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Debunking common myths about Medicaid

by Legacy Plan
September 11, 2023

In the vast array of health care options, Medicaid stands as one of the most crucial safety nets, providing vital health coverage to millions of Americans from various walks of life. Yet, this expansive program is often misunderstood and misrepresented by those who could benefit from it the most.

From the misconception that Medicaid is synonymous with welfare to the dangerous belief that Medicaid planning is unnecessary, myths persist. These myths can deter eligible individuals from applying, prevent effective estate planning and even adversely affect the quality of care one receives.

In this article, we will dismantle four of the most prevalent myths about Medicaid, offering a clearer, more nuanced understanding of what Medicaid is, how it operates and how you can make the most of the benefits it offers. Whether you are planning for your future health care needs, seeking options for a loved one or are a policy maker aiming to understand public sentiment, this article aims to shed light on the intricacies of Medicaid and dispel the misunderstandings surrounding it.

Medicaid is one of the most widely used public assistance programs in the United States, providing essential health coverage to millions of low-income Americans. Yet, despite its significance, there are many misconceptions about what Medicaid is and how it functions.

Myth 1: Medicaid is a form of welfare

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Medicaid is a joint federal and state program designed to provide health coverage to people with low income, including some low-income adults, children, pregnant women, elderly adults and people with disabilities. While welfare programs are primarily geared toward providing financial aid for food and shelter, Medicaid is focused on health care services. They are distinct programs serving different needs and should not be conflated.

The misconception that Medicaid is a form of welfare stems from a lack of understanding of how both programs work, their intended beneficiaries and the type of assistance they provide. While both Medicaid and welfare programs aim to assist individuals and families in need, they serve different purposes, have different eligibility criteria and offer different types of support.

The term "welfare" typically refers to programs designed to provide general financial assistance to individuals or families who are unable to support themselves. This might include assistance for food, housing or direct financial aid.

On the other hand, Medicaid is a health insurance program with the express purpose of providing medical care. It is not intended to offer general financial assistance for day-to-day living expenses. Eligibility for welfare benefits often depends on various factors, including income, family size and sometimes work requirements. Eligibility for Medicaid also depends on income but considers additional factors such as age, disability status and family situation, including pregnancy and number of dependents. Some assets may also be considered, particularly for long-term care coverage.

Welfare benefits might be provided in the form of cash assistance, food stamps (SNAP) or housing vouchers. Meanwhile, Medicaid benefits are strictly health care-related, including hospital stays, doctor visits, preventive care, mental health services and long-term care, among others.

The funding structure is another difference. Welfare programs are typically funded solely by the federal government, although they may be administered at the state level. Because Medicaid is a joint federal and state program, both levels of government contribute to the funding. States have some flexibility in setting eligibility criteria and benefits, resulting in Medicaid programs that can look quite different from one state to another.

Unfortunately, both welfare and Medicaid programs can be stigmatized as handouts, but this is an oversimplification and misunderstanding of their roles. Welfare aims to provide a safety net of last resort for basic living needs, while Medicaid provides essential healthcare services to those who otherwise might not be able to afford them.

Understanding the differences between Medicaid and welfare is crucial for informed discussions about social safety nets, public health and policies that impact vulnerable populations. Medicaid is a specialized program with the specific aim of providing health care coverage, and as such, it should not be considered or categorized as welfare.

Myth 2: Planning for Medicaid is not needed

calendar with several days marked off with a hand and pencil marking off more days

Contrary to popular belief, Medicaid planning is an essential part of financial and estate planning, especially for older Americans or those with long-term care needs. Qualification for Medicaid often involves complex financial calculations, including a "look-back" period that can affect eligibility. Asset planning, including the use of certain types of trusts, can be a strategic way to secure Medicaid eligibility while preserving one's estate. Failure to plan can result in loss of benefits or unnecessary depletion of assets.

The belief that planning for Medicaid is unnecessary is a dangerous myth that can result in significant financial and emotional strain. Medicaid is a complex program with various rules, limitations and eligibility requirements, which differ not just by individual circumstance but also by jurisdiction. Proper planning can be instrumental in securing benefits, safeguarding assets and ensuring the highest quality of care for you or your loved ones.

There are several reasons why planning for Medicaid is critical. First, Medicaid's financial eligibility criteria examine both income and assets. For some Medicaid programs, especially those dealing with long-term care, there is a "look-back" period of five years. Any asset transfers or gifts given during this period that are below fair market value can disqualify you from receiving benefits for a set time. Without planning, you may find yourself ineligible for Medicaid precisely when you need it the most.

Proper Medicaid planning can help protect your estate and your family’s inheritance. Techniques such as setting up specific types of trusts can legally shield some of your assets while still allowing you to qualify for Medicaid. Failure to understand these tools can lead to the unnecessary depletion of your life's savings or assets that you would like to pass on to your family.

Proceed carefully, because Medicaid eligibility rules can be extremely complicated and can involve navigating a maze of federal and state statutes, regulations and interpretive guidelines. Attempting to handle this without careful planning or expert guidance can result in mistakes that jeopardize your chances of receiving benefits. Also, laws and regulations surrounding Medicaid are frequently changing. What may have been true a few years ago might not apply now. Ongoing planning is essential to adapt to these changes and ensure continued eligibility and optimal benefits.

But planning isn’t just about financial eligibility; it’s also about the quality of care. Medicaid has different programs offering varying levels of service. Understanding these options and planning for them can be the difference between receiving mediocre care or getting the services that best meet your needs.

For married couples, when one spouse requires long-term care, proper planning can protect the financial well-being of the spouse who remains at home. There are specific Medicaid provisions to prevent spousal impoverishment, but taking advantage of them requires understanding and foresight.

Medical crises can arise suddenly, leaving you with little time to understand complex Medicaid rules and make crucial decisions. Planning ahead provides you with the time to consider all your options, consult experts and make informed choices that align with your wishes and needs.

Failing to plan for Medicaid can result in missed opportunities, financial loss and unnecessary stress for you and your family. With the stakes so high, the myth that Medicaid planning is not needed can be a costly one to believe.

Myth 3: Medicaid can't help if you're already in a nursing home

healthcare worker giving food to elderly patient

Many people think that once you're in a nursing home, it's too late to apply for Medicaid benefits. However, Medicaid does cover the cost of nursing home care for eligible individuals. Even if you've entered a nursing home paying out-of-pocket, you may still become eligible for Medicaid to cover ongoing costs. It's advisable to consult a Medicaid planner or attorney to explore your options.

The belief that Medicaid can't help if you're already in a nursing home is a damaging myth that can result in unnecessary financial burden and emotional stress for families. While each case is unique and dependent on various factors like jurisdiction, income and assets, it's essential to understand that Medicaid can often be accessed even after someone has entered a nursing home.

In many cases, Medicaid benefits can be retroactively applied. This means that you may be able to receive reimbursement for nursing home costs incurred in the months leading up to your Medicaid application, provided you met eligibility criteria during that period. This retroactivity can be a financial lifeline for families.

The term "spend-down" refers to the process of reducing your countable assets to qualify for Medicaid. If someone has already entered a nursing home and is paying out-of-pocket, those expenses can often be counted as part of the spend-down process to achieve Medicaid eligibility more quickly.

While it's true that Medicaid has a look-back period where asset transfers can result in a penalty, there are specific exemptions and strategies for asset protection even after entering a nursing home. For example, certain types of asset transfers are exempt from penalty, and some assets may be converted into non-countable assets to help with Medicaid qualification.

In cases where a married individual is in a nursing home, Medicaid has provisions to prevent the impoverishment of the spouse still living at home, often referred to as the "community spouse." Specific assets and income may be allocated to the community spouse, which can both help with immediate financial concerns and with Medicaid eligibility for the institutionalized spouse.

Your needs, or the needs of a loved one, can change over time, particularly when dealing with long-term medical conditions. Medicaid offers not only nursing home care but also other services like home and community-based services that might become more appropriate over time. Just because someone has entered a nursing home doesn't mean that Medicaid's role in their care is null and void. On the contrary, understanding Medicaid's various provisions can enable better, more tailored care.

The idea that Medicaid can't help once you're in a nursing home is rooted in misunderstanding the program's flexibility and the strategies available for late-stage planning. Proper guidance and understanding of Medicaid can open doors to benefits, even for those who have already transitioned to nursing home care.

Myth 4: Medicaid only covers hospital visits

person touching hand of man in hospital bed

In reality, Medicaid provides a wide array of services beyond just hospital care. These can include physician services, preventive care, mental health services, prescription drugs and even services like home and community-based services that allow seniors to age in place.

One common misconception about Medicaid is that it only covers hospital visits. This myth is not only misleading, but it can also discourage eligible individuals from tapping into the program's full range of benefits. In reality, Medicaid offers a broad spectrum of health care services far beyond emergency room or inpatient hospital care.

Medicaid is designed to provide comprehensive health care coverage that extends to a multitude of services. These can include:

  • Primary care visits: Medicaid often covers regular checkups with primary care physicians, ensuring preventive care and early diagnosis of potential health issues.

  • Specialist visits: Consultations with specialists, including cardiologists, neurologists and other medical experts, are typically covered to some extent under Medicaid.

  • Preventive services: This includes immunizations, mammograms and other screenings designed to catch health issues before they become more serious problems.

  • Prescription drugs: Medicaid programs often offer some level of prescription drug coverage, although the specifics can vary by state.

  • Mental health services: Counseling sessions, psychiatric evaluations and even some inpatient mental health services are generally part of Medicaid’s coverage.

  • Maternal and child health: From prenatal care to pediatric visits, Medicaid aims to support the health of mothers and children.

  • Long-term care: Depending on the state, Medicaid can cover the costs of long-term care facilities or home-based care for those who qualify.

  • Home and community-based services (HCBS): These services are aimed to help individuals with disabilities or chronic conditions live in their homes or communities rather than in institutions.

  • Dental and vision: While not universally covered and often limited, some Medicaid programs offer dental and vision care as well.

How do I create an estate plan?

There are numerous options and scenarios to consider when developing an estate plan that protects your legacy and achieves your objectives, and important decisions should be made with the advice of qualified lawyers and financial experts. Membership with Legacy Assurance Plan provides members with valuable resources and guidance to develop comprehensive estate plans that take life's contingencies into consideration and leave a positive impact for generations to come. Legacy Assurance Plan members also receive peace of mind that a team of trusted, experienced professionals will assist them in developing legal, financial and tax strategies that will meet their needs today and for years to come through periodic reviews.

This article is published by Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at legacyassuranceplan.com.

Phone - 844.445.3422
Email - info@legacyassuranceplan.com
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