If you have a low income and very few assets other than your home, you may qualify for assistance from your resident state's Medicaid program. Medicaid's purpose is to help pay medical costs for financially needy people. Not only does it pay Medicare premiums, deductibles and co-payments, it also covers some medical services that Medicare doesn't. Although the federal government established the Medicaid program, its actual administration is governed by the individual states.

The basic difference between Medicaid and Medicare is that while Medicare is obtainable by almost everyone age 65 or older regardless of their income or assets, Medicaid is available to people of any age who are financially needy. And although there are federal guidelines for the Medicaid program, they tend to be fairly broad. This is because each state is permitted to make its own rules regarding program eligibility, coverage, and benefits.

Generally, states use one of two ways to determine eligibility for Medicaid. First, eligibility may be based on an applicant's income and assets alone, which is called Categorically Needy. To qualify for Medicaid as Categorically Needy, the applicant's income and assets must be at or below certain dollar limits set by the state. Most states use the same income and asset limits established by the federal Supplemental Security Income (SSI) program; some, however, put forth their own Medicaid limits. In most states, eligibility for SSI assistance automatically qualifies the applicant for Medicaid benefits as well. In a few states, program standards are slightly less difficult to meet than SSI standards, while in others the standards are more strict, including a dollar limit on the value of an applicant's home and lower limits on the values of automobiles and other property.

The second method used to determine program eligibility is based on the applicant's income and assets plus medical costs; this qualification is known as Medically Needy. If your income and assets are higher than SSI or other state limits, but your current or expected medical expenses cancel this higher amount out, you could be considered Medically Needy and eligible for Medicaid. This process of subtracting actual medical bills from income and assets is called 'spending down'. Let's look at an example: say you have a very low income, but your savings are $2,000 more than what's allowed to qualify for Medicaid as Categorically Needy in your state. However, you have surgery, medication, physical therapy, and other healthcare bills not covered by Medicare that amount to $3,000. Assuming that your state offers Medicaid coverage to the Medically Needy, if you were to pay all of the medical bills your assets would be reduced down to a level that would meet the Medicaid standards. However, instead of forcing you to spend that money and be reduced to Medicaid savings levels, you would immediately be qualified for Medicaid, which would pay the bills.

Medicaid covers the same kinds of services that Medicare does and, in most states, also covers a number of services that Medicare does not. One notable benefit of Medicaid is that it covers most long-term care, both at home and in nursing facilities. This includes not only long-term skilled nursing care, but also non-medical personal care such as adult day care and at-home assistance with the activities of daily living. Medicaid also pays many of the amounts that Medicare doesn't cover with regard to hospital and doctor bills. Some of these charges include the inpatient hospital insurance deductible and coinsurance amounts that Medicare won't pay, the Medicare medical insurance deductible, the 20% of approved doctors' fees that Medicare doesn't pay, and the monthly premium charged for Medicare Part B insurance.

In every state, federal law mandates that Medicaid completely cover certain medical services, paying whatever amount Medicare does not. These services include inpatient hospital or skilled nursing facility care, nursing home care in approved facilities, outpatient hospital or clinic treatment, laboratory and X-ray services, physicians' services, home health care, and transportation (by ambulance if necessary) to and from the place of medical treatment.

Medicaid also covers many other types of medical services. However, state Medicaid programs aren't required by law to cover these optional services, and in some states a small fee may be charged for them. Most states do provide the following optional medical services:

  • Dental care - Routine dental care. Most states also cover the cost of dentures.
  • Eye care - Includes standard eye exams (every one to two years), plus the cost of eyeglasses.
  • Physical therapy - Most states provide some amount of physical therapy beyond the very limited amount covered by Medicare.
  • Prescription drugs - All states provide Medicaid coverage for prescription drugs, although there may be a small co-payment for each prescription filled. However, for people eligible for both Medicare and Medicaid (known as dual eligibles), Medicaid no longer covers most drugs. Instead, dual eligibles now receive their drug coverage through the separate Medicare Part D plan (though in some states Medicaid covers the cost of some prescription and over-the-counter drugs that Medicare Part D plans don't cover).
  • Prosthetic devices - All states cover the costs of medically necessary prosthetic devices beyond what's covered by Medicare.
  • Transportation - Non-emergency transport to and from the place of medical care, usually with a specialized van service under contract to the county of residence.

The types and amounts of coverage for other optional services can vary widely from state to state. However, provided services often include chiropractic care; podiatry; speech and occupational therapy; private-duty nursing; personal care services; personal care and case management services as part of home care; adult day care; hospice care; various preventive, screening, and rehabilitative services; and inpatient psychiatric care for people 65 and older. But Medicaid coverage for optional services changes frequently, with various states adding some services while dropping others. Contact your local county department of social services or department of welfare for the most current program information in your area. For further details, be sure to consult the official Medicaid website.

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