Many people feel confused about the difference between Medicare and Medicaid. That confusion can lead people to improper planning for their medical needs as they age. Adults over the age of 65, as well as those who receive Social Security Disability benefits, typically qualify for Medicare. Medicare is a special insurance program designed to protect older adults and provide cost-effective health care options.
However, there are limits to what Medicare covers. That can leave some people in need of better coverage, such as what is available through Medicaid. Medicaid is an insurance program aimed at helping those with lower income levels connect with health care.
Older adults with more intense medical needs, such as those who may require in-home care, may find that Medicaid is necessary because Medicare does not cover what they require.
Since Medicaid is for low-income individuals, many adults with retirement plans, pensions or other assets may find it difficult to qualify for Medicaid without penalties that require them to spend thousands on health care. Proper planning for long-term care is important for anyone approaching their golden years.
Medicaid limits your income and your assets
To qualify for Medicaid for nursing assistance or long-term care, you must meet the relatively strict standards that Medicaid has for both existing assets and income. While your income may be fixed or low, your overall assets could present an issue. For example, common retirement funds, such as 401ks, can keep people from qualifying for Medicaid.
When determining eligibility, the government will look at the full amount of your retirement account, and not just the monthly amount you draw from it. In fact, Medicaid will look back for five years when reviewing your financial situation. Any transfers or gifts that you made during that five-year period could theoretically place you over the income or assets threshold.
If you hope to engage in long-term care planning to ensure that you qualify for Medicaid, the sooner you move assets to trust or family members, the better.
Long-term care planning should start when you approach retirement age
Planning an estate and planning a retirement are often viewed as separate. In reality, they both have to do with your assets and your senior years. There is a lot of overlap in the concerns related to both your retirement finances and your estate. When you update your estate plan as you move into retirement, that is an excellent time to consider long-term care planning.
Most adults are past the age where they can purchase affordable long-term care insurance policies. However, proper planning, such as the transferring of assets in the trust, can ensure that you will have the protections of Medicaid if you need them as you grow older.