Trying to navigate the world of health insurance options can be challenging — especially when you're trying to determine your needs for health insurance in retirement. Medicare and Medicaid are both government-provided health care options for older Americans, but there are some significant differences between them.
If your retirement income qualifies you for Medicaid, the program can be a viable way to get the coverage you need. Here's an overview of Medicaid's offerings as well as specifics about who is eligible to enroll in the program.
What Is Medicaid?
Medicaid is an insurance program that provides access to health care for people with low incomes, including the elderly, people with disabilities, children and pregnant women. While federal and state governments fund the program, Medicaid is administered by each state following broad national guidelines and laws. That means coverage can vary depending on where you live.
As of 2021, nearly 75 million people are enrolled in Medicaid, which is sometimes confused with Medicare, another federally run health insurance program. Medicare offers health insurance coverage for people with disabilities and anyone over the age of 65. The program is entirely funded by the federal government, and it coordinates with hospitals and health care providers to arrange coverage. There is no income qualification requirement for Medicare.
What Does Medicaid Cover?
Medicaid pays for care either directly or through partnerships with private insurance groups. The program can be used to cover the costs of doctor's visits, hospital visits and custodial care, among other needs. This arrangement helps limit out-of-pocket expenses for people on Medicaid, who pay nothing for health care services.
Each state must cover specific care-related services through Medicaid, including:
- Doctor's visits
- Inpatient hospital services
- Outpatient hospital services
- Prescribed medications
- Mental health services
- Maternity and prenatal care
- Preventative care, including colonoscopies, mammograms and immunizations
There are also services that states can choose to cover under Medicaid. Because Medicaid's exact coverage levels vary between states, you'll want to review your state's offerings carefully. Some optional services covered by Medicaid in certain states include:
- Dental services
- Vision and eye services
- Physical therapy
- Prosthetic devices
- Home and community-based services
Check with your state's Medicaid office to learn which services Medicaid covers in your area.
It's possible for someone to be enrolled in both Medicare and Medicaid at the same time. People who are enrolled in Original Medicare (Parts A and B) and qualify for Medicaid through one of the Medicare Savings Program (MSP) eligibility groups are known as "dual eligible beneficiaries." MSPs that tie into Medicaid include:
- The Qualified Medicare Beneficiary Program (QMB), which helps to cover premiums, deductibles, coinsurance and copayments for Medicare Part A, Part B or both.
- The Specified Low-Income Medicare Beneficiary Program (SLMB), which helps to cover Medicare Part B premiums.
- The Qualifying Individual Program (QI), which helps to cover Medicare Part B premiums.
Medicare covers about 80% of a subscriber's health insurance costs. The remaining 20% must be paid out of pocket or covered by a Medigap plan. With Medicaid, these out-of-pocket expenses are subsidized, which means qualifying individuals either pay very little or nothing at all, depending on their income.
If your income changes in retirement, it could impact whether you still qualify for Medicaid and how much of your Medicare premium is covered by Medicaid. If you have questions about this, consult with your local Medicare or Medicaid office.
Who Is Eligible for Medicaid?
To qualify for Medicaid, you must meet specific requirements. One is that you must be a U.S. citizen or Green Card holder and prove residency in your state.
Additional requirements vary by state, but federal law dictates what groups are eligible for Medicaid, including seniors, related caretakers of minor children, and people with disabilities. These people can qualify for Medicaid in any state.
Eligibility is determined by a person's income relative to the Federal Poverty Level (FPL). In general, if you and a spouse are trying to qualify for Medicaid, your joint income must be below 138% of the FPL. In 2021, the FPL for a two-person household is typically set at $17,420, but this can vary between states, so it's critical to look at the specific qualifications for where you live to ensure you fit the requirements.
Some states also offer Medically Needy programs. These programs help individuals who have higher incomes but also significant health issues. To qualify, participants must spend down the income that's above the state's standard. Spending down can mean paying for medical treatments or other care for which they don't currently have health insurance. Once a person's expenses for medical care are greater than the difference between the Medicaid income threshold and that individual's current income, they may qualify for Medicaid coverage.
The Federal Poverty Guidelines for 2021 are provided by the Department of Health and Human Services. If you decide to apply for Medicaid, you will need to submit an application through your state's Medicaid agency or the Health Insurance Marketplace.
What Role Can Medicaid Play in Retirement?
Now that you know what Medicaid is, you can determine whether it's something you may want to consider in retirement. You'll need to think about your current retirement savings and your projected income. If your financial situation is above the eligibility requirements for your state, then you probably aren't going to qualify for Medicaid immediately.
Aging people should also consider that they may need long-term care at some point. Long-term care, which may include extended stays in nursing or care homes, is generally not covered by Medicare. If it is covered, it's usually only for a limited time. Note that long-term care can be very expensive, often running into thousands of dollars per day. For most people, these expenses aren't affordable out of pocket.
Medicaid does cover long-term care costs. To qualify for this assistance, you may need to spend down income and assets to meet the threshold in your state. Before doing so, meet with a financial professional or attorney to determine what you would need to do if you ever required Medicaid for long-term care, and if there are steps you can take now to help protect your assets.
How to Determine If Medicaid Is Right for You
As you approach the end of your working career, your health insurance in retirement becomes an important consideration. When you're assessing your future health care needs, it may be wise to visit your state's website and get specific information based on where you live to help you determine whether Medicaid is something you might need in retirement.
It can also be helpful to work with a financial advisor. They can help you get a clear picture of what kind of monthly income your current retirement savings, including your Social Security benefits, would grant you in retirement. From there, you can determine whether applying for Medicaid is an option based on your needs.
Looking ahead to these matters now, while you still have some time and flexibility, can help you identify the best path moving forward.