When you are planning ahead for retirement, you need to learn about government programs that are relevant to senior citizens. Medicare is certainly one of these programs.
However, North Carolina Medicaid is also something that you should understand if you are looking ahead toward your golden years and the twilight years that will follow.
In this post, we will explain the differences between these two programs.
The Medicare Program
Medicare is the government health insurance program that you are paying into as you pay taxes on your income. If you have paid into the program sufficiently throughout your working career, you will be eligible for Medicare coverage when you reach the age of 65 under existing laws.
There is a formula that is used to determine your eligibility for Medicare. You accumulate credits as you are working and paying taxes. If you earn $1260 in 2016, you are awarded one Medicare credit.
You get one credit for each $1260 you earn. However, you can only earn four credits in a year.
Over the course of your lifetime, you must earn at least 40 credits to qualify for Medicare. As long as you qualify, you get the same level of coverage as the next person regardless of your contributions into the program.
There are out-of-pocket expenses that you must account for if you are budgeting for the future. Medicare Part A pays for inpatient hospital stays. There is a deductible for each benefit period, and co-payments may be necessary depending on the length of stay.
Medicare Part B covers outpatient care and visits to doctors. There is a relatively modest deductible, but there is also a monthly premium. Most people are paying approximately $105 per month in 2016, and it is generally deducted from your Social Security direct deposit.
If you need to reside in a nursing home or assisted living community late your life, Medicare will not assist with these expenses.
Medicaid Assistance
Now let’s get into the differences between Medicaid and Medicare.
Unlike Medicare, Medicaid is a need-based program. If you paid into the Medicare program sufficiently, you could be a billionaire and still qualify for coverage.
To qualify for Medicaid, your countable assets cannot exceed $2000.
People pay into the Medicare program throughout their lives while they are working. On the other hand, Medicaid has no requirements with regard to accumulating credits while you are working. You can qualify for Medicaid even if you did not earn enough credits to qualify for Medicare.
In addition, Medicare is a program that is available to people who have reached the age of 65 as we have stated previously. Medicaid is available to people of all ages, even children.
Another difference is the fact that Medicaid will pay for long-term care if you become eligible for the program.
North Carolina Medicaid Planning
Long-term care is very expensive, with the average nursing home stay of just over two years coming with a price tag that is in the vicinity of $200,000 using current costs. This is more than many Americans have saved for retirement.
Since Medicare will not pay for long-term care, Medicaid winds up filling this void in many cases.
If you don’t plan ahead, you could potentially spend all of your resources paying for long-term care. Once you have exhausted your savings, you could then qualify for Medicaid to pay for the long-term care that you are receiving.
It is possible to take steps in advance of applying for Medicaid to keep a maximum store of resources in the family.
In the previous section, we stated that there is a $2000 limit on assets. We should point out the fact that some things that you own are not counted, including your home. The Medicaid evaluators don’t count the value of your home up to $552,000 in equity in 2016, but it is possible for Medicaid to seek to attach the value of the house after you pass away.
With the correct type of planning, you can take steps to prevent future Medicaid recovery.
You can divest yourself of assets that are countable, giving them to people who would otherwise be inheriting them. However, you have to be cognizant of the 60 month look back period.
If you give away assets within five years of applying for Medicaid coverage, your eligibility could be delayed. The duration of the period of ineligibility would be determined by comparing the amount of your gifts to the cost of long-term care in the state of North Carolina.
Schedule a Medicaid Planning Consultation
We can help if you would like to learn more about North Carolina Medicaid planning. To schedule a consultation, send us a message through our contact page or call us at (704) 944-3245.
John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
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