Question: Being over age 65, both of my parents are now on Medicare and receive Social Security. My sister and I have beginning to take an active part in our parents’ planning, but we are having difficulty understanding where Medicare ends and Medicaid begins – and vice versa. How do these complicated programs work, where is the crossover, and how do we help our parents plan for the future? We feel lost.
Answer: The is significant overlap of the Medicare and Medicaid programs which, to say, the least, is difficult for the average American to understand. The Medicare program (provided for under the Social Security Act) is a federally funded program that furnishes hospital insurance -- also known as Part A coverage -- and medical insurance -- called Part B coverage for people 65 years of age and older -- and for certain disabled persons. For those who have insured status under Social Security or Railroad Retirement, coverage Part A coverage is automatic while Part B coverage requires payment of a monthly premium. Medicare is available to everyone. Medicaid, on the other hand, is a joint federal and state program for the poor.
Some aged and/or disabled persons are covered under both the Medicaid and Medicare programs. For those Medicare beneficiaries who are also fully eligible for Medicaid, Medicare coverage is supplemented by health care services that are available under each State's Medicaid program. If a person is a Medicare beneficiary, payments for any services covered by Medicare are made by Medicare before any payments are made by the Medicaid program because Medicaid is always "payor of last resort." As each State may elect, services such as eyeglasses, hearing aids, and nursing facility care that are not covered by Medicare may be provided by the Medicaid program.
There are some Medicare beneficiaries who are not fully eligible for Medicaid, but who do receive some help through the State Medicaid program which pays part of that person’s Medicare premiums and cost-sharing expenses. For example, Qualified Disabled and Working Individuals (called "QDWI’s") are those who lose Medicare benefits because of their return to work and are allowed to purchase Medicare Part A and Part B coverage with certain stipulations. Then there are certain poor Medicare recipients whose incomes are below the Federal poverty level and whose resources at or below twice the standard allowed under the SSI program. For these folks -- known as "Qualified Medicare Beneficiaries" (QMBs), the Medicaid program pays the Medicare premiums and cost-sharing expenses for Medicare Part A and Part B. But for "Specified Low-Income Medicare Beneficiaries" (SLMBs) -- who are like QMBs, but have slightly higher incomes -- the Medicaid program pays only the Part B premiums.
Medicaid is a vendor payment program, meaning that payments are made directly to the providers, by agreeing to participate in Medicaid, must accept the Medicaid reimbursement level as payment in full. Each State has very broad discretion to determine, within federally-imposed limits and specific restrictions the reimbursement methodology and resulting rate for services, with three exceptions: (1) payment for institutional services may not exceed amounts that would be paid under Medicare payment rates; (2) different limits apply to disproportionate share hospitals (DSHs); and (3) rates can’t be lower that Medicare rates for hospice care services.
States may also impose nominal deductibles, coinsurance, or copayments on some Medicaid recipients for certain services, but emergency services and family planning services must be exempt from such co-payments. And certain Medicaid recipients must be excluded from this cost sharing: pregnant women, children under age 18, hospital or nursing home patients who are expected to contribute most of their income to institutional care, and categorically needy HMO enrollees.
The amount of total Federal outlays for Medicaid has no cap or set upper limit but, instead, the Federal government must match whatever the individual State decides to provide, within the law, for its eligible recipients in that state. It is important to remember, however, that these reimbursement rates must be sufficient to enlist a sufficient number of providers to assure that Medicaid care and services are available under the plan at least to the extent that such care and services are available to the general population in that geographic area.
Each state must add its own funds in order to pay qualified hospitals that provide inpatient services to a disproportionate number of Medicaid recipients and/or other low-income persons under what is known as the disproportionate share hospital (DSH) program. But recent legislation has reduced some States' excessively-large DSH payments which had been paid to a number of States in order to get higher Federal matching monies with little or no increase in the States' share through refundable donations and provider taxes.
The part of of the Medicaid program which is paid by the Federal government -- known as the Federal Medical Assistance Percentage (FMAP) -- is determined each year for each State by a formula that compares the State's average per capita income level with the national average. By law, the FMAP cannot be lower than 50 percent nor greater than 83 percent of this number. That’s why the wealthier States have a smaller share of their costs reimbursed by the Federal government which also shares in the State's expenditures for administration of the Medicaid program.
Although most administrative costs are matched at 50 percent for all States, higher matching rates -- that is, 75, 90 and 100 percent -- are authorized by law for certain functions and activities.
We suggest that planning in these areas be handled only with experienced professionals who have the knowledge and skills to guide you and your parents through these governmental labyrinths.
Please send your questions by email to janwarner@nextsteps.net or by mail to P.O.Box 11704, Columbia, S.C. 29211.
