Senior Moments: Medicare versus Medicaid: Just what is the difference? By Jackie Byrd
A column for seniors and those who love them
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I find the great thing in this world is not so much where we stand, as in what direction we are moving. To reach the port of heaven, we must sail sometimes with the wind, and sometimes against it; but we must sail, and not drift, nor lie at anchor. - Oliver Wendell Holmes
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Do you understand the Medicaid program and how it works? Do you understand the difference between Medicare and Medicaid? Do you know which one will pay for longtime nursing home care over days, weeks and months? Do you understand which one is a welfare program and only available on a means-tested base?
Wow. Quite a group of questions. So, today a little information on those topics. The column is not long enough to cover the entire waterfront, but every little bit of information helps add to our mental data base, and we can add more information to it as we go along. There are always many discussions of Medicaid and Medicare going on. Unfortunately, we sometimes lose the heart of the matter.
There is hardly anything more American than the much-admired concept of working hard to pay your own way; it's right up there with mom, baseball and apple pie. Americans know, however, that if our house accidentally burns down, we might not have ready cash to replace it, so we purchase fire insurance. Still, that's a form of taking care of ourselves and paying our own way. Americans know that if we're struck by cancer, heart disease or some other catastrophic illness, we might not be able to pay the medical bills, so we purchase health insurance of all kinds. That, also, seems to be a way of taking care of ourselves and paying our own way.
But what do Americans know about how they can pay their own way if they are struck by Alzheimer's disease, Parkinson's disease or some other chronic ailment requiring what is commonly referred to as long-term custodial care? What if they live an additional 20 years after they first discover that they cannot dress each day without help? If we've been paying attention, here's what we know: Medicare does not pay for long-term custodial care except for a very few days at the beginning. Private health insurance, no matter how great, does not pay for long-term custodial care. Tricare for Life, a much-appreciated benefit for veterans, does not pay for long-term custodial care. In our entire land, there are only three ways to pay for long-term custodial care: private funds for as long as they last, long-term care insurance and/or Medicaid. Not a very long menu of choices.
First, let's tackle paying privately, with your personal assets and funds, for long-term custodial care. Although may persons have a different impression, most U.S. elderly homes are far from affluent. As reported in May 2005 by Ellen O'Brien of the Georgetown Health Policy Institute, the median household income of elderly Medicare beneficiaries is $25,000 annually. Among elderly women living alone (those most likely to become nursing home residents) median household income is less than $12,000 annually.
Studies show that almost half of all nursing home residents pay with private funds during their entire nursing home stay. The idea that the government is paying for everybody in nursing homes does not stand up to the facts.
A June 2005 Kaiser Family Foundation paper reported that most elderly people in this country do not have assets sufficient, including equity in their homes, to finance a nursing home stay of one year or more. Furthermore, the paper reports that 84 percent of the elderly most likely to need nursing home care would exhaust their assets within one year there.
These studies are important for many reasons because their facts call into question the assertion the Medicaid spending will ever be significantly reduced by tightening transfer rules and other so-called, perceived loopholes. The Kaiser study showed that among the few elderly who could cover several years of nursing home care - and so presumably could take full advantage of Medicaid's asset transfer rules - only 1 percent are at high risk of needing nursing home care.
A 2001 paper written by economist Anthony Webb found that married couples across all asset classes save more if they expect to enter a nursing home. Among married couples, a belief that the wife is likely to enter a nursing home leads to an increase in savings and a reduction in consumption. This occurs regardless of the initial level of the household's financial assets.
On the other hand, the rich among us can afford the very best in home health care; the care everyone desires. The people most devastated by stringent and confusing Medicaid rules are really the middle-class seniors. People who own their home and have $100,000 or less in personal assets are in a bind if nursing home care is needed, because they have too many assets. They stand to lose many of them before Medicaid eligibility is established.
More later. Meantime, take another look at the new long-term care insurance products, and think about planning ahead.
Thanks for reading. Stay well. See you next week.
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The writer, a longtime resident of Bowie, is secretary of the Maryland/D.C. chapter of the National Academy of Elder Law Attorneys and a member of the Elder Law Section of the Maryland State Bar Association. You can e-mail her at jbyrd@byrdandbyrd.com.
