As we age, we may find ourselves in limbo regarding our health insurance needs. While health insurance needs vary from person to person, Medicare and Medicaid are two health insurance options designed for those 65 and over. Understanding how these two health insurances work together may help Medicare receipts determine if they want to maintain their Medicaid eligibility after a settlement or inheritance.

What is Medicare?

Medicare is an earned benefit, from working and paying taxes, and is often used as primary insurance for those who are age 65+. Medicare is also accessible to those who are permanently disabled who have paid taxes into the program.

What is Medicaid*?

Medicaid is a needs-based benefit accessible to those who are disabled or who have low income.

Medicare and Medicaid, Dual-Eligible

In some cases, a person may be eligible for both Medicare and Medicaid – we call this Dual-eligible. When a recipient is dual-eligible, Medicare can be used as the primary form of health insurance, and Medicaid can be used as a secondary. In this arrangement, Medicaid can be used to pay Medicare’s monthly premium (approximately $170 a month in 2022) and also covers long-term care needs not generally covered by Medicare.

Settlement and Inheritance Planning

Dual-eligible recipients have strict income and asset limits to maintain their Medicaid. This means in most states dual-eligible recipients receiving a settlement or inheritance must decide if protecting Medicaid eligibility is important as qualifying for both may be financially beneficial.

We recommend protecting Medicaid whenever possible, with a Pooled Special Needs Trust or a Spend Down. Protecting Medicaid is even more important if the recipient is on a tight monthly budget, has extensive prescription costs, has high medical expenses, or requires caregiving services or a skilled nursing facility now or in the future. Without Medicaid, these expenses would be paid out-of-pocket.

Without Medicaid, Medicare premiums will be automatically deducted from a recipient’s monthly Social Security income which could impact their ability to afford daily living expenses.

Dual-eligible recipients have the best of both worlds when it comes to managing their health insurance and their finances now and in the future. For this reason, we recommend preserving Medicaid benefits using a Pooled Special Needs Trust or a Spend Down.

If you have additional questions or need assistance, please feel free to schedule a free consultation with us, here.

*There are many forms of Medicaid coverage.  For the context of this article, this only refers to the form of eligibility available to Medicare recipients.

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Resources:

1. Get Help Paying Costs: Medicaid, 2020: https://www.medicare.gov/your-medicare-costs/get-help-paying-costs/.medicaid
2. Effect of WCMSA on Medicaid Eligibility, 2005: https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/WCMSA-Memorandums/Downloads/July-11-2005-Memorandum.pdf
3. DUALLY ELIGIBLE BENEFICIARIES UNDER MEDICARE AND MEDICAID, 2020: https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/medicare_beneficiaries_dual_eligibles_at_a_glance.pdf
4. Costs of Care: Nursing Home Costs by State and Region: Updated March. 2022 (medicaidplanningassistance.org)
5. https://www.medicare.gov/

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