Finances: Payment Sources

Understanding the "ins and outs" of health care financing can be as confusing as finding the resources themselves.  Because everyone's financial situation is unique and each State has slightly different guidelines for many of their economic programs, it is important to seek the advice of a financial planner or attorney specializing in elder care. 

The following attempts to clarify several financing programs. It is important to understand what costs you may be facing, how they have been determined and how they will be paid.

Medicaid is a program that provides medical assistance to economically impoverished persons.  Eligibility is dependent on financial need, low income and low assets. Medical expenses include:

  • Care from hospitals, doctors, nurses, dentists, podiatrists, etc.
  • Drugs, medical supplies and equipment
  • Health insurance premiums
  • Transportation for medical care

To qualify for Medicaid an individual must meet four levels of eligibility:

  • Aged 65, blind or disabled
  • State Resident, United States Citizen
  • Financial Eligibility: Income and Assets
  • Application completed through local County Economic Assistance Department 

Within the past year, the Federal and State Governments have imposed stricter regulations on the transfer of assets prior to applying for Medicaid .  It is important to talk with an experienced attorney or estate planner before transferring any assets.

Medicare is a Federal health insurance program that assists individuals age 65 and older (as well as some disabled persons under age 65).  Eligibility is linked to eligibility for Social Security or Railroad Retirement benefits.  Unlike Medicaid, Medicare is not a means-tested program.

Medicare is divided into two parts: Part A (hospital insurance) and Part B (medical insurance).  Part B benefits require a monthly premium and entitlement to Part A.  Medicare has co-pays and deductibles.

Medicare Part A pays for the following:

  • Cost of normal hospital services.
  • Extended care services in a "skilled-nursing facility" assuming the following:
    • 3 day prior hospital stay
    • Admittance to a SNF within 30 days of hospital release
    • Treatment in SNF for same condition of hospitalization
    • Need for skilled care on a daily basis
    • Condition shows measurable improvement
    • Facility is Medicare certified and physician writes a care plan.
  • Home Health Services which meet certain criteria:
    • Short term; intermittent basis for skilled nursing care
    • Physical and/or speech therapy if patient is home bound and Dr. ordered
    • 80% of durable medical equipment
    • Not in excess of 35 hours per week or 8 hours per day of skilled nursing care
  • Hospice Services:
    • In-home or facility
    • Dr. certified that patient is terminally ill and prognosis of less than six months to live
    • Care provided by Medicare participating program

Medicare Part B covers:

  • 80% of reasonable charges from physicians and other health care professionals after deductible is met including:
    • Medically necessary ambulance service.
    • Physical, speech, and occupational therapy.
    • Home health services, doctor certified as medically necessary.
    • Medical supplies and equipment.
    • Out patient surgery.

It is important to be aware of what Medicare does not cover:

  • Most nursing home care.
  • Prescription drugs not given in the hospital.
  • In-home daily routine care/maintenance.
  • Routine physical exams and X-rays.
  • Hearing aids and hearing loss examinations.
  • Dental care.

Filling Medicare's Gaps:

Given the expense of medical care, individuals are searching for ways to fill Medicare's gaps. While it is an individual decision as to how much you can afford and what you need, the following are several options that provide additional coverage:

  1. Medicare Supplements
  2. Managed Care Plans
  3. Long Term Care Insurance

Medicare Supplements are designed to supplement Medicare's benefits.  Federal and state law regulates these policies.  These policies range from Plan "A" through Plan "J", with Plan A providing a basic benefit package while the other 9 plans include the basic package plus different combinations of additional benefits.  All Medigap Insurers must at least offer Plan A. 

Medigap policies pay most, if not all, Medicare coinsurance amounts and may provide coverage for Medicare's deductibles.  Some of the benefits have dollar limits, unlike some types of health coverage that restrict where and from whom you can receive care. Medigap policies generally pay the same supplement benefits regardless of your choice of health care provider.  Enrollment in Medigap Supplements can be purchased within a time-limited period after your Medicare becomes effective.

Managed Care Plans also called Coordinated Care or Prepaid Plans or HMO's, allow you to select care providers from those who are part of the network.  You will have a primary care doctor who is responsible for managing your medical care, admitting you to a hospital and referring you to specialists.  Most plans require a fixed monthly premium and small copayments when you use services.  You continue to pay the Part B premium to Medicare. You however do not pay Medicare's deductibles and coinsurance.

Long Term Care Insurance are policies which cover nursing home care costs as well as some home health care costs (depending on your policy).  While premiums for these policies can be more expensive then other types of insurance, they are a good protection against long-term care costs that can be devastating.  Look to your financial advisor or insurance agent specializing in long term care insurance to discuss the appropriate policies for you.