A Beginner’s Guide to Medicaid
Medicaid is a state-operated program that provides medical care coverage for certain low-income individuals and families with limited resources. It’s also an enormous part of the health care system in the United States: As of September 2018, nearly 73 million people were enrolled in Medicaid, and in 2017, the program accounted for 17 percent of national health care expenditures.
Nationwide Medicaid Enrollees by Demographic Group
Adults 65 and over
Adults under 65
Source: Kaiser Family Foundation, 2019
People often confuse Medicare and Medicaid, but the two programs are different in a number of ways, including the following.
- Medicare is federally funded using taxpayer dollars and is available to all individuals age 65 and older, and to younger individuals who meet specific disability requirements. All seniors qualify for Medicare coverage, but whether you pay for certain elements of the coverage depends on how long you paid into the Medicare/Social Security system through payroll taxes.
- Medicaid is a federally aided program, which means some federal tax dollars go toward helping states fund their programs. However, the programs are operated at the state level, so certain elements of each program may be different.
- Qualifying for Medicaid isn’t based on Social Security benefits or even age. Whether you qualify for the state-run coverage depends on your income and resources.
The Medicaid program has several parts:
- Medical coverage through Medicaid includes most common forms of health care. Medicaid medical benefits cover at least the same health care services that Medicare does, as well as some services that Medicare doesn’t cover. Medicaid may also pay Medicare premiums, deductibles, and copayments for people who are enrolled in both programs.
- A separate part of Medicaid covers long-term nursing home care.
- Special Medicaid-funded programs cover long-term, in-home personal care. Income and asset eligibility rules for these long-term, at-home care programs are usually quite a bit looser than for regular Medicaid programs.
- In some states, a Medicaid-related program can pay some of the costs of assisted living.
Determining whether you’re eligible for Medicaid can be difficult, let alone figuring out what the program covers and how to apply. This guide explains some of those topics and addresses whether Medicaid may be an option for covering care-related expenses for seniors.
How Does Medicaid Work?
Once you qualify for Medicaid, you’ll receive a medical card and benefits that you can use in much the same way as health insurance coverage through any other insurer. Because determining eligibility for Medicaid can be complex, that topic is covered in depth later in the article. This section explains some basics about how Medicaid works, including what it covers and how to use it.
First, individuals who are eligible for Medicaid coverage may have it as their only health coverage or in conjunction with another plan (including Medicare). Federal law requires that Medicaid be considered the “payer of last resort.”
That doesn’t mean you can’t rely on Medicaid benefits if you have them. What it means is that Medicaid will pay after any other payer has paid its share of the services provided. For example, if you have Medicare or any type of private health care coverage, Medicaid will always be the secondary payer. Health care providers will bill the primary payer first, and Medicaid will then consider the claim and may pay any balance due after the primary payer has paid.
Individuals who qualify for Medicaid often don’t have to pay a monthly premium for the benefits, but there are some exceptions. In certain cases, if someone is receiving Social Security benefits, a nominal deduction may be made from those benefits, depending on total resources and income, to help supplement the cost of Medicaid coverage.
Otherwise, the program provides 100 percent coverage for most medical expenses and does not require payment of premiums or deductibles. In addition, health care providers who accept Medicaid cannot bill the patient for any additional charges after Medicaid has adjudicated the claim, as they can with Medicare. The only exception to this is in some cases where state Medicaid plans cover “optional” medical services that are not covered under Medicare.
Some people confuse Supplemental Security Income (SSI) with Medicaid because people with SSI automatically have Medicaid. The reverse is not true. SSI is federally funded by tax revenues. It is designed to aid the aged, blind, and disabled who have little or no income so they can meet their basic needs for food, clothing, and shelter.
Medicaid programs may also differ in each state. To find out exactly which Medicaid and Medicaid-related programs operate in your state – including what they cover and who’s eligible – contact a local office of your state’s Medicaid program.
To find a local Medicaid office, go to the federal government’s[LS1] Benefits.gov website and choose your state from the dropdown menus. Also choose the “Medicaid and Medicare” subcategory. This will take you to a page with information about your state’s Medicaid program and contact information for local offices.
Is Medicaid valuable for someone who also has Medicare?
If someone qualifies for both Medicare and Medicaid, Medicare covers most of that person’s medical services. But there are a number of medical services that Medicare doesn’t cover, and a state Medicaid program might cover those expenses.
Also, Medicare sometimes doesn’t pay a person’s medical bills entirely, even for covered services. Your out-of-pocket expenses as a Medicare beneficiary can include Medicare premiums, deductibles, and copayments, as well as the cost of some prescription drugs not covered by a Medicare Part D prescription drug plan.
If Medicare Part A or Part B covers a medical service but leaves some part of the cost unpaid, Medicaid will pay that extra amount for someone who’s enrolled in both programs. Someone with both Medicare and Medicaid must enroll in a Medicare Part D plan in order to get their prescription drugs covered, but Medicaid may cover some drugs not included in Medicare Part D plans.
What kind of medical care is covered by Medicaid?
Every state’s Medicaid program covers basic medical care to the same extent that Medicare Part A and Part B do. This includes:
- Inpatient hospital care
- Inpatient short-term skilled nursing or rehabilitation facility care
- Doctor services
- Outpatient hospital or clinic care
- Laboratory and X-ray services
- Short-term home health care (provided by a home health care agency)
- Ambulance service
- Prescription drugs for people not covered by Medicare
For these basic services, neither Medicaid nor the health care provider may charge the patient any copayment.
State Medicaid programs may choose to cover optional medical services beyond those listed above. If a state Medicaid program covers an optional medical service, the patient may be charged a small co-payment. The optional coverage offered and the copayments for each optional service vary from state to state but may include:
- Eye examinations and glasses
- Hearing tests and hearing aids
- Dental care
- Preventive screenings
- Physical therapy (beyond what is offered under Medicare)
- Non-emergency transportation to and from medical treatment
- Some prescription drugs not covered by Medicare
- Some nonprescription drugs, including certain vitamins
- Chiropractic care
Will Medicaid cover medical care from any provider?
In order for Medicaid to cover your medical care, a doctor or another provider who participates in Medicaid must provide the medical services you use. But Medicaid doesn’t reimburse doctors and other health care providers at the same rates as private insurance, so many practitioners do not see patients who have Medicaid as their only coverage. If you’re enrolled in Medicaid, make sure to check in advance with any health care provider about whether they accept Medicaid patients.
Many Medicaid enrollees receive care through a Medicaid managed care plan, such as a health maintenance organization, or HMO. These Medicaid managed care plans work in the same way that a Medicare Part C managed care plan does, meaning there are restrictions on which doctors and other providers you may see. However, there’s no monthly premium and no copayments, except for any optional services beyond what Medicaid is required to provide.
In some states, you can choose from several of these Medicaid managed care plans in addition to regular Medicaid coverage, under which you’re free to choose any doctors or other providers as long as they accept Medicaid patients. When you enroll in Medicaid, you get information from your local Medicaid office about what Medicaid managed care plans are available to you and how they work.
What Medicaid Does Not Cover
Medicaid covers a broad range of medical care, but the program generally doesn’t cover certain items and services. For example, Medicaid doesn’t cover prescription drug costs. However, those who are eligible for Medicaid may be able to get their premiums paid through Medicare Part D, Medicare’s prescription drug plan.
Below are some additional health-care-related costs not covered by Medicaid:
- Routine or annual physical checkups
- Over-the-counter medications or supplements
- Custodial care, or assistance with activities of daily living
- Missed appointments
- Dental services
- Cosmetic surgery
- Medical services provided outside of the U.S.
More information on the items and services not covered by Medicare, plus exceptions to those exclusions, can be found on the Medicare website. The Medicaid website includes a list of items and services all states must cover, as well as a list of benefits that states may choose to cover or not cover.
Who’s Eligible For Medicaid?
It partly depends on where you live. In all states, you can qualify based on income, family size and status, disability and other factors that may vary by state. But when the Affordable Care Act was enacted, states had the opportunity to expand Medicaid eligibility based on income alone, using the standard of Modified Adjusted Gross Income (MAGI). With this system, each state’s income standard is set as a percentage of the federal poverty level. Other requirements can include citizenship, immigration status, and state residency.
Certain groups of people getting Medicaid through another program also may still have to qualify under the old guidelines, and asset or resource tests are still required when applying for long-term senior care. Asset limitations are based on whether the individual is single or married with an at-home spouse. Meeting these limitations is the most difficult criteria when applying for Medicaid for the purpose of covering long-term senior care.
Single, unmarried seniors seeking Medicaid coverage to cover long-term care cannot have countable assets that exceed a certain amount. Additionally, those individuals cannot have an income that exceeds a specified amount per month. Similarly, married persons with an at-home spouse cannot have combined countable assets that exceed a certain amount per month. However, the Medicaid applicant is allowed to keep a specified amount of income per month.
Refer to the Medicaid website at www.cms.hhs.gov for the current limitations.
- Checking accounts, savings accounts and CDs
- Investment accounts, including mutual funds, stocks and bonds
- Credit union accounts
- Certain life insurance policies, based on amount of face value
- Annuities that have not annuitized (beneficiary not yet receiving payments)
- Automobiles, if more than one is currently registered
- Second homes and non-business properties
- Revocable trust accounts
- Promissory notes
- Primary residence, if applicant is married with an at-home spouse, or if applicant intends to return to home
- Property used in business or trade
- One automobile
- Household items and family heirlooms
- Pre-need burial expenses, up to $1,500
- Life insurance policies less than $1,500
- Annuities, if the beneficiary is receiving payments
To qualify for long-term care coverage in a nursing home setting, seniors can’t simply give away their assets to meet requirements. This may come with some penalties, depending on how the asset transfers were handled.
How much income is allowed for Medicaid medical coverage?
Medicaid coverage is available only to people with very low income. Exactly how much income is permitted depends on the state where you live. In all states, if your income falls below the eligibility standard for the federal government’s Supplemental Security Income program, known as SSI, you’re also eligible for Medicaid medical coverage.
This amount is about $770 per month in what’s called “counted” income. But quite a bit of your actual income might not be counted toward this figure, so you should consider applying for Medicaid, even if your monthly income is much higher.
If either spouse in a married couple applies for Medicaid, the income of both spouses (if living together) is counted by Medicaid when deciding eligibility. Also, if a Medicaid applicant receives free housing and regular meals from family or friends, or has bills regularly paid for them, Medicaid may consider this as income when deciding eligibility.
In many states, Medicaid medical care coverage is also available to people whose income is higher than the state’s Medicaid eligibility level if they also have regular medical expenses that aren’t paid by another program or insurance. This category of people is known as “medically needy.”
So if you have any regular medical bills that aren’t covered by Medicare or other insurance, you still may be eligible for Medicaid coverage, even if your income is well over the normal Medicaid limit.
How much in assets is allowed for Medicaid medical care coverage?
An individual applying for Medicaid medical coverage is allowed around $2,000, and a married couple living in the same house can have $3,000 in cash, savings, or other assets, plus a number of other assets that are excluded from Medicaid eligibility rules. The actual allowed amount can vary by state. Exempt assets include:
- A house that the applicant lives in
- An automobile, sometimes limited to a certain fair-market resale value
- Personal property and household goods for regular daily use, sometimes limited to a certain fair-market resale value
- Wedding and engagement rings
- Life insurance with a total face value (cash surrender) of no more than $1,500, and term life insurance with no cash surrender value
- Specially earmarked funeral and burial fund of up to $1,500, plus a burial space
A person who wants to apply for Medicaid medical coverage can give away or transfer any amount of assets in order to qualify. Medicaid medical coverage eligibility doesn’t have any of the rules or penalties regarding transfer of assets that apply to Medicaid nursing home coverage.
How do I get help with Medicare costs if my income is too high for Medicaid?
If you have low countable income and few assets (not counting your home, a car and other personal possessions), but your income or assets are slightly too high to qualify for Medicaid, you still may be eligible for another program that provides substantial financial help with medical costs. These other programs are called Qualified Medicare Beneficiary (QMB), Specified Low-Income Medicare Beneficiary (SLMB), and Qualifying Individual (QI).
Here are the basics about these three programs as of 2018. The numbers can be adjusted over time, so always double check your eligibility.
- QMB: You may qualify as a QMB if your individual monthly income is $1,032. (This limit is slightly higher in Alaska and Hawaii.) You may also have nonexempt individual assets of up to $7,560 ($11,340 for a married couple). If you qualify as a QMB, your state will pay for Medicare Part A and Part B premiums, deductibles, co-insurance, and co-payment amounts.
- SLMB: You may qualify as an SLMB if your individual monthly income is $1,234. (This limit is slightly higher in Alaska and Hawaii.) You may also have nonexempt individual assets of up to $7,560 ($11,340 for a married couple). If you qualify as an SLMB, the program will pay your Medicare Part B premium only.
- QI: You may qualify as a QI if your individual monthly income is $1,386. (This limit is slightly higher in Alaska and Hawaii.) Your nonexempt individual assets can be no more than $7,560 ($11,340 for a couple). If you qualify as a QI, the program will pay your Medicare Part B premium only, but you must apply each year. Benefits are granted as applications are received, and priority is given to those who got QI benefits the year before. If you qualify for Medicaid, you can’t get QI benefits.
How does Medicaid spend down work?
“Spending down” refers to the process of reducing your assets in order to qualify for Medicaid. Medicaid eligibility requirements are established by each state, so you will need to contact your state’s department of health to learn the current asset limit where you live. There are two different asset limits: one for the “Medicaid Only” program and one for the “Medically Needy” program.
Medicaid allows the reduction of assets through paying off debt, making home modifications, buying a car and prepaying funeral expenses. However, other methods of spending down (such as giving away assets, transferring property and creating certain annuities) can trigger a penalty, depending on the type of Medicaid coverage you are seeking. In addition, if the equity interest in your home exceeds a certain amount, you may be ineligible for Medicaid.
Assets that are exempt from spending down
Certain assets are exempt from spending down. The home of a single individual is exempt if the person intends to return to it. In some states, Medicaid assumes that the person will not return home if he or she does not return within six months of entering a nursing home, in which case it would not be exempt.
However, if the person in the nursing home is married and the noninstitutionalized spouse remains in the home, then the home is exempt from spending down. Similarly, for a married couple with an at-home spouse, the family car is also exempt.
How Medicaid views community spouses and individuals
The at-home spouse, also known as the “community spouse,” gets a “community spouse resource allowance,” which means that he or she gets to keep 50 percent of the couple’s assets up to a predetermined maximum. Those assets are exempt from spending down since the spouse is legally permitted to keep them. (Some states allow the community spouse to keep 100 percent of the couple’s assets, but the maximum value is the same.)
Medicaid determines the maximum amount of assets the community spouse is allowed to keep. The amount of spend-down is determined based on the assets of the couple as of the day the institutionalized spouse enters a facility, a hospital, a nursing home or — in some states — an assisted living facility for a designated extended period of time.
Medicaid refers to this date as the “snapshot date.” In what is known as the “five-year look back period,” Medicaid officials may review an applicant’s financial transactions from the preceding five years to ensure that all transactions meet Medicaid’s eligibility requirements.
Various exemptions and allowances are available to married couples that are not available to single individuals. In addition to the family home and family car exemptions and the community spouse resource allowance, the community spouse is also entitled to a “minimum monthly maintenance needs allowance.” However, a single individual is only entitled to a very modest monthly personal needs allowance and to limited exemptions. The allowances for community spouses are intended to protect them from being reduced to poverty.
Get a Medicaid planner
We strongly recommend drafting a Medicaid/Asset Protection Plan with a professional Medicaid planner. The goal of such a plan is to “dispose” of assets in a manner designed to protect and preserve those assets for related costs in the future, such as for the funeral costs of the institutionalized spouse. These funds can be converted to exempt status and protected from spend down.
Medicaid planning routinely involves the transfer of the funds to a relative (not a spouse) or other trusted beneficiary. Once those funds have been given, they belong to the recipient to do with as they wish, including holding the funds in the event the patient may develop a need that Medicaid will not cover.
Medicaid Coverage of Residential Senior Care
Long-term care is generally considered to be the custodial care provided when a person needs assistance for activities of daily living, which include eating, bathing, dressing, continence, toileting and transferring. Medicare typically doesn’t pay for these services.
Skilled nursing care, on the other hand (which is paid for to some extent by Medicare) is for situations in which you are expected to get better as a result of the care. It is often referred to as short-term rehab and includes health care services such as inserting and managing IVs, administering medications, changing dressings, and getting physical and speech therapy. Once a patient’s progress stops, the skilled care is considered custodial care.
Medicare will not pay for long-term care without the need for skilled care, and so the burden falls on Medicaid to pay for the ongoing costs of custodial care.
Although Medicaid will pay for long-term care, there are restrictions on the qualifications for assistance. First and foremost, Medicaid is a program designed to help those who are impoverished. In order to qualify for long-term care assistance through Medicaid, you must make very little money and contribute practically all of your own assets before Medicaid will begin to pay for expenses. (Refer to the spend-down section above for more information.)
Medicaid was not initially set up to cover the costs of care in a home setting. The care was usually provided within a residential facility, meaning that a person had to give up much independence in order to qualify. In this situation, an individual loses the ability to control the kind of care received because the state determines where and how the care is administered.
Also, the skyrocketing costs of long-term care mean many state Medicaid programs are under extreme pressure, and much needs to be done to help make sure that this vital program will continue to be available for those who have limited means and who need it most. As a result, both state and federal governments are encouraging Americans to take responsibility for their own future long-term care needs. Getting more information on the important issues surrounding long-term care and how it affects us all is a good place to start.
Before individual state governments passed much-needed legislation in recent years, many assisted living facilities were private pay only. Fortunately for many older Americans facing housing dilemmas, Medicaid waiver programs have begun to ease that burden. By funding placement in assisted living facilities as well as a number of other helpful services, Medicaid helps lower-income, elderly individuals receive the care they need.
All states accept funds from Medicaid waiver programs for placement within a nursing home, which are normally more expensive than assisted living facilities. Although some states still do not authorize funds from Medicaid waiver programs for assisted living, those that do offer many options to aging Americans needing assistance with daily living activities.
Be aware that some states may offer the program on a trial basis, have limited participation, or cover only certain state residents. As always, verify eligibility requirements with the Centers for Medicare and Medicaid Services.
Medicaid Payments for Home Health Care and Family Caregivers
If you’re one of more than 70 million people who provide unpaid caregiving for a family member or friend — either in that person’s home or in your own — you know that the time and energy burden can be enormous. In fact, you may have cut back or given up your paying job, and your smaller (or now nonexistent) paycheck may be pinching you hard. If so, it might be possible for you to get a small but regular payment for your caregiving work.
Here’s how: If the parent, spouse, or other person you’re caring for is eligible for Medicaid, its Self-Directed Services program (also known as Cash and Counseling), available in most states, can provide direct payments that could go to you. A few states have programs for low-income seniors even if the person receiving care doesn’t quite qualify for Medicaid. Also, if the person you’re caring for has long-term care insurance that includes in-home care coverage, in some cases those benefits can be used to pay you.
If the person you’re caring for will be paying you from any source, it may be a good idea — for both of you — to draft a short written contract outlining the terms of your work and payment.
Medicaid in-home care assistance for people with little money
When Medicaid provides in-home care, it usually does so through a licensed home health care agency. Medicaid pays the agency, which sends care aides to the senior’s home on scheduled visits. This arrangement works well for many people.
But for others, in-home care through an agency isn’t the best arrangement. Many in-home care agencies are overstretched, with high worker turnover. This can mean that in-home care visits are sometimes irregular, with changing caregivers who don’t know the senior’s needs and preferences. And if you (or another family member) are already providing most of the care, the occasional presence of an outsider may not be that helpful.
How self-directed services programs can help
Experts understand that family members often make the best caregivers and recognize that professional home care agencies aren’t always able to provide consistent care. In some states, Medicaid runs a program called Self-Directed Services, which pays seniors directly to cover their in-home care. The amount the senior receives depends on a Medicaid assessment of need and the prevailing pay rate for in-home care aides in that state.
Seniors can then use the money to pay anyone they choose to provide care, including you or other family members. They can also use some of the money to buy things for the home that would make life more comfortable, such as kitchen items, a new vacuum cleaner, or safety equipment. Or they can use some of the money to pay for services such as cleaning, meal delivery, or transportation.
Most states currently have a self-directed services program in effect, and other states have similar programs, offering cash for in-home care to seniors who have little money but whose income or assets are slightly too high for them to qualify for Medicaid in that state.
How cash assistance programs work
Cash assistance programs have several components and application processes, and eligibility varies among states:
If the seniors you’re caring for don’t already have Medicaid coverage, you can help them apply for Medicaid or another cash assistance program. This means gathering bank, tax, and other records that show how much they have in income and assets. Medicaid (or the other relevant cash assistance program) can then determine if they’re financially eligible.
If the seniors you’re caring for are financially eligible, the program will come to their residence to assess their in-home care needs. They’ll speak with you and other caregivers about the care currently provided, and they may speak to their doctor.
Based on the assessment of needs, the Self-Directed Services or other program determines how many hours per month of in-home care assistance it would approve if the care were coming from an in-home care agency. Using the rate that in-home care workers are paid in the state, it then figures out how much in total it will directly pay to the seniors every month to help with in-home care.
The seniors decide who they want to provide the care and how much they’ll pay you or other caregivers out of the program’s monthly payment. (It has to be at least minimum wage, but it can be any reasonable amount you and they agree on.) They can also decide how else they might want to spend some of the money. The program helps seniors work out this plan, including paperwork and taxes.
Find state programs where you live
To find out whether your state has a consumer-directed cash assistance program for seniors, contact your local Medicaid, human services, or social services office. To find the nearest Medicaid or other state office that handles in-home care programs, use the Area Agency on Aging locator tool to learn more about direct payment programs for in-home care and other free and low-cost resources for senior care.