This is Strategy #4 from Lamson & Cutner’s publication, “25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.”  Click here to see the other strategies.

Understand the difference between Medicare and Medicaid.

Medicare and Medicaid are both medical and health programs provided by government entities to pay benefits to senior citizens and the disabled. That's where the similarity ends. They're completely different, and each has its own rules and regulations. Many people confuse the two, but their functions are quite distinct.

Medicare is medical insurance for seniors and the disabled. It's similar to any other medical insurance policy, except that the federal government provides it, if you are age 65 or older and you or your spouse worked and paid Medicare taxes for at least 10 years. Medicare pays expenses related to short-term illness or injury, acute care and rehabilitation.

Unlike Medicare, Medicaid is a federal, state and locally funded program. In addition to covering medical services, it provides benefits for those needing long-term, custodial care, who are permanently ill, injured or disabled, and who are financially eligible.  Medicaid will assist people who have difficulties with the “activities of daily living,” such as bathing, dressing, eating, and going to the toilet, as well as those who need skilled nursing care. Medicaid also covers most medical expenses that are not covered by Medicare or other insurance.

A major benefit of being approved for Medicaid is that it will pay for long term care expenses that Medicare doesn't cover. You may also gain access to additional services, such as adult day care.

For example, Lamson & Cutner represented a single, middle-aged man suffering from traumatic brain injury. We shifted his excess income to a protective trust, so that it could still be used to pay his living expenses. As a result of this planning, he qualified to receive Medicaid benefits, and to be placed on the Traumatic Brain Injury Waiver Program list, which provides extra services for his special needs.

Remember: Your medical insurance is for acute medical needs and rehabilitation only. In our experience, a significant number of people assume that their Medicare or other medical insurance will cover the cost of their long-term care, which is entirely incorrect. Also, while Medicare and supplemental insurance provide “up to 100 days” of coverage for rehabilitation from a given injury or illness, actual coverage may be far less if rehabilitation is achieved earlier, or you are not making progress. Patients are often surprised when the rehab facility tells them they are going to be discharged, when they are not ready to resume their former lifestyle, and need continuing care. They suddenly find that they will be obligated for large out-of-pocket costs.

25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs

1. You can qualify for Medicaid (even if you don’t think so)
2. The “Wait and See” Approach can Result in Ruinous Health Care Expenses.
3. Plan for Home Care and Nursing Home Facility Care while You Still Can.
4. What’s the difference between Medicare and Medicaid?
5. It’s NOT too Late for Effective Medicaid Planning (even if you think it is)
6. Why Hire an Elder Law Attorney?
7. Don’t Prepare Your Own Medicaid Application
8. Trusts Can Protect Your Home and Your Money!
9. Special Trusts for Specific Purposes
10. Protecting Co-op Apartments Require Special Handling
11. Evaluate Your 401k or IRA Carefully when Planning for Medicaid
12. Why Take the Lump Sum Option on Your Pension or Retirement Account?
13. Choose Your Trustee Wisely
14. Private Annuities can Help Protect Your Assets
15. Caregiver Agreements Help Achieve Medicaid Eligibility
16. Keep Your Medicare Insurance
17. The Durable Power of Attorney
18. Elder Law and Estate Planning
19. The Health Care Proxy vs. the Living Will
20. How to Choose an Elder Law Firm
21. Streamline Your Financial Affairs and Record Keeping
22. New York State is More Generous than Other States
23. Your Attorney can Help Find the Best Care for You
24. Long-Term Care Insurance Won’t Necessarily Solve the Problem
25. Compassionate Elder Law Planning Focuses on Your Future Quality-of-Life!