Many older adults preparing for retirement qualify for Medicare coverage. Even those who may not have worked consistently can potentially qualify based on the employment records of their spouses. Medicare coverage is a crucial form of protection for older adults in the United States.
People can receive basic medical care using their Medicare coverage. However, many legal and financial professionals recommend that those preparing for retirement or reviewing their finances during retirement engage in Medicaid planning. Why is Medicaid planning so important for those preparing for or enjoying their retirement years?
Medicare doesn’t cover everything
There are significant gaps in Medicare coverage. Specifically, Medicare often does not typically cover long-term care costs. People can use Medicare for short-term rehabilitation support after surgery or an injury.
Any services that last for more than a month are likely ineligible for Medicare coverage. Medicaid is the only government insurance program that can pay for home health support or a bed in a nursing home.
Medicaid has very strict rules
Unlike Medicare, which is a near-universal form of protection after retirement, Medicaid is a need-based benefit only available to those with limited resources. The state looks at both countable assets and income when determining Medicaid eligibility.
Applicants must undergo a review of five years of their previous financial transactions. Without advance planning, any valuable gifts or transfers made before they apply could lead to a penalty. The Medicaid penalty forces an older adult to pay for their own care for a certain number of months based on the amount of the transfers or gifts they made.
Additionally, after the recipient dies, the Medicaid estate recovery program may take action in probate court. Medicaid usually seeks full repayment for long-term care costs, even if that means that an individual’s beneficiaries inherit nothing. Advance planning for Medicaid can protect resources and help people get coverage quickly when they need support.
Engaging in Medicaid planning prior to experiencing medical hardship is a smart move for those unable to fully cover long-term care costs with their retirement savings. Those creating or updating their estate plans may want to discuss Medicaid eligibility and how to protect themselves later in life.
