Medicare vs. Medicaid for a Parent's Long-Term Care

If your parent needs ongoing help with bathing, dressing, eating or supervision, Medicare generally will not pay for it simply because the help is necessary. Medicare may cover short-term skilled care and certain medical services. Medicaid may cover longer-term services and supports if your parent meets the program's financial, functional and state-specific eligibility rules.

The two are not a choice between one and the other. A parent on Medicare who qualifies for Medicaid keeps Medicare, and the programs pay for different things in a set order. This article walks the questions in the order a family meets them, from what each program is to what to ask now.

The two programs, side by side

Medicare is federal health insurance, mostly for people 65 and older, with the same rules in every state. Medicaid is financed jointly by the federal government and the states and run by the states: within broad federal rules, each state decides who is eligible, which services it covers and how it operates. The table reads the same ten questions against both.

The distinction to understand is skilled versus custodial

When a discharge planner says the care your parent needs is custodial rather than skilled, that is not a judgment about how much help is needed. It is the category that decides whether Medicare is the payer. Medicare's coverage page describes long-term care, which it also calls custodial care or long-term services and supports, as mostly help with the basic personal tasks of everyday life. Then it draws the line: because most long-term care is non-medical, Medicare and most health insurance, including Medigap, do not pay for it, in a nursing home or in the community.

Skilled care is different in kind, not in amount: care that can be given safely only by, or under the supervision of, nurses or therapists, such as intravenous medication or physical therapy after a fall. Medicare covers that, in a facility or at home, when its requirements are met. Coverage follows those rules rather than the word anyone used at a meeting, so the useful question is which kind of care your parent needs this month.

What kind of care does your parent need?

Start from the care itself. Each answer says which program is in the picture; the sections below say what each requires.

1. 1Is it short-term skilled care: nursing or therapy after a hospital stay, or intermittent skilled care at home?

   If yes

   Medicare may cover it when its requirements are met: a qualifying inpatient stay and a doctor's decision that daily skilled care is needed, for a facility; the four home health conditions, at home. It ends when the skilled need ends.

   No, the need is ongoing daily help: continue to question 2

2. 2Is it ongoing help with bathing, dressing, eating, moving about or supervision, with no skilled need driving it?

   If yes, and my parent may meet Medicaid's financial and functional rules

   Medicaid may cover it: nursing-facility care and, depending on the state and its programs, care at home or in the community. The rules are the state's, inside a federal frame. Start with the eligibility section, then the state's Medicaid agency.

   If yes, but I do not know whether my parent qualifies

   The eligibility section lists what a state tests and what to gather. Until the state decides, Medicare generally will not pay for this kind of care.

   If yes, but my parent is above the limits, or holds a long-term care policy

   Medicaid is not in the picture yet, and Medicare generally does not cover custodial care. Personal funds and a long-term care policy, where there is one, are what pay.

3. 3Does your parent have Medicare and Medicaid at the same time?

   If yes, both

   The programs work together. Medicare pays first for Medicare-covered care, such as a skilled stay or home health; Medicaid pays last, and may cover long-term services and supports and other costs Medicare does not.

   If only Medicare

   Medicare pays for the skilled and medical care it covers. Ongoing custodial care is paid another way unless and until your parent qualifies for Medicaid.

• The rail says which program is in the picture. It does not decide eligibility: the state's Medicaid agency does, and a Medicare claim is decided under Medicare's rules.

What Medicare may cover, and for how long

The figure families arrive with is a hundred days, and it is right in a narrower way than it sounds. Medicare Part A limits skilled nursing facility coverage to 100 days in each benefit period. Coverage depends on a qualifying inpatient hospital stay of three consecutive days, not counting the day of discharge or time under observation; entering the facility within a short time of leaving the hospital, generally 30 days; and a doctor's decision that your parent needs daily skilled care from, or supervised by, skilled nursing or therapy staff.

Under Original Medicare the first 20 days of a covered stay carry no daily coinsurance. From day 21 through day 100 there is a daily amount, set each year, that your parent pays. After day 100 in a benefit period Medicare pays nothing for the stay. Few stays run the full hundred days: coverage continues only while the daily skilled need continues, and ends when it ends.

Two things a family is told at that point deserve checking. The first is that coverage stops when a patient stops improving. The regulation says the opposite: restoration potential is not the deciding factor, and skilled care to maintain a condition or slow its decline is covered when the care itself is skilled. The second is that the rules above are the whole picture. They are the Original Medicare picture. A Medicare Advantage plan may waive the three-day stay, may charge copayments in the first 20 days, and sets its own cost sharing, so read the plan's rules.

Medicare also covers care at home, on its own terms. Home health has four conditions, and the one that decides it is that your parent is confined to the home; the others are a doctor's plan of care, a need for intermittent skilled nursing or therapy, and a participating agency. Once those are met, a home health aide for bathing, dressing and moving is covered as part of that care, and ends when the skilled service ends. What a benefit period is, and how to appeal a discharge, are on Rehab and skilled nursing and Home health is not home care.

If the question is about signing up for Medicare in the first place, the windows and the penalty for missing them are on Medicare enrollment. They have no bearing on whether Medicare pays for long-term care.

How Medicaid long-term care eligibility works

Medicaid does not qualify a person because their income is low, and it does not disqualify a person because they own something. It tests several things at once, each the state's rule inside a federal frame. Medicare's own guidance puts it plainly: you must meet your state's rules for income and resources, and other rules, such as being a resident of the state, and who is eligible differs in each state.

• A financial test on income. The limit is the state's. Some states let a person whose income is above it spend down, by paying medical expenses and cost sharing until income reaches a qualifying level.
• A financial test on resources, which is the rules' word for savings and property. What counts, what is exempt and the limit itself are the state's, within federal requirements.
• A functional test of the care your parent needs, which each program sets. For services at home under a waiver, the federal rule says it in terms: the person needs the level of care a nursing facility provides and would otherwise be institutionalized but for the waiver services, and the state re-checks that at least once a year.
• Residence in the state, and the pathway applied for. A state may run more than one route to long-term care coverage, and the rules differ by route.
• Where the care will be given. Nursing-facility coverage and home or community-based coverage are separate questions, often with separate programs.

This article prints no dollar limits, because a national figure would be wrong somewhere. The state's numbers are on Paying for long-term care, and what Medicaid actually does, by state, and the state Medicaid agency is where an application is made.

The five-year look-back

The look-back is real, and it is narrower than its reputation. When a person applies for Medicaid long-term services and supports, the state looks at transfers for less than fair market value in the 60 months before the date the person is both institutionalized and has applied, for transfers made on or after February 8, 2006. The services it reaches are named: nursing facility services, an equivalent level of care in another institution, and home or community-based services under a waiver. It is not applied to every Medicaid application.

The part that is easy to get wrong is when the consequence lands. A transfer inside the window produces a period of ineligibility computed from the amount given away, and that period does not start when the gift was made. It starts when the person would otherwise have qualified: institutionalized, applied and eligible but for the transfer. Money moved to protect it, informally and at the wrong moment, can produce exactly the outcome it was meant to prevent.

Some transfers are outside the rule by name, and the spouse heads the list: a transfer to the spouse is not penalized, and neither is a transfer of the home to a spouse, to a child who is under 21 or blind or disabled, or, in defined circumstances, to a sibling or a caregiving child.

The house

Two different questions hide inside the word house. The first is whether the home counts as a resource when the state tests what your parent owns. That is the state's eligibility rule, and the place to look first. The second is a separate federal limit on home equity: in deciding eligibility for nursing-facility or other long-term care services, a person whose equity in the home exceeds a federal ceiling is not eligible. The statute sets the figure, lets a state choose a higher one within a federal maximum, and indexes both each year, so the current thresholds differ by state.

The equity limit has exceptions, and they are all people. It does not apply while a spouse, a child under 21, or a blind or disabled child of any age is lawfully living in the home. A reverse mortgage or home equity loan may reduce the equity that counts, and federal law requires a process for waiving the limit where applying it would be a demonstrated hardship. A question that sounds like it is about a property is a question about the household.

Nothing here is advice about what to do with a house: a move that looks protective can trigger the look-back, change the household, or reach into the estate later. What each state does with the home is on the Medicaid page, by state.

The spouse at home

A husband or wife who stays at home does not have to be impoverished before the other qualifies. Federal law calls that person the community spouse, meaning the spouse who remains at home, and protects them in two ways. When one spouse enters an institution, the couple's resources are assessed as a whole and split, with a spousal share set at half. From that share the state computes a community spouse resource allowance: what the spouse at home keeps, not counted against the parent's eligibility. Either spouse can ask for that assessment before any application, and gets a written copy.

On income, no income of the community spouse is treated as available to the spouse in care, and a monthly allowance can be set aside from the institutionalized spouse's income to bring the at-home spouse up to a floor. The purpose is to keep one spouse's care from leaving the other without a home or an income. Every figure in this section is set by the state each year inside federal limits, which is why none is printed here.

It is natural to assume any transfer near an application is dangerous. On this one move the statute says the opposite twice. A transfer to the spouse is outside the penalty altogether, and once eligibility is decided the statute tells the institutionalized spouse to move the protected share to the spouse at home as soon as practicable. It is one of the few places in this subject where the law tells a family to act promptly rather than warning them off.

Estate recovery

For long-term care paid after age 55, estate recovery is not something a state may do. Federal law requires the state to seek recovery from the estate of a person who was 55 or older when the care was paid, for nursing-facility services, home and community-based services and related hospital and prescription drug costs. A state may go further; the long-term care floor is the mandatory part.

The same section says when it cannot happen. Recovery is made only after the death of a surviving spouse, and only when there is no surviving child under 21 and no surviving child who is blind or disabled. A lien on the home is also deferred while a sibling with an equity interest, or a child who provided the care that kept the person at home, lives there under the statute's conditions. And every state must have a procedure to waive recovery where it would work an undue hardship, applying federal criteria.

What the state can reach is the other half of the question. The estate includes, at a minimum, what passes through probate under the state's law. A state may also choose to include property that passed outside probate, such as a jointly held house, a life estate or a living trust, and some do. Whether your parent's state does, and how its hardship procedure works, is on the Medicaid page, by state.

Care at home and in the community

Medicaid is not only a nursing-home program, and assuming it is can cost a family the option they would have chosen. A state home and community-based waiver may pay for services the ordinary Medicaid plan does not: case management, homemaker services, home health aides, personal care, adult day health, respite care, and other services the state proposes and the federal agency approves as necessary to avoid a move into an institution. Those services are defined by the state and approved for that state, which is why this coverage exists state by state.

The door into a waiver is a level-of-care test. The federal rule requires the state to evaluate whether the person needs the level of care a hospital, a nursing facility or an intermediate care facility provides, and would otherwise be institutionalized but for the waiver services, and to re-evaluate that at least once a year. Care at home under a waiver is not an easier standard than a nursing facility. It is the same functional test, met at home. Other state programs for care at home set their own criteria.

What follows is the thing to hold onto: home and community-based coverage is not a national entitlement equivalent to nursing-facility coverage. Which programs a state runs, who each serves, what it offers, whether it has room for a new person and how to get onto it are questions for the state's Medicaid agency, and the answers differ substantially by state. Ask early, before a discharge date forces the answer.

What if your parent has both

Nothing about qualifying for Medicaid takes Medicare away. A person with both Medicare and full Medicaid coverage is called dually eligible, and the programs pay in a set order. Medicare pays first for Medicare-covered services, such as a hospital stay, a covered skilled nursing stay or home health. Medicaid pays last, after Medicare and any other insurance, and may pay for services Medicare does not cover: for a parent needing ongoing help, the long-term services and supports this article is about, along with costs such as premiums and cost sharing under the state's rules.

So a parent with both can have a rehab stay paid by Medicare and, when the skilled need ends, stay on in the same facility or go home with Medicaid covering the ongoing care, if the state has found them eligible. How the two coordinate depends on the coverage held: Original Medicare with Medicaid behind it works as described, and a Medicare Advantage plan, including one designed for people with both, adds its own rules. The plan documents and the state Medicaid agency answer it for your parent.

What to ask now

Eight questions, in the order they usually need answering: three about Medicare and this month, five about Medicaid and the household.

• Is the care skilled or custodial, and who decided? Ask the discharge planner or the doctor to say which, and why.
• Was there a qualifying inpatient stay of three days, not counting the discharge day or observation? Ask the hospital which status each day was.
• Is it Original Medicare or a Medicare Advantage plan? The plan's rules on the three-day stay and the first 20 days decide what the family pays.
• Which state's Medicaid rules apply, and which pathway: nursing-facility coverage, a home and community-based program, or both?
• What are the state's income and resource limits for that pathway, and does the state allow a spend-down?
• Has anything been given away or sold for less than it was worth in the last five years? Gather the record before the application asks.
• Who lives in the house, and does the state count it? A spouse or a qualifying child changes the answer.
• Is there a spouse at home, and has the state been asked to assess the couple's resources? Either spouse can ask before applying.

Medicare and Medicaid are not the only ways a family pays. Personal funds carry what Medicare does not cover, and a long-term care insurance policy, where one exists, pays on its own claim test; that test is on Long-term care insurance. Sahvelo can work through the questions above with the facts you give it rather than in general, and the Medicaid page holds the state's own rules.