Drawing Distinctions Between Medicare and Medicaid

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					     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


                            PAUL A. KRAFT
                    Indiana Estate Planning Attorney

Drawing Distinctions Between Medicare and Medicaid   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

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    portion of the program that covers hospital stays. Extended stays can involve
    significant co-payments.

    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-
                                            based program.

                                            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            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
    in mind.

    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
    your application.

    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

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    can protect your home from future recovery so that your loved ones can inherit
    the property.


    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


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    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
    Indianapolis, IN46204-2485
    Phone: (317) 684-1100
    Fax: (317) 684-6111

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Description: A closer look at the two government health insurance programs called Medicare and Medicaid - how they are run, the benefits they offer, and their eligibility requirements.