Medicaid and Medicare: Same thing?

You like potato, I like potahto

You like tomato, I like tomahto

Potato, potahto, tomato, tomahto

Let’s call the whole thing off!

The point the Gershwin brothers were making, I take it, was that slight differences in semantics shouldn’t make any difference in reality. Okay, maybe it’s more complicated than that, but I didn’t write this column to talk about Fred Astaire and Ginger Rogers.

Sometimes, slight wording differences matter tremendously. Take Medicare and Medicaid, for example. They sound almost the same. So similar that, even though I talk about both of them quite a bit, I occasionally slip and use the wrong name.

But Medicare and Medicaid are dramatically different programs.

Certain folks might tell you that the most important difference is that one of them is federal, and the other is state. That is literally true, Medicare is a federal program administered directly by the federal government, whereas Medicaid is a state program. However Medicaid is so loaded up with federal requirements (and federal funding) that while there are differences from state to state, the differences are fairly small and the similarities across state lines are substantial.

No, what is really different about them is what kind of program each of them is. While they are both governmental, Medicare is like an insurance program, but Medicaid is like a welfare program.

In your working years, there was some money taken out of your paycheck for Medicare. Going back some years, it was just part of the FICA deduction. In more recent decades, employers have had to list it separately from Social Security, so you actually see a deduction for Medicare tax on the paystub. The point is, if you are covered by Medicare, you paid for it.

And as a result, if you apply for Medicare, they don’t care how much money you have. They only care that you are over 65, or are long-term disabled; and that you paid enough into the system to qualify. You could have a billion bucks in the bank, and still have Medicare paying for your medical expenses. It’s insurance. Sort of.

But when you apply for Medicaid, they do very much care what you own. You don’t pay into Medicaid; it is paid for by everybody’s taxes. It is intended for people who can’t afford to pay for their own medical needs. And as a result, there are a lot of fairly complicated requirements as to who can qualify for Medicaid. It’s a welfare program. Sort of.

I have to be careful here. A lot of people who are on Medicaid would take umbrage at my suggestion that they are benefiting from a welfare program. Originally, Medicaid was supposed to be for people who were genuinely poor. After all, back when the program was created, your typical middle-class person could afford to pay for their own medical treatment. But with the high cost of healthcare nowadays, the only people who can pay for all of their own medical needs out-of-pocket are either the very wealthy, or the young and healthy. Everybody else needs some kind of medical coverage and, if they don’t have it and they need medical care, they may very well end up on Medicaid.

Adding to the confusion between Medicaid and Medicare, there are a lot of people who have both. They are over 65, or long-term disabled, so Medicare pays for their doctor visits, their medications and, if they need it, hospitalization. But there is one big category of expenses which Medicare will not cover: long-term care. So if they need to be in a nursing home or assisted living facility for more than a short time, or need help in order to continue living at home, they end up turning to Medicaid.

Medicaid is expensive. In Alaska, the cost of one month in a skilled nursing facility is well over $25,000 for one person. That can eat up the life savings of most people very quickly. When that happens, many people turn to elder law attorneys for a variety of complicated strategies to try to pass along or protect assets while still qualifying for Medicaid.

Well, what else are you going to do? Tell somebody who worked hard for 40 or 50 years and saved a good part of their income, that they can’t pass any of their savings along to their heirs, because of their medical needs late in life?

A quick disclaimer here: Medicaid is an incredibly complex program, with a lot of subprograms and a lot of different technicalities and rules in each one. The statements made in this column are necessarily oversimplified, because otherwise I would have had to persuade the Senior Voice to give me about five pages for this column, and you would have fallen asleep anyway before you finished it.

Kenneth Kirk is an estate planning attorney in Anchorage. This article should not be taken as legal advice in any specific situation; for legal advice, you should consult an attorney directly.

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