An In-depth Look at the Two Government Health
Insurance Programs called Medicare and Medicaid –
How They are Run, the Benefits they Offer,
and their Eligibility Requirements
MEDICARE and MEDICAID
PAUL A. KRAFT
Indiana Estate Planning Attorney
Drawing Distinctions Between Medicare and Medicaid www.FrankKraft.com 1
Those who are planning ahead for their senior years have many things to think
about. You have to be able to finance your active retirement years, and this may
be the first thing that comes to mind.
However, you don't want to overlook the twilight years that follow the golden
years of retirement.
With this in mind, let's take an in-depth look at Medicare and Medicaid.
Let's look at some of the components of the typical estate plan.
Medicare is a government health insurance program that you pay into while you
are working. While you are paying taxes on your earnings or self-employment
income, you are accruing retirement credits.
To qualify for Medicare you must accumulate at least 40 credits during your
working years. In 2013, you get one credit for every $1160 that you earn up to
a maximum of four credits.
If you paid into the program
sufficiently you become eligible to
receive Medicare coverage at the
age of 65. This is the current age
of eligibility. However, legislators
are engaged in ongoing budgetary
negotiations. Raising the age of
Medicare eligibility would save
Therefore, you should pay attention to these ongoing talks if you are planning
ahead for your retirement years. You want to be aware of any changes that may
be implemented along the way.
Medicare has four different parts. There are out-of-pocket expenses that go
along with coverage. There is a deductible for Medicare Part A, which is the
Drawing Distinctions Between Medicare and Medicaid www.FrankKraft.com 2
portion of the program that covers hospital stays. Extended stays can involve
Medicare Part B covers visits to your doctors and outpatient treatments. You
have to pay a monthly premium for Part B coverage. The exact amount of the
premium varies depending on your income. In 2013 most people have been
paying $104.90 per month.
Medicare Part C enables you to use your Medicare benefits to obtain private
coverage that may be more streamlined and efficient. This is optional.
Medicare Part D is the prescription drug portion of the program, and it is
optional as well.
One very important thing to know about Medicare is the fact that it does not
pay for an extended stay in a nursing home or an assisted living community. It
will pay for up to 100 days of convalescent care after surgery, but it will not pay
for custodial care at all.
Unlike Medicare, Medicaid is available to people of all ages, and it is a need-
Many people are confused when they
hear about Medicaid being mentioned as
something that senior citizens need to
know about, because Medicaid is for
people who don't have any financial
Medicaid is relevant because Medicare
will not pay for long-term care, and most
senior citizens will eventually need it.
Medicaid will assist with these costs if
you can qualify.
Drawing Distinctions Between Medicare and Medicaid www.FrankKraft.com 3
To put it bluntly, if you need to enter a long-term care facility and you initially
pay out-of-pocket, you may well go broke while you're still receiving the care. At
that point you would qualify for Medicaid.
It may be surprising to hear that Medicaid actually pays for most of the long-
term care expenses that are incurred in the United States. This is because
nursing homes and assisted-living facilities are extremely expensive.
If you compare the cost of the average length of stay to the average retirement
nest egg, the numbers simply don't add up.
Because of the realities that
many seniors are faced with,
intelligent and informed Medicaid
planning becomes necessary. It
is possible to take steps well in
advance with Medicaid eligibility
There is an upper asset limit of
$1,500 in Indiana that you must
stay within to qualify for
Medicaid. However, it is possible
to divest yourself of assets in advance of applying.
This takes some measured planning, because there is a five year look-back
period. You are penalized if you give away assets within five years of submitting
It should be noted that you can keep your home up to a certain amount of
equity ($536,000 at minimum in 2013) because home value does not count
when the program is evaluating your resources.
However, Medicaid recovery can be an issue. If you plan ahead effectively you
Drawing Distinctions Between Medicare and Medicaid www.FrankKraft.com 4
can protect your home from future recovery so that your loved ones can inherit
Medicare is a program that you pay into when you are working. You don't have
to demonstrate financial need to qualify.
Medicare does not pay for long-term care.
Medicaid is a need-based program. If your assets don't exceed the upper
resource limits, you can qualify for coverage.
Medicaid will pay for long-term care.
If you are concerned about future assisted-living costs, you may want to discuss
Medicaid planning with a licensed elder law attorney.
Social Security Administration
Drawing Distinctions Between Medicare and Medicaid www.FrankKraft.com 5
About the Author
Paul A. Kraft
Paul Kraft is Co-Founder and the senior Principal of Frank & Kraft, one of the leading law
firms in Indiana in the area of estate planning as well as business and tax planning.
Mr. Kraft assists clients primarily in the areas of estate planning
and administration, Medicaid planning, federal and state
taxation, real estate and corporate law, bringing the added
perspective of an accounting background to his work.
In addition to his practice, Mr. Kraft has lectured extensively in
the areas of living trust planning, Medicaid planning, and
presenting public and private seminars on the importance of
proper estate planning. He has also authored various articles on
estate planning and is a contributing author of LEGACY: Plan,
Protect, and Preserve Your Estate–Practical Answers from
America’s Foremost Estate Planning Attorneys.
Mr. Kraft is a co-founder of the Indiana Network of Estate Planning Professionals, a charter
member of the AmericanAcademy of Estate Planning Attorneys and a founding member of
the National Network of Estate Planning Attorneys. He is also a member of the Indianapolis
Bar Association, including the Taxation, Business Law and Estate Planning sections; the
Indiana State Bar Association, including the section on Taxation Law; the Indiana CPA
Society; and the Estate Planning Council of Indianapolis. Mr. Kraft is admitted to practice law
before the Supreme Court of Indiana, U.S. District Courts, and U.S. Tax Court.
Frank & Kraft
A Professional Corporation
Attorneys at Law
135 N. Pennsylvania Street Suite 1100
Phone: (317) 684-1100
Fax: (317) 684-6111
Drawing Distinctions Between Medicare and Medicaid www.FrankKraft.com 6