The Programs and How They Work

MEDICARE:  Medicare comes with two different coverage categories.  Part A is hospitalization insurance.  You pay the premiums every time you pay taxes.  Part B is Doctor and Home Healthcare.  You must pay the Part B premium when you start getting Medicare.  Medicare pays for the same things health insurance pays for when you are working.  Additionally, it can pay for skilled care in a nursing home when needed – after a three day admission to a hospital.  It pays for up to the first 20 days at no deductible and no co-pay.  After that, it can pay for up to the next 80 days of skilled care with a daily co-pay for which the insured is responsible.  Medicare does not pay for stays at nursing homes beyond the 100 days.  It will pay for home health and doctor visits while in a nursing home, but not for the stay.

If you are on Medicare you should strongly consider having a Medicare supplement policy.

MEDICARE SUPPLEMENT:  Medicare Supplement policies are private insurance policies that cover most, if not all, of Medicare co-pays and deductibles.  Additionally, Medicare supplement policies can pay for coverage beyond the scope of traditional Medicare; depending on the policy and what coverages are selected.

One kind of Medicare supplement policy that many people get is called a Part D Policy, or a Drug Policy.  This policy can pay for a part of most drug costs.  Drug costs are generally not covered by Medicare or normal Medicare Supplement policies.

MEDICARE ADVANTAGE:  Medicare Advantage policies (also known as Part C policies, or Medicare Replacement policies) are private insurance policies that replace regular Medicare policies and generally have all the features of Medicare Supplement and Part D policies as well.  Medicare Advantage carriers have an agreement with Medicare where monies representing Medicare Part A coverage is paid by Medicare to the Medicare Advantage company allowing purchase of a Medicare Advantage policy for about the same price as a regular Medicare policy with Part B, Supplement and Part D coverages added to it.  Most Medicare Advantage policies are built upon a Health Maintenance Organization (HMO) platform, with checkups and reduced or free membership in local YMCA’s as a part of the coverage.

Where a Medicare Advantage plan falls short of need is when the insured has deteriorated health that calls for measures like skilled care at a nursing home, or dialysis.  Typical Medicare Advantage plans have high co-pays and deductibles as well as significant limitations on how long a skilled care stay can be.  This is possibly because Medicare Advantage companies are paid monies by Medicare on a capitation basis (a fixed amount per insured) versus by the service provided basis.

SWITCHING FROM MEDICARE ADVANTAGE TO MEDICARE:  In an ideal world people would be able to sign up for a Medicare Advantage plan when they are younger and in generally better health so that they can prolong that good health and then switch to regular Medicare when their needs start becoming more acute.  We do not live in an ideal world.  If an insured desires to switch from Medicare to Medicare Advantage, or vise versa, the insurance companies will look to current health to see if they will provide coverage and at what cost.  Once the health of the insured is an issue, getting a policy is also an issue.  Persons newly eligible for Medicare coverage and persons just coming off of employer plan health insurance do not have to undergo underwriting and can get a Medicare or Medicare Advantage policy no matter what their health situation may be.

MEDICAID:  Medicaid is the medical benefit (not insurance) program for impoverished persons.  SSI eligibility, or less than $2,000 in countable assets are the gateways for acceptance into Medicaid coverage.  Additionally, there are income limits depending on family size.  Medicaid pays for hospital, doctor office, rehab and drugs.  It is not divided in coverage as is Medicare.

TENNCARE/MEDICAID:   Medicaid is not an insurance program.  It is assistance to the needy and strict income and asset guidelines apply.  Additionally, any benefits are subject to estate collection.

Asset Eligibility is:

$2,000 for the institutional spouse

In order to prevent giving money away to become eligible there is a five year look back period during which transfers create a penalty.  The penalty is calculated by dividing the full amount given away in the last five years by the current penalty divisor.  This year the penalty divisor is $5,472.00.  So, if an applicant has given away $43,824.00 four years and eleven months before applying for Medicaid the State will not pay for care until 9.54 months have passed.  The penalty period begins when the applicant is otherwise qualified, meaning in the long term care facility and down to $2,000 in countable assets.  In case someone is tempted to incur the penalty to be able to disburse assets, the cost of private care is usually at least $2,500 more a month than the penalty divisor.

Just because the IRS allows you to give away certain monies every year without incurring a gift tax does not mean those gifts are exempt from creating a penalty.

 

 

Assets

A Medicaid spend down is all about what is a countable asset and what is not a countable asset.  Some examples below:

Countable:

Liquid assets

Institutional Spouse IRA, 401k, etc.

Cumulative cash value of life insurance exceeding $1,500

Equity in a business exceeding $6,000

Second house

Second vehicle

Equity in house over $543,000

Primary residence if held in revocable living trust

Primary residence if it is rented out

Non contiguous land to principal residence

Non-Qualifying annuities

 

Non-Countable:

Primary residence if equity under $543,000

Community Spouse tax deferred savings

Vehicle of any value as long as it is used to transport to and from medical care

Vehicle (1) under $4,600 equity

Qualified annuities

Equity in a business for support of $6,000 or less

Qualifying Special Needs Trust

Assets that cannot be liquidated

Most itemized pre paid funeral plans and gravesites

Once qualified the patient pays their income directly to the facility and TennCare pays the rest of the state authorized pay rate for the facility.  The patient actually gets to keep $50.00 a month for personal expenses like clothes, shoes, hair cutting or styling, etc.  Usually the facility keeps the money for the resident and doles it out as necessary.

VA PENSION:  A benefit paid to a veteran or surviving spouse who needs care and qualifies on income and assets.  There are three basic levels:

Basic Pension              Home Bound              Aid & Attendance

The amount of the benefit depends on marital status and whether or not the applicant is a veteran, or a surviving spouse.  The full A&A amounts are:

$1,759 single veteran

$2,085 married veteran

$1,130 surviving spouse

NOTE: spouses of living veterans are not entitled to benefits.  So, for instance, if the veteran is fine and the non-veteran spouse needs assistance the VA will not provide assistance until the veteran dies.

The benefits are not taxable and are not subject to estate collection.

In order to qualify the veteran must have had a minimum of 90 days of active duty, at least one of which was during a defined term of combat.  The length of duty for Gulf War veterans is longer, generally 24 months.

Income qualification is the benefit amount.  In other words, if your income matches or exceeds the benefit amount, you are not eligible.  Income is calculated as net of qualified expenses.  Qualified expenses are costs of care in a facility, health insurance, supplies, etc., which exceed the benefit by 5%.

Asset eligibility is an area filled with myths.  The actual limit is the amount of your qualified, but un-reimbursed, expenses over your expected lifetime as calculated by VA life expectance tables.  The application has to go to a committee if assets are $80,000 or over.  Generally, a successful application should have countable assets of roughly one year’s worth of expenses.

You may give away all of your money in the morning and apply for benefits in the afternoon.

The VA does not count trust assets where the veteran loses all control over the money.  So, the typical VA trust makes sure the grantor has no control.  The trustee is supposed to give the facility the difference between income and facility cost.

Annuities can convert countable assets into income, or into a non countable asset.  In order to do this the annuity must be:

Fixed

Non-Commutable

Non-Assignable

The annuity need not be actuarially sound.

 

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