The Limited Value of Medicare and Medicaid

Medicare was established by the government to cover some expenses for a limited time during disability or old age. Medicare pays less than 25% of long-term care costs in the United States. Private insurance often pays for even less. (That’s why it’s important to carefully scrutinize a long-term care policy.)

Medicare covers many hospital (“Part A”), medical (“Part B”), and prescription drug (“Part D”) costs. (Medicare “Part C” is an option to obtain Medicare benefits through a private insurer.) While the benefits Medicare does provide are critical to many seniors in the United States, Medicare does not provide complete coverage. Indeed, it provides very limited coverage for long-term care.

If you have to enter a long-term care facility, Medicare will likely cover the first twenty days. The next eighty days will be partially covered, with a co-pay. After the 100th day, you’re on your own so far as the long-term care facility goes, and that commonly costs around $360 per day, or $11,000 per month. Unfortunately, for this reason, most people must pay out of their own pockets for long-term care – at least until they have depleted their assets enough to be eligible for Medicaid (known as MassHealth in Massachusetts).

Medicaid was established by the government to cover long-term care for the elderly, disabled, and children—but only if they qualify financially. Many middle-class senior citizens turn to Medicaid to pay for their nursing and health care. But there are very strict guidelines on who qualifies, and seniors can’t simply offload their assets to lower their estate value because a “five-year look-back period” applies to prevent people from doing exactly that in order to qualify for Medicaid. If a disabled person or senior citizen hasn’t planned properly—at least five years in advance—they could lose their estate to health- and nursing-care costs if they are deemed ineligible for Medicaid.

Although the federal government outlines the basic structure of Medicaid, it is administered by state governments. That means each state applies its own rules, and eligibility varies from state to state. Because there are many nuances to this important option, it is discussed in its own section at the end of this chapter.