A great deal of confusion surrounds Medicare and Medicaid. They’re often mistaken for one another, but they are two very different programs that provide health care benefits for Americans. While many people believe that participation in these programs is mutually exclusive, the truth is that some seniors do qualify to receive both Medicare and Medicaid coverage. When a Medicare beneficiary also qualifies for Medicaid, they are deemed a “dual-eligible beneficiary” and are entitled to enhanced benefits.
Medicare vs. Medicaid
Medicare is a federal health insurance program for seniors age 65 and over and younger individuals who are disabled or have certain chronic illnesses. Americans pay into Medicare through payroll taxes.
Medicaid, on the other hand, is a joint federal and state means-based program that helps low-income individuals with limited resources afford health care. Unlike Medicare, Medicaid can differ widely from state to state. Both Medicare and Medicaid are administered by the Centers for Medicare and Medicaid Services (CMS).
How Dual Eligibility Works
Logically, there is some overlap between these two programs. A significant number of senior Medicare beneficiaries do not have substantial income or retirement savings to fund their health care and long-term care. Once a Medicare beneficiary has nearly exhausted their financial resources and meets strict state-specific income and asset limits, they may apply for full Medicaid benefits. These individuals are known as full-benefit dual-eligibles.
A senior may also become a dually eligible beneficiary by qualifying for one of four Medicare Savings Programs (MSPs) offered by their state’s Medicaid program to help pay Medicare premiums and sometimes coinsurance and copayments. These benefits are not as comprehensive compared to the combination of Medicare and full Medicaid, but MSPs feature higher asset limits and more flexible income limits. Individuals who qualify for MSPs are known as partial-benefit dual-eligibles.
How a Dually Eligible Beneficiary’s Medical Bills Are Paid
Medicare continues to be a dually eligible beneficiary’s primary payer. They are free to seek care from any provider that accepts Medicare. However, Original Medicare (Parts A and B) offers coverage that is limited in scope. For this reason, many beneficiaries who can afford it choose to purchase a Prescription Drug Coverage Plan (Part D), a Medicare Supplement Insurance Policy (also known as Medigap) or a Medicare Advantage Plan (Part C) to fill these gaps in coverage. (Keep in mind that Part C is simply a different way of receiving Original Medicare, so it will always function as the primary payer.)
For example, if a full-benefit dual-eligible beneficiary has Original Medicare and a Medigap Plan, then Medigap will function as the secondary payer. Essentially, Original Medicare will pay up to the limits of its coverage and then the secondary payer will pay the remaining costs up to its coverage. Medicaid would then function as the tertiary payer and cover any qualifying expenses that Medicare and Medigap do not.
Exploring Medicare and Medicaid Coverage
Many seniors are not aware that Medicare and Medicaid can work with each other to help lower health care costs. This is especially important since Medicaid covers different types of long-term care services that Medicare alone does not. For assistance exploring all health insurance options and methods for reducing health care costs, contact your local Area Agency on Aging (AAA). Each AAA offers free counseling through the State Health Insurance and Assistance Program (SHIP) to help seniors understand Medicare and Medicaid benefits.
Bruce Webb is a Senior Real Estate Specialist (SRES) and has an extensive network of senior related referrals.