” Medicaid will cover nursing homes, whereas Medicare won’t,” Hill says. Medicare will pay for short-term stays after a hospitalization, but extended, ongoing custodial care is not a covered benefit.
However, to become eligible for Medicaid, seniors must spend down most of their assets as well as meet income requirements. In most states, there is a five year look-back period that prevents seniors from simply transferring assets to another family member in order to meet Medicaid eligibility. The look-back provision considers asset transfers made during the applicable time period and can be used to apply a penalization period before someone becomes eligible for Medicaid.
There are legal ways to spend down assets, including buying a Medicaid compliant annuity. Since state rules can vary significantly and be complex, “it makes sense to talk to a financial planner familiar with those state requirements,” Kelly says.
For those living independently, Medicare is the primary source of health insurance, and Medicaid serves as a supplement. “Medicaid dollars are used to pay for Medicare out-of-pocket costs,” Soistman says. “If (you’re) in a nursing home, Medicaid would be primary (insurance).”
People can be either partially or fully eligible for dual enrollment in Medicaid and Medicare. Their status can depend on their income and health needs. Dual enrollees may maintain separate policies or, in some cases, select a Medicare Advantage plan that also includes their Medicaid benefits. Hill notes that fully eligible individuals will be unable to buy a Medicare supplemental policy, or Medigap plan, should they remain on original Medicare.
Getting Help to Fill the Gaps
While Medicare and Medicaid pay for many core services, there may still be gaps in coverage, such as a lack of dental services or excluded prescriptions. To cover these costs, people may need to look outside the insurance industry.
“Americans can close the gap in dental care by coupling their Medicare or Medicaid coverage with an affordable alternative to dental insurance, such as a dental savings plans,” Stoll says. She notes these plans may require a membership fee but can save members between 10 to 60 percent on procedures. For prescriptions, free discount services such as GoodRX and Blink Health can reduce drug costs by half or more.
Navigating Medicare and Medicaid can be confusing, and FitzPatrick says an elder law attorney can be a valuable resource. For those with limited financial means, enrollment help is available through your State Health Insurance Assistance Programs. “It’s the easiest way to do it,” she says. “It’s free.”
State Health Insurance Assistance Programs are designed to help with Medicare specifically but may be able to guide people to local resources that can help with Medicaid. You can find a local SHIP office by visiting Shiptacenter.org.