A Beginner’s Guide to Medicaid
Reviewed by: Dr. Brindusa Vanta, MD
Medicaid is a federally controlled, state-administered health insurance program that covers vulnerable Americans at all stages of life. As of November 2020, it insures more than 72 million Americans from birth through age 65 and beyond. Given the scope of its coverage base, it’s not surprising that the system is incredibly complex, and the rules may seem even more confusing if you’re thinking about nursing home placement and trying to navigate important long-term care decisions at the same time.
Although Medicaid has been insuring low-income families since 1965, the program is more important than ever due to the high cost of care. In 2019, health care costs increased by 4.6%, with Americans spending an average of $11,582 per person. In the fiscal year 2010, the total spending for long-term care was almost $208 billion. Given the high cost of assisted living and nursing home care, which ranges from $51,600 to $93,075 per year, many seniors depend on programs, such as Medicaid, to help pay for medical bills, personal care and other supports.
Medicaid is an excellent resource for seniors. It provides comprehensive coverage as a standalone product, and it works hand-in-hand with Medicare to help older adults manage their health care and long-term care costs. In most states, it allows seniors to receive covered services in a setting of their choice, not just in residential institutions. However, it’s hard to understand how the program works, what it covers and who qualifies, especially since requirements vary by state and differ based on an applicant’s medical needs and financial situation.
In this guide, we’ll explain Medicaid in basic terms to help you understand the program, learn about eligibility requirements and see what’s covered. We’ll talk about specific Medicaid benefits for senior care that’s provided at home, in assisted living communities and in skilled nursing facilities. Our goal is to leave you with a solid understanding of what Medicaid is and how it can help you or a loved one.
What Is Medicaid?
Medicaid is a federal health insurance program available to low-income families and other mandatory coverage groups. In 2013, the Affordable Care Act expanded Medicaid eligibility to adults earning up to 138% of the Federal Poverty Level (FPL). This is true in many states, although income limits can vary. States with the highest Medicaid enrollment include:
- California (10,860,126)
- New York (5,863,440)
- Texas (4,034,937)
- Georgia (3,805,520)
- Pennsylvania (2,980,867)
States with the highest number of enrollees as a percentage of the population include:
- New Mexico (34%)
- Louisiana (28%)
- Vermont (28%)
- Washington, D.C. (28%)
- West Virginia (28%)
One of the most confusing things about this system is that there isn’t just one type of Medicaid. Most states have several Medicaid programs that target specific populations. In addition to regular Medicaid, which serves low-income adults, there’s a poverty-level program for the Aged, Blind or Disabled. Institutional Medicaid is one of the more relevant programs for older adults, and it’s what we’ll focus on in this guide.
Institutional Medicaid is an important source of long-term care funding. This program covers more than 60% of the nation’s nursing home residents. Additionally, Medicaid pays for more than 50% of long-term care claims nationally, which makes this program an important part of the federal budget, as well as the health care industry and the nation’s economy.
Medicaid pays for care provided in nursing homes, which is important because Medicare only pays for 100 days of skilled nursing per coverage period. It also covers in-home care and personal assistance through Home- and Community-Based Services waivers. These add-ons allow states to offer additional benefits, as long as they’re consistent with federal guidelines.
How Does Medicaid Work?
If you want to access Medicaid benefits, including long-term care waivers, the first step is to apply for coverage. You can complete this process through the Healthcare Marketplace or your state’s Medicaid agency. Applications are typically processed by the Department of Human Services or a similar division.
To qualify for Medicaid, you must meet certain financial and medical eligibility requirements. There are income and asset limits, and for some benefits, applicants must require a nursing facility level of care (NFLOC), as determined by a functional needs assessment that rates your health and ability to perform everyday tasks.
Since Medicaid is for individuals who have limited resources and/or extensive medical needs, there are no premiums or deductibles in most cases. However, some states have share-of-cost requirements that are typically based on your income. Once your coverage is in place, you’ll have access to primary and emergency medical care, as well as long-term services and supports. In some states, Medicaid is administered by the government, and other states have managed care organizations that are operated by private insurers. This type of coverage gives you access to Health Maintenance Organization (HMO) or Preferred Provider Organization (PPO) networks that will be familiar if you’ve had other types of insurance.
One of the nice things about Medicaid is that if you’re a dual enrollee, it can take care of your Medicare copays or coinsurance, and it will handle any charges that aren’t picked up by your primary insurance. Medicaid may also pay for prescription medications that aren’t covered by your Part D prescription drug coverage or Advantage Plan. According to federal Medicaid regulations, this type of coverage is optional, but all states choose to offer it, and it covers nearly all FDA-approved medications, which the program purchases at cost, thanks to rebates and special agreements with pharmacies.
What Does Medicaid Cover?
Medicaid covers certain mandatory medical services similar to those offered by Original Medicare Parts A and B. These include the following:
- Hospital care
- Skilled nursing
- In-home care
- Doctor’s visits
- Preventive care
- Wellness screenings
- Medical transportation
States have the option to offer additional benefits, such as dental and vision. Other optional benefits include:
- Personal care
- Case management
- Prescription drug coverage
- Physical and occupational therapy
- Respiratory services
- Rehabilitative care
- Speech therapy
What Medicaid Does Not Cover
Although Medicaid will pay for some services that aren’t covered by Medicare, the program does have some coverage exclusions. Most items that aren’t covered fall into one of four categories:
- The services are unreasonable or medically unnecessary
- Charges were improperly bundled or billed through another allowance
- Providers were reimbursed through another program
- The particular service or test isn’t covered
Medicaid won’t pay for medical care provided outside of the United States, except in certain travel-related situations or when a foreign hospital is closer than domestic alternatives. Additionally, Medicaid will not pay for:
- Durable medical equipment replaced through a warranty
- Health care services provided by another government agency
- Free health screenings or devices that are given away
- Cosmetic surgery and any resulting complications
- Personal comfort items, such as TVs and beautician services
Who Qualifies for Medicaid?
Medicaid is a federal entitlement program that offers guaranteed coverage to all qualifying residents. Certain individuals, including low-income families, pregnant women and adults who are blind or disabled, are included in mandatory eligibility groups. States may also offer optional coverage to individuals who are categorically needy. This includes seniors who receive home- and community-based services, are on hospice, live in a nursing home or are in poor health. Because each state operates its own Medicaid program within the federal framework, income limits and medical eligibility requirements vary by state.
Financial Eligibility for Medicaid
At least 42 states have adopted the optional Special Income Level standard for Institutional Medicaid. Under the special income rule, individuals who are expected to need nursing home care for at least 30 days can earn up to 300% of the Supplemental Security Income Federal Benefit Rate. For 2021, the limit is $2,382 per month, and it typically doubles for couples applying jointly.
A handful of states, including Tennessee, Washington and Wyoming, set the income limit as low as $794, which is 100% of the FBR. Other states, such as California, Hawaii and Kansas, require seniors to use all or nearly all of their income for institutional long-term care before Medicaid kicks in. Fortunately, there are other ways for individuals who have substantial medical needs to qualify for Medicaid.
Asset Limits and Exemptions
Medicaid has strict asset limits of $2,000 per applicant and $4,000 for couples, although this may vary by state. Since Medicaid is never simple, there are also a number of exemptions. For example, if your spouse needs nursing home care but you plan on staying at home, you may be entitled to keep a significant amount of assets, typically upwards of $100,000 in most states. You may also be entitled to collect at least $2,155 or up to $3,259 of your spouse’s income as a minimum monthly maintenance needs allowance to help you pay your bills and everyday expenses.
The following items are considered countable assets:
- Cash and bank accounts
- Secondary homes or vehicles
- Life insurance policies with a cash value
- Revocable trusts
- Certain annuities
Exempt assets include:
- Retirement accounts
- A primary vehicle
- A primary home up to a fixed value
- Personal property
- Household items
The American Council on Aging provides a state-by-state eligibility guide. You can visit MedicaidPlanningAssistance.org to find the income limit for your state.
Institutional Medicaid only pays for skilled nursing if individuals need this level of care. Most states require seniors to complete a functional needs assessment as part of the application process. This assessment typically takes 45 minutes to an hour to complete. An assessor asks a series of state-approved questions to gauge the applicant’s functional needs, mobility, overall health and need for assistance with activities of daily living. These answers are then scored and used to determine an overall rating.
To qualify for Institutional Medicaid or Long-Term Services and Supports that are covered by Medicaid waivers, applicants typically must require assistance with at least two activities of daily living. States may also consider the applicant’s medical history since some conditions, such as Alzheimer’s disease and Parkinson’s disease, may necessitate the need for institutional long-term care.
If you think you may qualify for Medicaid, you must apply for coverage in your primary state of residence. Benefits are available to U.S. citizens and legal residents. Out-of-state coverage is limited unless you experience a life-threatening emergency or are unable to access necessary services in your home state.
How to Know If You Qualify for Medicaid
The only way to see if you qualify for Medicaid is by completing an application. However, before you do, consider working with a Certified Medicaid Planner (CMP) to ensure the best chances for success. Medicaid is one of the government’s most complex bureaucratic systems so it’s worth hiring a professional, just as you would hire an accountant to file your taxes or consult a lawyer for help with legal questions.
CMPs are certified by the CMP Governing Board. They must meet strict standards for education and work experience before they can sit for this exam. Most certified planners have at least a bachelor’s degree or an associate’s degree, along with two years of full-time work experience in law, financial planning, social work or long-term care within the past six years. CMPs include attorneys, accountants, social workers, financial advisors and geriatric care managers.
Some CMPs charge for their services, while other organizations offer free assistance, thanks to private donations and community block grants. If you have assets that you would like to protect or a spouse and family that you’d like to provide for even if you require long-term care, consulting a professional is the best option for addressing your current and future needs, especially since asset spend-downs and real estate transfers are subject to a five-year look-back period.
You can find a professional in your community by calling 211 or contacting your local senior center, legal aid society or Area Agency on Aging. The American Council on Aging also offers a free service that can check your eligibility and match you with a qualified advisor before you need long-term care.
Medicaid Coverage of Residential Senior Care
Due to the high cost of skilled nursing, which averages around $7,756 per month, Medicaid is an important source of funding for almost two-thirds of the nation’s nursing home residents. Medicaid picks up the slack once Medicare beneficiaries have exhausted their 100 days of skilled nursing facility (SNF) coverage, and it covers individuals who need skilled nursing but don’t qualify for Medicare.
Today, 43% of Medicaid long-term care spending goes toward care provided in skilled nursing and intermediate care facilities. The remaining 57% of funding goes toward waiver programs that allow members to receive long-term services and supports in assisted living facilities, senior living communities or their own homes. There are a few ways that Medicaid can help with the cost of long-term care:
- Nursing Homes: In addition to providing regular medical care, Institutional Medicaid pays for skilled nursing, personal care, room and board and specialized rehabilitative services provided in nursing homes.
- Assisted Living: Since assisted living facilities are less costly and less restrictive, many states will pay for these services through waiver programs. However, residents are still responsible for room and board.
- Community Housing: Nearly all Medicaid waivers will pay for the cost of personal care, home modifications and supportive services provided at home or in a residential setting, such as subsidized senior apartments.
To receive long-term care benefits, you must require a nursing home level of care as determined by a functional needs assessment that gauges your ability to perform activities of daily living, such as cooking, bathing, dressing and toileting. You must also meet your state’s income and asset limits.
Fortunately, many states offer spend-down programs that allow medically needy adults to qualify for Medicaid if they use excess income to pay for qualifying medical bills. States that offer a medically needy qualification pathway must also permit residents to establish a Qualified Income Trust, also called a Miller Trust. With this option, excess money is diverted into an irrevocable trust to help you meet the state’s income threshold. Approximately 36 states provide this qualification option to help residents who need long-term care.
Home- and Community-Based Services (HCBS) waivers are a great resource for seniors. Waivers were first introduced in 1983 through section 1915(c) of the Social Security Act, and many programs still bear this title. Today, there are more than 300 waiver programs available in 47 states. Collectively, they cover more than 1.4 million seniors and disabled adults while giving them the freedom to age in place and avoid institutional care.
Waivers are important because, normally, Medicaid only covers long-term services and supports that are provided in licensed health care institutions, such as nursing homes. Waivers let beneficiaries receive these services at home or in another community-based setting, such as an assisted living facility.
The government’s goal was to reduce long-term care spending by allowing members to receive covered services in the least restrictive and costly setting. However, these programs also benefit seniors who want to age in place and remain in comfortable surroundings, which creates a win-win for the government and the public. There are several types of HCBS waivers:
- 1915(c): Traditional HCBS waivers cover medical and nonmedical services, such as respite care and adult day health care, that are designed to prevent or delay the need for institutional services.
- 1915(i): Available to targeted groups, State Plan Home- and Community-Based Services cover acute care, as well as long-term supports, such as home modifications and case management.
- 1915(j): Some states opt to provide Self-Directed Personal Assistance Services. Participants receive funding to hire, train and pay qualified caregivers, including relatives.
- 1915(k): Introduced in 2011, Community First Choice waivers allow states to cover home- and community-based attendant services.
- 1115: Demonstration waivers are available in nearly 25% of states. These pilot programs give states greater flexibility as long as they can show that government spending won’t increase.
Frequently Asked Questions
Is Medicaid free?
Yes, Medicaid is usually free. Although states are permitted to require a share of cost, there are usually no premiums, deductibles or copays with Medicaid since this program is intended for low-income families and individuals with very high medical bills. Cost sharing may be required for some higher-income target groups, and you may incur out-of-pocket expenses when requesting certain name-brand, non-preferred medications. If you qualify for Medicare, Medicaid may even pick up some excess charges.
What’s the difference between Medicare and Medicaid?
Medicare and Medicaid are both federally managed insurance programs, but there are several differences. Medicaid is an income-based program available to certain individuals who meet financial eligibility requirements. Medicare is available to all adults who are aged 65 or older, regardless of income. Younger individuals who have end-stage renal disease, Lou Gehrig’s disease or have received Social Security Disability benefits for at least 24 months also qualify for this program.
Does Medicaid pay for assisted living?
Yes, many Medicaid programs cover assisted living and personal care through waivers or managed care organizations. At least 34 states have Community First Choice Waivers, and 39 states have HCBS waivers or managed care organizations that cover personal care, household assistance, transportation, delivered meals, case management, emergency response systems and related supports. There may be restrictions on where participants can receive these services, and seniors still have to pay for room and board, unless they qualify for an SSI stipend. Waivers are also subject to waiting lists.
Can I get paid by Medicaid to be a caregiver?
It’s possible for informal family caregivers to receive compensation for the services that they provide through Medicaid. Consumer-directed or self-directed waivers may grant seniors a needs-based stipend that they can use to hire their own caregivers. A handful of states, including Arizona, Florida, Kentucky, New Jersey and Wisconsin, even compensate caregiving spouses. The caregiver must register as a provider with the state’s Medicaid program and meet certain other requirements to qualify.
How do you qualify for Medicaid?
Medicaid eligibility is based on your income, assets and medical need. Requirements may vary, depending on your age and whether you have a disability. The state will also consider your health care expenses if you are medically needy and earn too much to qualify through regular eligibility pathways. You can see if you qualify by contacting a Certified Medicaid Planner, completing a Medicaid eligibility test or applying through your state’s Medicaid agency.
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