Chapter 15
Medicare, Medicaid, and Other Government Programs
The one advantage of being broke is I can let Uncle Sam cover my medical expenses. Nobody cared when I was making my $25,000 a year.
—Jerry R.
While we do not have health care for everyone, you may be eligible for one of the health coverage programs provided by our federal and state governments. Medicare and Medicaid are the largest and best-known programs. There are similar programs for government employees and veterans, and other state programs.
Section 1. Medicare
Medicare is a federal health insurance program. Medicare premiums are paid by the taxes on your salary or on self-employment income. Like any health insurance plan, your other income is not relevant (i.e., Medicare is not “means based”). Unlike most private health plans, Medicare does not have a lifetime maximum.
1.1 Eligibility
Medicare is not available merely because you paid premiums (taxes). To be eligible to receive Medicare benefits
• taxes (premiums) must be paid for a minimum number of quarters—the same number of quarters as are necessary to qualify for Social Security Disability Insurance (see chapter 8, section 8.1)—and
• you must have been receiving SSD for twenty-four months because you are disabled or
• you are age sixty-five or older and receiving Social Security retirement benefits or
• you are blind and a Social Security recipient or
• you suffer from kidney failure and are a Social Security recipient or
• you are at least twenty-two years of age, your disability started before age eighteen, and you have a disabled, elderly, or dead parent who receives or would have qualified for SSD or
• you are a widow or widower at least fifty years of age, without enough quarters to qualify for SSD on your own, who was married for a minimum of ten years to a deceased worker who would have qualified for SSD.
Applicants for benefits who are over sixty-five years of age may purchase Medicare coverage if they do not have sufficient quarters to qualify for Social Security benefits.
Eligibility for Medicare can continue for a lifetime, no matter how much you earn or for how long you’ve returned to work, provided you continue to have the condition that acted as the entry point for Medicare eligibility.
1.2 Benefits
Medicare is divided into two parts, Part A and Part B.
Part A is hospital insurance. In general, it covers inpatient hospital care, skilled nursing facilities, physician-prescribed home health visits by nurses, or physical and occupational therapists working for a licensed agency. Part A even covers hospice care. The insured must pay varying deductibles and coinsurance amounts.
Part A is paid for through your payroll taxes, so you don’t have to keep paying for it when you start receiving benefits.
Part B is medical insurance. In general, Part B pays for visits to physicians, outpatient hospital services, and some medical supplies and equipment. If you want Part B, you must pay for it, even after you start receiving benefits.
Medicare Part A. Coverage is described in the chart here.
Medicare Part B—medical insurance. Once you pay a deductible of $100 per calendar year, Medicare Part B pays 80 percent of the cost of approved services including
• physician’s and surgeon’s services, whether furnished in a hospital, clinic, office, home, or elsewhere.
• emergency room.
• outpatient hospital diagnostic services.
• diagnostic tests including X rays.
• outpatient physical therapy and speech-language pathology services furnished by participating hospitals, skilled nursing facilities, home health agencies, and therapy clinics, or by other companies that contract with and are supervised by participating entities.
• outpatient physical therapy and occupational therapy services furnished by a licensed, independently practicing physical or occupational therapist in the therapist’s office or in the patient’s home (not to exceed $900 in a calendar year).
• prosthetic devices including breast prostheses and surgical brassieres.
• home dialysis supplies and equipment.
• chiropractor’s treatments.
• podiatrist’s services.
• certain ambulance services.
• oral cancer drugs if they are the same chemical entity as those drugs administered intravenously and certain other cancer drugs.
• outpatient psychiatric services, but the copayment is 50 percent rather than 20 percent and there is a yearly limit of $1,000.
• home health care visits, which you would expect to find in Part B, are covered by Part A.
Medicare Part B does not cover
• outpatient drugs. It will, however, cover many outpatient infusion drugs and IV nutritional supplements when administered by licensed home health personnel. It may also cover some oral drugs that are the equivalent of infusion therapies.
• dental or eye care.
• hearing aids.
• routine physical examinations.
Physicians’ bills. How much the doctor may charge Medicare, and how much he can also charge you, and whether payments for your deductible and copayments go to the doctor or to Medicare are determined by whether the doctor is a “participating” or a “nonparticipating” doctor.
A participating doctor accepts the Medicare approved rate as full payment for all services he provides to patients with Medicare, including you. The doctor submits the bill directly to Medicare. Medicare pays the bill in full. Medicare then bills you for any deductible and copayment that you may owe.
A nonparticipating doctor may charge more than Medicare allows, but only to a maximum of 115% of the Medicare-approved rate. A nonparticipating doctor sends the bill directly to you. You have to pay it and then seek reimbursement from Medicare. Medicare will only reimburse you for the share Medicare is to pay. You will be out of pocket for any deductible and copayment plus the extra percentage over the Medicare-approved rate. For example, if the doctor usually charges $150 for a particular service, and Medicare only pays $90 for that service, the maximum the doctor may charge is $103.50 (115 percent of $90). You will be required to pay the deductible of $18 (20 percent of $90), plus the difference between $90 and $103.50 or $13.50—for a total of $31.50 ($18 + $13.50). In some states, the permissible extra charge is less than 15 percent. Doctors can be fined for charging more than these limits. Some surgeries are exempt from the limit.
If your doctor is nonparticipating, but accepts assignment for services rendered to you, the procedure and rules apply as if he were a participating doctor.
Tip. If your doctor does not accept assignment, to avoid paying the doctor more than is allowable, send the bill on to Medicare, but do not pay the doctor until you receive money and an Explanation of Benefits from Medicare or your insurance company if you have health insurance in addition to Medicare.
Voluntary waiver. Under a law passed in 1997, a doctor may ask a patient to voluntarily waive Medicare. If the patient agrees, the doctor can charge any rate that is negotiated between the doctor and the patient. To assure that doctors do not take unfair advantage of patients, if the doctor negotiates a higher fee for even a single service to a single patient, the law requires that the doctor discontinue receiving Medicare reimbursement for any service to all patients for a period of two years.
Outpatient services. Under Part B, outpatient services at a hospital are not subject to any Medicare-approved rate. You may be required to pay 20 percent of an outrageous sum. It is advisable to determine the cost before agreeing to outpatient procedures.
Tip. To determine whether you are being billed correctly when you receive Medicare treatments, keep a record of all your medical visits and any procedures that were done. This will also provide a record in case you have to appeal for more money due you. Of course, review every bill for errors.
Tip. Medicare provides to all Medicare recipients a directory of participating doctors. Even if your doctor is not a participating doctor, he might accept assignment of Medicare for the services rendered to you if you ask.
If you also have private insurance. There are no limits on the amount of fees your doctor can bill your private insurance company. Whether, and how much, the insurance company will or will not pay is addressed in section 1.5 below.
If you have a complaint about charges, call the Department of Health and Human Services hot line at 800-447-8477.
Travel. Generally, Medicare does not pay for care outside of the United States. However,
• if you live in the United States and need medical care and a Canadian or Mexican hospital where you could get treatment is much closer than the nearest U.S. hospital, you can go to a hospital in Mexico or Canada.
• if you are traveling in Canada or coming from Alaska to one of the other states, you can receive emergency care at a Canadian hospital.
Veterans. Veterans can get both Medicare and veterans’ benefits. Medicare will not pay for services veterans receive from VA facilities except for certain emergency hospital services or if the VA pays for VA-authorized services received in a non-VA hospital or from a non-VA physician.
Appeals. Medicare has an administrative appeals system if a claim is inappropriately denied. If you go to a participating doctor or to a nonparticipating doctor who accepts assignment, the doctor will handle the appeal. Otherwise, Medicare’s notice of denial should include instructions on how to ask for a review. If you’re dissatisfied with the results of the review, and the amount in dispute is at least $100, you can request a hearing before a Medicare insurance-carrier hearing office. If you are still dissatisfied with the outcome after the hearing, and the amount in dispute is at least $500, you can request a hearing before an administrative law judge.
If you are a member of Medicare+Choice (see below), the information you receive from the company should also include details of the appeals process.
Note: If you are in the hospital and a decision would force you to leave, whether you are in Medicare or Medicare+Choice, you may be entitled to an expedited review.
Abuses. The Department of Health and Human Services runs the Inspector General Hotline (800-772-1213) to answer complaints concerning fraud, overcharging, or other abuses relating to Medicare or Medicaid.
1.3 MediGap
The coinsurance payments (your 20 percent share), prescription costs, and other costs not covered by Medicare can become quite expensive for people with a serious condition. Insurance policies known as MediGap policies cover these gaps. MediGap policies come in ten standardized categories, which are titled A through J. “A” MediGap policies have the least coverage, and “J” MediGap policies have the most, including limited prescription drugs.
If you are younger than sixty-five. In most states, insurers are not required to, and do not, provide MediGap policies to Medicare recipients under the age of sixty-five who qualify for Medicare because of a disability. A few states require a limited MediGap open-enrollment period for Medicare beneficiaries under sixty-five, and a few states offer MediGap through their health insurance pool. It’s worth a call to your state’s Department of Insurance to find out about the availability of MediGap policies to disabled Medicare recipients under age sixty-five. Also ask about state-sponsored health insurance. Some, but not all, of these plans are open to disabled Medicare patients.
Tip. Some employers will continue to provide some kind of medical benefit even after a disabled employee qualifies for Medicare. Check your benefits.
If you are sixty-five or older. For a period of six months from the date you are first enrolled in Medicare Part B and are age sixty-five or older, you have the right to purchase MediGap insurance. You cannot be turned down or charged higher premiums because of your health if you purchase a policy during this period.
If you have Medicare Part B but are not yet sixty-five, your six-month MediGap open-enrollment period begins when you turn sixty-five. A preexisting-condition exclusion is permitted for up to six months. If, during open enrollment, you change coverage from private insurance to MediGap with no gap, the prior coverage counts against the six-month MediGap exclusion.
If you need assistance in finding or deciphering MediGap policies, contact your local Social Security office or call the Medicare hot line at 800-638-6833.
1.4 Medicare+Choice
Medicare+Choice provides another alternative for eliminating the deductible, copayment, and other gaps in Medicare—and possibly even for increasing coverage.
Medicare+Choice provides private-sector alternatives to traditional Medicare. Since it is part of the Medicare system, the eligibility requirements are the same.
Medicare+Choice plans must cover people with a disability the same as people who qualify because of age (with the exception that they do not have to accept kidney patients or people already in hospice care). They are permitted to limit coverage to a low option plan, a plan that must at least equal Medicare benefits without deductibles or copayments. Emergency services must be available twenty-four hours a day.
An amount equal to the Medicare Part A premium is paid by Medicare to the Medicare+Choice company. Participants in Medicare+Choice continue to pay an amount equal to Part B premiums. The private insurance companies offering Medicare+Choice coverage can charge premiums in excess of the Part A and Part B premiums, but cannot charge a higher fee or impose a different preexisting-condition clause or waiting period solely due to a disability.
You can terminate your participation in a Medicare+Choice plan and return to traditional Medicare at any time effective the first day of the month after the month in which you notify Medicare+Choice of your intent to leave.
Medicare+Choice includes all the types of managed care organizations described in chapter 14, section 3.1, medical savings accounts (MSA) described in chapter 18, section 2.4, and traditional indemnity-type health insurance policies described in chapter 14, section 2.
Managed care. Managed care companies are required to offer a benefit package that includes what Medicare itself would cover. In addition, plans can (but don’t have to) offer
• coverage of all or almost all of the Medicare deductibles and coinsurance situations that would otherwise be covered by MediGap.
• services that aren’t even usually found in MediGap coverages, such as outpatient prescription drugs; preventive dental; hearing and eye tests; durable medical equipment; hospital, home-health, skilled-nursing, and hospice days over the Medicare limits. They can also offer heavily discounted dental and vision services. Read plan materials carefully to be sure you understand these “extras” and any limitations on them.
While it would appear on the surface that a Medicare+Choice managed care plan that eliminates deductibles and extends coverage to such items as prescriptions would always be better than traditional Medicare, consider the issues discussed in chapter 14, section 3, relating to managed care coverage in general. Also look at whether there are any annual or lifetime limits in the plan.
In addition to the quality and accessibility of the specialists in your condition, look at whether the MCO is a risk contract or cost contract, which refers to how the government pays the plan. The type of contract determines how, what, and where your plan covers.
• Under a risk contract, the MCO is paid a fixed fee from Medicare for all care provided. The MCO promises to provide all medically necessary covered services for the capitated amount Medicare pays. If you go outside the plan for any services, you have to pay for those services yourself.
• Under a cost contract, the MCO is paid according to what the plan spends on each patient. Thus, there is no incentive to provide you with inadequate care. If you go outside the plan, Medicare covers services you receive that are covered by Medicare, subject to the regular copayments and deductibles.
Where charged, the extra premiums for these packages have generally been low (e.g., $35 per month), with small copayments subject to a yearly maximum.
Tip. If you travel, request a “guest membership” to a Medicare MCO in the area to which you are traveling for the maximum period you expect to be in the area.
Participants in Medicare MCOs have specific rights of appeal. You can request an “expedited” review. If you ask for a review by a “peer review organization” (PRO) as soon as your coverage is denied, you are entitled to stay in the hospital at no charge until a decision is made. If the review is conducted internally by the MCO, you can also stay in the hospital during a review, but you may have to pay for the extra days if you lose.
Medical Savings Account (MSA). Under the MSA alternative, each year the government will pay into your account an actuarially determined amount equal to what SSA would have spent on you during the year. You are expected to purchase private medical coverage and pay from your own funds for any medical expenses up to the deductible. After that, the insurance coverage would take over. To illustrate, if SSA gives you $5,000 for your medical savings account, you buy a policy for a premium of $2,000 to cover all medical expenses in excess of $10,000. You then spend the next $3,000 from the account for medical expenses, then the next $7,000 in expenses from your personal funds. Any medical bills in excess of $10,000 would be covered by the insurance company.
Unlike a traditional MSA, (see chapter 18, section 2.4), any money in the MSA not spent by the end of the year can be withdrawn for your own use tax free. If you die and there is money left in the MSA or that originated in the MSA, it is also free of estate taxes.
Indemnity coverages. Since as of this writing the law is still new (it was passed in 1997), it is uncertain what the requirements will be with respect to indemnity-type companies. The only certainties are that they will have to accept both aged and disabled Medicare patients regardless of preexisting conditions and must offer, at a minimum, the basic Medicare benefits package.
Information. If you want information on Medicare+Choice plans in your area, contact your local Social Security office. The Office of Managed Care of the Health Care Financing Administration publishes “The Medicare Managed Care Directory” free. Call 800-638-6833.
1.5 The Relationship Between Medicare and Private Health Insurance
Medicare permits you to obtain additional private health insurance. If you have Medicare and can obtain additional health insurance through an employer or otherwise, you will reduce or eliminate your deductibles and copayments. If you can obtain both coverages, I urge you to do it.
Tip. If Medicare is your primary coverage and you have additional private health insurance, you may have access to experts in your condition unwilling to treat Medicare-only patients due to the plan’s reimbursement rates.
Tip. You can probably convert continued group coverage to an individual policy. If the policy the carrier offers on conversions is too limited, look at purchasing health coverage on your own. If the new carrier won’t let you have two private coverages, in month twenty-eight from the date you went on disability, don’t pay the premium for your private coverage on time. Your private coverage stops if not paid on the due date and does not start again until the premium is paid within the grace period. You can now correctly state to the new carrier that you do not have insurance since the private insurance does not exist and Medicare hasn’t started. Reinstate your former coverage before the end of the grace period.
Billing. Medicare has specific rules for whether it or private coverage is the primary payer with respect to all services and treatments. Medicare is secondary for
• disabled people with group coverage through their current employment or a health plan based on current employment of a family member if the employer employs one hundred or more people, or, if fewer than one hundred employees, is part of a multi-employer plan in which at least one employer has one hundred or more employees.
• people age sixty-five or over with coverage through employment or spouse’s employment for employers with twenty or more employees.
• eighteen months for people with permanent kidney failure and with group health coverage himself or herself or through a family member.
• people with work-related illness or injury or if no-fault insurance or liability insurance is available to cover.
As a practical matter, this means that if your doctor, hospital, or other service provider does not take an assignment of Medicare, you must send the bill you receive to the primary provider first. If the primary provider is Medicare, you send the bill to the Medicare carrier (the company hired by Medicare to process claims) on the Medicare claim form that the local Medicare carrier uses; the carrier then sends you an explanation of benefits form (EOB). Then, you take that form and mail it to your secondary carrier. If your private coverage is primary, the process works in reverse—send the bill to the private carrier first. If you’re lucky, an electronic database connection between the two companies will eliminate the paperwork for you once the bill is submitted to the primary carrier. Be sure to show your Medicare and other health insurance cards to your doctor’s office staff and tell them which is primary and which is secondary.
1.6 How to Apply for Medicare
You are automatically enrolled for Medicare after receiving SSD for twenty-four months. You will receive a notice in approximately month twenty-eight informing you that Medicare is in place for you, including A and B coverage. The notice also informs you how much will be deducted from your SSD payments for B coverage. It is then up to you to elect to refuse B coverage if you so desire.
If you choose to refuse Part B coverage, you must notify the SSA in writing. The letter should include your Social Security number, state that you are eligible for Medicare, and that you do not want Part B coverage.
Tip. An election with respect to B coverage is not permanent. You can discontinue it whenever you want. You can recommence B coverage every year (at a much higher than normal rate), but only if you so elect between January 1 and March 31. Even then coverage does not start until July 1 of the year you enroll. There are special enrollment periods for Part B coverage if you qualify for Medicare for reasons other than disability. It is always essential to take B coverage.
Others who may be eligible for Medicare should apply at their local Social Security office.
1.7 If You Need Assistance to Pay for Medicare Part B Payments, Fees, and Deductibles
Three federal programs assist low-income Medicare recipients pay Medicare premiums and/or deductibles and copayments: Qualified Medicare Beneficiary (QMB), Specified Low-Income Medicare Beneficiary (SLIMB), and Qualified Working Disabled Individual (QWDI).
For each of the programs, “net countable income” and assets cannot exceed a defined level, which is different for individuals, married people, and people with children. These programs determine net countable income in the same manner as for eligibility for SSI (see chapter 8, section 8.2). Keep in mind that this means you can earn (from a job) slightly more than twice the limit and still be eligible.
In calculating income for eligibility purposes, total SSD payments are included before deduction for the Medicare Part B premium. In late 1997, the net countable monthly income eligibility levels for a family of one are QMB, $658; SLIMB, $888; and QWDI, $1,315.
Under SLIMB, Medicare premiums are paid for the recipient (deductibles and copayments are the recipient’s responsibility). As a bonus, the monthly deduction for Medicare Part B, currently $43.80 per month, is restored to the recipient’s SSD check.
Under QMB, if the Medicare beneficiary’s countable income is less than $658 per month, the Medicare premiums, the hospital admission deductible, and the copayment for doctor visits are paid for by the state. Eligible individuals receive full coverage for just about all medical care except prescriptions, dental, and nursing home care. These excepted items are covered by state Medicaid. Most states do not, however, cover adult dental care in their Medicaid programs, even though New York does. If you don’t qualify for state Medicaid, see chapter 25, section 6.8, for advice on obtaining free medicines.
Under QWDI, only Medicare Part A premiums are paid.
If you are already receiving SSI, apply for these programs at your Social Security office. Otherwise apply through your local welfare office. For more information about these programs contact the Medicare hot line at 800-638-6833 or the Social Security Administration at 800-772-1213.
Additional information. If you have questions about Medicare, call the Medicare hot line at 800-638-6833, the Health Care Financing Administration at 202-690-6726, the Medicare Rights Center hot line at 800-333-4114 or 212-869-3850, or your local department of aging. You can also obtain a free copy of Your Medicare Handbook by writing the Health Care Financing Administration, Office of Beneficiary Relations N-1005, 7500 Security Boulevard, Baltimore, MD 21244-1850.
There are also state programs to pay Medicare premiums, coinsurance, and deductibles.
Section 2. Medicaid
2.1 Eligibility
Medicaid is a “means-based” benefit program that is paid for by the federal government but administrated by the states. Medicaid, which is known in California as MediCal, pays the medical bills for people with a low income and few assets provided they fit within one of six categories:
• disabled.
• blind.
• people under the age of twenty-one.
• pregnant women.
• members of families containing one or more children under age eighteen deprived of two fully functioning parents in the home due to absence, death, medical incapacity, or recent loss of a job (Aid to Families with Dependent Children or AFDC families). This category presents a second opportunity for qualification for Medicaid since the disability test for an “incapacitated parent” is far more liberal than the SSA standards for disability.
• people over age sixty-five.
Aged and disabled legal aliens in the United States as of August 22, 1996, are eligible for Medicaid. Most such legal aliens entering the country after that date are no longer eligible for Medicaid unless and until they become citizens. Illegal aliens are not eligible for Medicaid.
Most larger industrial states have their own programs, which they also call Medicaid, for poor people who do not fit in the six categories. Since the rules vary so much from state to state, check the specifics of your state. The following general description of Medicaid is meant to provide an overview only.
Basically, to be eligible for Medicaid, your income and assets must be less than the SSI or AFDC levels in your state. The asset tests are the same as those used for SSI and the Medicare means-based programs (see chapter 8, section 8.2). The deductions are also the same—except that with Medicaid, in all but thirteen states, you can also deduct a “spend down.”
Tip. If you leave work due to disability and you have no health coverage, you immediately qualify for Medicaid if you qualify for SSI. This coverage can continue through the five-month waiting period for SSD. Since most SSD payments will be above the SSI income level, you would lose Medicaid coverage when SSD starts unless your SSD level is below the SSI level or you qualify through “spend down” provisions as described below.
Spend down. When income is too high to meet Medicaid eligibility requirements, the program allows income to be reduced by a spend down equal to the amount of medical bills that are incurred during the subject period. It is not necessary that the bills be paid—just that they be incurred. This generally includes premiums for Medicare and private health insurance. To illustrate, if the eligibility income level is $500 and you make $700, but you incur medical bills in the month for $200, your countable income becomes $500 ($700 less $200 in medical bills incurred) so you are eligible for Medicaid during that period.
Spend down provisions only apply to excess income, not to excess assets.
Generally, SSI and Medicaid do not care if an applicant sells assets for less than fair market value or even gives them away in order to qualify, except with respect to long-term care (see section 2.3).
Living benefits. If you obtain an accelerated benefit from the life insurance company or sell your policy in a viatical settlement, once you receive the money, you flunk the income test. You also fail the asset test—until you no longer have the money.
Getting your Medicaid card. In most states (“1634 states”), SSI recipients automatically receive Medicaid cards. In other states (“Title XVI states”), SSI recipients have to prove SSI eligibility to the state welfare office to qualify. In a third set of states (“209(b) states”), recipients must apply separately for Medicaid at the welfare office because Medicaid rules are stricter than SSI rules—although as a general matter most SSI recipients will qualify for Medicaid as well.
Spouses. When one member of a married couple moves to a nursing home and applies for Medicaid, there are protections for the other spouse’s assets known as the community spouse resource allowance (CSRA), which vary from state to state. The spouse not in the home can usually also retain his or her income. There is also an allowance for the remaining spouse and a family income allowance for minor children.
2.2 Benefits
In addition to providing what could be thought of as traditional health coverage, Medicaid tends to become the payer of last resort for long-term care. Each state has its own program, which is subject to federal minimums. In just about all states, Medicaid covers
• physician services
• prescription drugs (subject, in some states, to limits per month).
• laboratory and X-ray services.
• medically necessary transportation to and from medical care (including ambulances and sometimes handicapped vans and taxis).
• care by a psychiatrist. Some states also cover psychologists and psychiatric social workers.
• clinic care.
• home care by professionals such as registered nurses and physical therapists. In some states, Medicaid also covers physician-ordered part-time skilled nursing, and homemaker services provided by certified home-health agencies—particularly if it would keep the applicant from having to enter a nursing home or a hospital. Likewise, personal care services may be covered if they are incidental to medical care. In all states except the District of Columbia, Medicaid will cover a personal care aide if ordered by a hospital under a “waiver” program. Some waiver programs even cover respite care. These waiver programs usually require the person be as impaired as someone who would otherwise be in a nursing home.
• assisted-living care if you qualify for a home and a community-based waiver of service (see here) if the facility is licensed by the state. This program may even cover case management, which is not ordinarily covered by Medicaid.
• hospital care, both inpatient and outpatient.
• nursing homes.
• hospice care (in about half of the states).
• family-planning services and supplies.
• at least basic dental care for children. A few states also cover adult dental care.
Medicaid payments are made according to a schedule of fees that varies state by state. The amount of payments is low compared to market prices and is generally even low compared to payments made by Medicare. The payments are made directly to the provider. The federal law allows requirement of a nominal copayment, which is not defined but is usually $.50 or $1 per office or clinic visit, per lab test, per prescription, and per other medical service or item. Federal law also provides that no provider can withhold an item or service if a Medicaid recipient cannot afford the copayment.
Participating physicians. In general, medical care providers do not have to participate in Medicaid. Many prefer not to because of the low Medicaid fee schedules and the requirement that the provider accept the Medicaid rates as full payment. As a general matter, the result is that doctors in poor neighborhoods accept Medicaid while most of those in middle-class and upper-class neighborhoods don’t. Your GuardianOrg or your social worker may have a list of participating providers.
Tip. An exception to the general rule is that doctors who are involved in a clinical practice associated with a teaching, research, or large public hospital are effectively required to participate in Medicaid. Their patients receive the latest medical care. The doctors are paid the difference between what they receive from Medicaid and their normal fees through subsidized endowments, charities, and the like.
Managed care. With a law passed in 1997, the states have the right to require that Medicaid patients enroll in managed care organizations. See chapter 14, section 3.2, for factors to consider if you have a choice as to which managed care organization to use.
Payment of Medicare and private health care premiums. Since states have realized that it is less expensive to pay premiums for health coverage than to pay the actual medical expenses for poverty-level residents, all states pay for Medicare premiums, coinsurance and deductibles for Medicare beneficiaries, and premiums for private health insurance policies for Medicare eligible people. All states can, and a few states do, pay COBRA health insurance premiums for those with low incomes and assets even if they are not eligible under the state’s regular Medicaid rules for other Medicaid benefits.
If you qualify for both Medicare and Medicaid. It is possible to be on both Medicare and Medicaid—for instance, when a person receives SSD but the amount of the monthly payment is below the SSI level. (When a person accesses both programs it is called Medi-Medi.) In that case, Medicare first pays medical bills up to whatever its rules allow, then Medicaid pays the rest. Health coverage becomes complete since prescription drugs are covered under Medicaid, and you won’t have to pay the deductibles and copayments that you would otherwise face without Medicaid. Your health care providers are also happy because they and hospitals are covered by the better rates paid by Medicare, which makes them more likely to accept you as a patient and devote adequate time to your care. Also, when you are on Medi-Medi, Medicaid will start paying the Medicare Part B premium for you so your SSD check will increase by the amount of the Part B premium.
2.3 Impoverishing Yourself to Qualify for Long-Term Care
Long-term care, which includes nursing homes, hospice care, and home health care, can be expensive. To avoid having people qualify for this expensive care by giving away their assets to loved ones, there is a look-back period—the responsible agency “looks back” to determine if any transfers for less than fair market value were made by the applicant during a specified period. The states do not have to include this look-back period, but if they do, a period of thirty-six months is mandated. The look-back period is extended to sixty months if the transfer was to a trust.
Transfers of assets to spouses do not count as transfers at all but are considered assets of the applicant. (Neither do transfers to blind or disabled children.) Transfers by the spouse of a person who receives or applies for Medicaid during the look-back period can disqualify the applicant.
Although state regulations vary, transfers without full value within the three-year period may be permitted depending on the purpose for which the transfers are made, and when. Matters are often decided case by case, and you will have to prove the transfer was not made to qualify you for Medicaid. For example, it is likely that if your father needs a $20,000 heart operation, you will not be penalized for giving him the money.
Any assets transferred in the look-back period trigger a penalty period. This penalizes applicants to the extent that the transferred money could have been used for long-term care:
• Determine how much money was transferred without fair value during the look-back period.
• Determine how much supervised care costs per month in the applicant’s area.
• Divide the amount that was transferred by the monthly cost of supervised care.
• The result is the number of months Medicaid will not pay for nursing home care, starting with the first day of the month succeeding the month in which you gave away assets.
For example, in the Syracuse, New York, area, nursing home care is assumed to cost $5,000 a month. If the applicant transferred $50,000 for no consideration to a son three months before applying for long-term care, then $50,000 divided by $5,000 equals ten months. The applicant would have to absorb the cost of a nursing home for ten months. Medicaid would start covering the costs of the nursing home in the eleventh month.
If the transfer is made during the look-back period, there is no limit on the term of the penalty period. In the above example, if the applicant transferred $300,000, the penalty would continue for sixty months. Thus, if the penalty would be more than thirty-six months, it is preferable to make the transfer and wait more than thirty-six months before applying for Medicaid.
Note: There are no federal prohibitions against transferring assets before applying for non-nursing-home Medicaid benefits. However, your state may impose such restrictions.
In response to abuses, Congress made it a criminal offense for professionals to give advice about divesting assets to qualify for Medicaid during the look-back period or during the penalty period. Advice given before the look-back is not a criminal offense, and neither is advice during the look-back or penalty period if the applicant does not actually apply for Medicaid coverage of long-term care until after the penalty period. The practical effect of this provision has been to make advisers more cautious about their advice. All of which leads me to state:
The following discussion is for information purposes only and is not to be considered advice or assistance with respect to disposing of assets to qualify for Medicaid long-term-care nursing home benefits.
People faced with the exorbitant costs associated with long-term care have become eligible for Medicaid by shielding assets to some extent or by transferring assets.
Conversion. The simplest method to qualify for Medicaid has been to shift assets into excluded categories (e.g., a home). For example, Sebastian L. could not obtain private health insurance but needed recurring expensive treatment for his kidney disease. He used his $100,000 nest egg for the purchase of a house. He rented a room to a friend, who pays for the expenses of the house instead of paying rent.
Divestiture. Another method used is divestiture (giving assets away). The common method of divestiture is to follow the “rule of half”—the applicant transfers one-half of his assets and keeps the other half. The rule of half is not arbitrarily set at 50 percent. Since there will be a penalty for the money given away, enough money is retained for the applicant to pay for the necessary care during the penalty period, while maximizing the amount that is given away. For example, a person with $100,000 gives $50,000 to a child and keeps the other $50,000, which is then used to pay for nursing home care. In the example we’ve been using in which nursing home care costs $5,000 a month, the $50,000 that is given away equals ten months in a local nursing home. In the eleventh month, the person applies for Medicaid. The second $50,000 is no problem because it was transferred for value—for the services of the nursing home.
To exemplify the problem advisers are having today: If the applicant applies for Medicaid in month nine, there is no effect on the applicant. There will still be no Medicaid coverage until month eleven. Nevertheless, if, during the penalty period, an adviser advises an applicant to do this, the adviser could be deemed to have broken the law.
Supplemental needs trusts (also known as special needs trusts). Under federal law and under many state laws it is possible for a friend or relative to establish a “supplemental needs trust” for a disabled person under age sixty-five to provide for needs supplemental to what Medicaid and SSI pay for—such as vacations, special educational and recreational programs, special equipment, or modifications to the home to accommodate a disability. The assets remaining in the trust upon the death of the beneficiary can be distributed according to the desires of the creator of the trust. Your GuardianOrg or state or local bar association can probably provide a referral to an attorney specializing in this area of law.
In some states, these trusts can be established with a disabled person’s own funds, which both reduces assets so as to become eligible for Medicaid and provides for additional needs. Generally, any assets remaining in this sort of trust after the death of the beneficiary are available to the state to recover the cost of care provided to the disabled beneficiary.
Keep in mind the practical difficulties of distinguishing between luxuries and necessities. For example, rent, food, and medical bills are necessities. For additional information, look at Third Party and Self-Created Trusts: A Lawyer’s Comprehensive Reference by Clifton B. Kruse Jr. (Chicago: American Bar Association, 1995).
Annuities. Another method that has been used to avoid the asset test is to purchase a single-premium annuity, which changes an asset into a stream of income. For example, if you go into a nursing home, you can assign the income to the home, then reclaim the remaining income when you leave the home. This usually works best for people with a longer life expectancy.
Liens. For people over age sixty-five, Medicaid can eventually seek to recover money from the estate of deceased recipients, or even place a lien on real property owned by the recipient for money spent by Medicaid on long-term care. If a home is inhabited by legally married spouses or minor or “disabled” adult children, Medicaid does not place a lien on the premises to try to recover money spent on long-term care for a deceased recipient or recipients no longer living on the premises unless fraud was involved. Generally, there can also be no recovery if title to the asset is transferred. For people under age sixty-five, liens and recoveries from estates are generally not permitted unless there has been fraud.
Tip. If transferring or spending your assets to qualify for Medicaid seems appealing, be aware that
• Medicaid does not cover a number of tests and procedures, and, since payments are limited, may not provide access to the best care.
• when you give away assets, you actually do impoverish yourself and no longer have any control over the assets. For money, you must rely solely on the discretion of the person to whom your assets have been transferred. Your assets will also be subject to that person’s legal and financial problems.
• the Unified Gift-Estate tax may apply (see chapter 33, section 4).
• you should consult a qualified attorney who is a specialist in this area. While being careful to comply with the new law, attorneys still give advice. To locate an attorney, contact your local bar association. The National Academy of Elder Law Attorneys, 1604 N. Country Club Road, Tucson, AZ 85716-3102 (520-881-4005) can provide a list of its members for $25.
Waiver services. If home attendant care is the issue, and it is not covered under Medicaid in your state, it may be covered as part of home- and community-based “waiver services.” This vague term permits less expensive home care (not normally covered) if it allows the person to stay at home rather than “risk institutionalization.” The word institutionalization was apparently meant as expensive nursing home care, but it has generally been interpreted to also include hospitalization. States can even set broader eligibility requirements for people who fit this category. For instance, in waiver situations, doctors can be paid more than the regular Medicaid payments to be sure the person gets treated outside the institutional setting.
Tip. If you need long-term care and can’t arrange it, get admitted to a hospital. You won’t be discharged until an arrangement for your care is in place. It may not be what you want, but it’s likely to be better than not getting the care you need. If not, you can always leave.
2.4 Appeals
You are entitled to a hearing if your application for Medicaid is denied or if your Medicaid benefits are terminated, suspended, or reduced. The written notice you will receive of cessation or reduction of your benefits will not only inform you about the action to take place, the reason and the date it will happen, it will also provide information about an appeal. The notice will describe the action you must take to continue your benefits pending a hearing. If you need to appeal, seek the assistance of an attorney with experience in Medicaid cases.
More information. If you have additional questions about Medicaid, call the Medicaid hot line (800-541-2381) or directory assistance in your state and ask for Medicaid’s telephone number or call your local department of aging.
Section 3. Hill-Burton—Free Hospital and Health Facility Care
In exchange for Hill-Burton program grants and loans to hospitals and other health facilities for construction, renovation, and expansion, the facility must give free or reduced-fee medical care to people with low incomes who are not completely covered by private health insurance, Medicare, or Medicaid. The amount of care a facility must provide is set (and audited) each year.
Hill-Burton does not consider assets. It covers inpatient hospital bills, but not doctors’ bills. It is possible to apply after you leave a hospital for the Hill-Burton program to pay for your stay, but it is better to do it before entering. To locate a facility in your area that participates in this program, call the Hill-Burton hot line at 800-638-0742.
Tip. When calling a facility to determine whether it will admit you for little or no cost, ask for the “Hill-Burton coordinator” or a financial counselor. Even if the facility has used its Hill-Burton requirements for a year, it may have other programs to provide free or less expensive care.
Section 4. Veterans’ Benefits
The Department of Veterans Affairs administers various health programs and needs-based income programs for veterans of the Air Force, Army, Coast Guard, Marines, Navy, the Environmental Services Administration, the National Oceanic and Atmospheric Administration, the World War II merchant marine, Army Air Corps Flying Services, Philippine guerrilla units, and commissioned officers of the Public Health Service. If you served in any of these organizations, contact the Veterans Administration at 800-827-1000 to find out about eligibility for health, income, and burial benefits. Generally, all veterans with honorable or general discharges who have at least 180 days of active duty can receive care at VA medical centers—even if they are not disabled under VA or Social Security rules and whether or not they served in a war zone or during “wartime.” If income exceeds a prescribed level, a copayment is charged.
Tip. Be aware that if your illness is not service based, when you go for care, people with service-based problems are taken care of ahead of you.
Tip. VA care can provide prescription coverage for many severely ill and disabled veterans for whom such coverage is not generally available (even if they have SSD and Medicare). VA clinics and hospitals charge only $2 per prescription, and small copayments—even for high-income veterans.
Section 5. State and Local Programs
Many other benefit programs administrated by states and localities provide for housing, medications, and other medical costs. To find out about these programs and whether you are eligible, you should speak with a social worker at the welfare office, county or city aging agency (even if you’re not elderly), county or city housing department, and legal aid agencies. Also speak with your GuardianOrg as well as other people with your condition.
Tip. If you are told that no programs apply to you, seek a second opinion from another expert. Alan E. was told by a case manager that no local programs would benefit him, although he could (and eventually did) qualify for a local housing program.