Understanding Medicare and Medicaid
By Rick L Law,
Lead attorney, Law ElderLaw, LLP
Serving seniors and those who love them
in the Chicago metropolitan area.
Most people don't understand the difference between Medicare and Medicaid. They think that just because they or a loved one has Medicare, their long-term healthcare expenses will automatically be covered. That is simply not the case, as you will read below. The biggest difference is that Medicare only “cares” for a sick person if they show signs of recovery - if you can get better, you still qualify. However for many illnesses, that is simply not the case - as those of us with loved ones affected by Alzheimer's know. The only option left is to use Medicaid, which is only for the impoverished, and leaves the individual with very little income and just a little bit of money left over for emergencies. Whatever the case, an elder law attorney who specializes in the area of Medicaid should always be consulted - otherwise dangerous mistakes might be made which can cause terrible penalties for your loved one.
A sweet 82-year-old gentleman shuffled into my office a few months ago. He's someone I've known for over 35 years, so I could not help but notice that he is now bent over with scoliosis and arthritis of the spine, and his breathing is quite labored. He's a salt-of-the-earth kind of man; he and his wife have a simple home and are living frugally on what they feel is a “comfortable” retirement. Like many seniors, their combined pension and Social Security income is approximately $2,200 per month.
This man has come to see me because his wife, age 81, is declining—she has arthritis in her back, shoulders, and hands, and she's currently in rehab at a local nursing home recuperating from a fall at home that resulted in compression fractures of her vertebrae. She is also beginning to have problems with her short-term memory. Yet when I ask my friend how he is doing, he tells me, “I'm okay. We've been handling things at home. But I am a little worried that I may not be strong enough to help my wife when she gets released from the hospital.”
The ideal solution for this all-too-common situation would be for the couple to hire someone to help with in-home nursing care on a long-term basis, or perhaps a move together to a long term care facility. However, when I suggest this to clients the reaction I see is often fear, or at the very least, resistance. They aren't ready to take that step yet; they don't know what it entails, and are afraid to lose their independence. Many also feel they can't afford the cost of long term care, and are determined not to resort to Medicaid. In fact, when I mention Medicaid to this particular client, his reaction is strong: “I don't want to use Medicaid. I am afraid of Medicaid.”
My client doesn't yet understand that Medicaid is his only governmental assistance option in the event that his wife must go into an assisted living facility or nursing home - and statistics say she may have to within 3-5 years. He also doesn't yet realize that assisted living of some kind is all but inevitable. This confusion could be avoided if the subject is approached before a crisis hits, but broaching the topic is not easy. Often one of the children or grandchildren must bring it up.
In this case, as with many others, the earlier the subject is brought up, the better. If you aren't sure how to begin looking into long term care for a spouse, parent or loved one, there are a few websites that can get you started, including Long Term Care Living, and this guide from the AARP website.
The law surrounding elder care issues can be confusing to those who don't deal with it every day, especially the laws concerning Medicaid, which are murky and convoluted. This is the reason why talking to an elder law attorney is so important - his role is to help seniors understand their options for assisted living and Medicaid, and help them plan for a future in which they can be both physically and financially comfortable.
It is no secret that senior citizens are the wealthiest segment of the U.S. population. Much has been said about the trillions of dollars that will ‘change generational hands' as the current seniors pass their wealth to their children/grandchildren. Unfortunately, seniors have to contend with a dirty little secret that was put in place by the previous Republican administration when they passed the Deficit Reduction Act of 2005 (DRA).
The DRA made changes in the way that the government will punish seniors for acts of both charity and giving. The Medicaid rules presume that when a senior makes a gift to a favorite charity or a family member that the gift was an attempt to get rid of excess assets in order to qualify for Medicaid nursing home expenses. That's right—seniors are considered guilty until proven innocent. The burden of proof is on seniors to show that when they gave money to their church or child, that they had some reason other than to qualify for Medicaid.
This DRA rule creates a cruel penalty of ineligibility for Medicaid services - and this is where the biggest danger lies. If and when a senior who gave away money needs nursing home services at any time within 5 years after the gift, they will enter into a period of ineligibility - and if that money is gone, it's gone. The senior must find some other way to pay for the healthcare they need. Our government has created a punishment for seniors who may suffer chronic long-term illness within 5 years after a gift.
As long as this law is in place, seniors must remember that the IRS gift tax rule (allowing gifts up to $13,000 tax-free) is only a tax rule. Giving away $13,000 may cause a senior to suffer a loss in nursing home coverage of 2 to 3 months if they need such assistance within 60 months after giving that money away. Thanks to our government, giving may now be hazardous to your health…care!
This is just one of the many reasons you should exercise extreme caution when it comes to long-term illness and your loved one's finances. There are benefits available, but there are also rules in place that make sure the senior needs those benefits. You still have options, but you should contact your elder law attorney to see what they are - your attorney can help create a long-term care plan that will not let your loved one be sabotaged by a seemingly-innocent misstep in this complex maze of a system. Go to www.NAELA.com to locate an elder law attorney in your area.