When choosing a Medicare plan or buying supplemental insurance, make sure you understand what is covered and tailor your plan and insurance to your specific needs and circumstances.

One way to avoid mistakes is to learn from the experience of others. Here’s an opportunity to learn from one of my clients.

I have a client whose husband was in a Skilled Nursing Facility (SNF).  When asked how she was paying for his care, she said that Medicare and her supplemental insurance were paying for it. This seemed like a reasonable explanation since Medicare will pay for the cost of care in a SNF, if her husband had a 3-day stay in the hospital prior to entering the facility, and if he continued to need skilled nursing services.  However, I knew that Medicare would only pay the full cost of care for the first 20 days; after that, Medicare would pay part of the cost for an additional 80 days, with a $148.00 copay per day.

My client’s husband stayed in the facility for the full 100 days.  Time passed and a bill came from the SNF.  When the bill was substantially more than my client anticipated, I called the SNF and learned the following:  My client did not have Medicare and a supplemental insurance; instead, she had a Medicare Advantage Plan.  Medicare Advantage Plans fall under Medicare Part C and include some types of managed care plans to provide Medicare benefits.  There are four different plans available under Medicare Part C.  Each plan has advantages and disadvantages in the services and coverage offered.  We learned that while some supplemental insurances will pick up the copay for care in a SNF, the plan that my client had did not completely cover her husband’s care.

When buying Medicare supplemental insurance, make sure you understand what it covers and tailor your insurance to your specific needs and circumstances. If you need help understanding Medicare, SHIBA (Senior Health Insurance Benefits Advisors) provides free assistance in understanding the complexities of the Medicare program.  You can contact SHIBA at 1-800-488-5764 or go online at www.shiba.idaho.gov.  An attorney experienced in handling Medicare and Medicaid questions can also help you.

A traditional estate plan, prepared for a couple when they were healthy, will be turned upside down if one of them develops a chronic health problem.  The cost of long-term care can quickly deplete a couple’s savings that has taken a life time to acquire.  When paying for long-term care, there is always the question of how to preserve assets to meet the life-time needs of the spouse who remains at home and to provide the highest quality of care for the spouse in a facility.  Medicaid will help pay for long-term care; however, money received from Medicaid to pay for long-term care may be recouped through Estate Recovery, just like I had to repay my student loan when I graduated from college.

Qualifying for Medicaid is based on a means test of an applicant’s monthly income, assets, and medical need.  When a married applicant with spouse at home applies for Medicaid, the applicant spouse is allowed to keep $2,000, and the at-home spouse is allowed to keep their home, one vehicle, plus one half of the countable assets up to a maximum of $115,920.  (Medicaid rules set the allowable amount and define countable and noncountable assets.)

Many couples, when applying for Medicaid, make mistakes based on misinformation they have received from a well-intentioned friend, neighbor, or health-care worker.      The following example shows how this can happen.  Bill has dementia and is being cared for at home by his wife, Mary.  Knowing that one day her Bill may need to go to a facility and knowing how much health care cost, Mary discusses her concerns with a neighbor.  The neighbor tells Mary that Medicaid requires a spend down of one half of the couple’s assets to qualify for Medicaid.  Acting on her neighbor’s advice and unaware that she should file a Community Spouse Resource Allowance (CSRA) with the Idaho Department of Health and Welfare (IDHW) before spending down their money, Mary spends down half of the Couple’s $200,000 that they have in CDs and various bank accounts to $100,000.

Mary then files an application for Medicaid and provides the necessary financial information to IDHW.  Mary is told that her attempt to spend down the money had no effect because she had not filed a CSRA before spending down the money.  Therefore, she will have to do a second spend down of one half of the couple’s current assets before Bill will be eligible for Medicaid.  Had Mary filed the CSRA first, she would have been able to keep $100,000 instead of $50,000. This brief example shows how complex Medicaid rules are, and how mistakes like this one can be avoided by obtaining advice from an attorney experienced in handling Medicaid cases.

As I consider this article and putting Medicare and Medicaid into a nutshell, squirrels scamper outside my window. The fall preparation and resiliency of these creatures are tested by our long Idaho winters. Winter has been aptly compared to old age. The Roman poet Ovid wrote, “Then with faltering steps, and shriveled, shivering, old winter treads; now all its hair is gone-or any left is white.” Like winter, old age is a test of a lifetime of preparation and an individual’s resiliency

Procuring and paying for medical care is one of the challenges of old age. Medicare is a federal program intended to provide financial protection against medical care costs for older adults. Eligibility requirements for Medicare include being age 65 and over and qualifying for Social Security or Railroad retirement benefits. Medicare is divided into different parts. Part A coverage is premium-free and covers expenses related to hospitalization and related care and equipment, inpatient care at a skilled nursing facility, home health care, and hospice. Part B of Medicare is a voluntary supplemental insurance to Part A. In 2012, the Part B premium for individuals earning less than $85,000 annually was $99.90. Part B covers physician’s services, medical supplies, and many other services not covered by Part A. Many people entering older adulthood assume that their health care costs will be covered by Medicare. While the goal of Medicare is financial protection, only a percentage of health care expenses for the elderly are paid by Medicare. Unfortunately, limitations and exclusions of the Medicare program result in a gap in coverage. This gap in coverage is paid by a number of different sources including self-funding, private supplemental insurance, the Veterans Administration, and Medicaid.

Medicaid is a joint federal and state program. It was developed through legislation in the 1960s to offer assistance to people without the financial means to pay for necessary medical care. Accordingly, a means test for assets and income determine eligibility for Medicaid. Assets are treated as either “countable” or exempt. For example, exempt assets commonly include a primary residence, personal furnishings, prepaid funeral and one vehicle. Countable assets include cash, savings and checking accounts, IRAs and the cash value of insurance policies. Before an individual can qualify for Medicaid, countable assets must be exhausted. Special consideration is afforded to spouses of nursing home residents. Spouses are allowed to keep monthly income such as Social Security benefits and retain a portion of the couple’s joint assets. During older adulthood, Medicaid often provides funding for nursing home care that would otherwise be unaffordable to many.  Next month we will review some Medicaid misconceptions and mistakes to look out for.

Medicare and Medicaid rules are complex.  If you have a specific question, you should consult with an attorney.

One of the biggest challenges facing seniors is financial security. A key aspect of this challenge is the need for long-term care insurance verses the affordability of the policy. The federal government is trying to help. In 2005, Congress passed the Deficit Reduction Act (DRA) in an effort to encourage and enable people to purchase long-term care insurance. The DRA created the Qualified State Long-Term Care Partnership program, which offers long-term care insurance policies that allow buyers to protect assets and qualify for Medicaid when the long-term policy benefits run out. When you purchase a policy, the state will not count an equal amount of assets as the face value of the policy when it determines your eligibility for Medicaid assistance.

For example, if you are single you would normally be allowed to keep only $2,000 in assets to qualify for Medicaid. However, if you buy a Qualified Long-Term Care Policy that provides a $150,000 of benefits, you would be allowed to keep $152,000 in assets and still qualify for Medicaid. When purchasing long-term care insurance it is important to purchase a qualified policy and to understand the different coverage options offered under the policy. For example some policies will offer inflation protection of 5% a year and non-forfeiture benefits which returns a least part of the premiums to you if you cancel or let your policy lapse. You should also understand when the policy will begin to pay for your care, what services are covered (skilled nursing facility, assisted living, home care) and the length of care covered. To get more information call the Idaho Department of Insurance Senior Health Insurance Benefits Advisors at: 1-800-247-4422.