Modern Estate Planning Blog

What is the Difference Between Medicare and Medi-Cal? There is a very large difference between Medicare and Medi-Cal (Medicaid) and people confuse the two all the time. So which program is which and what do they cover?

Medicare is a federally funded entitlement program to provide health insurance primarily to Americans over the age of 65 and many individuals with disabilities.

There are several parts to Medicare:

Part A covers hospital bills, post-hospital nursing home stays and home health care,

Part B covers medical insurance and pays most basic doctor and lab costs, and some out-patient medical services, including medical equipment and supplies, home health care, and physical therapy

Part C covers some of the costs of prescription medication.

Medi-Cal (Medicaid) on the other hand is a federal program, administered by the State of California, that pays for certain health services and nursing home care for older people with low incomes and limited assets. It also pays for some long-term care services at home and in the community. Medi-Cal covers a broader range of services and people than Medicare, including children, pregnant women, parents of eligible children, seniors and individuals with disabilities. Its greatest difference from Medicare is that Medi-Cal is based on need and financial resources. In order to qualify a person must fall into a covered group and meet the financial needs test.

Medicare generally doesn’t pay for long-term care. Medicare also doesn’t pay for help with activities of daily living or other care that most people can do themselves or that can be provided by family or non-medical personnel. Medicare only covers a small amount of the nursing home care provided in the United States, and only under very limited circumstances, making the hope of Medicare paying the bill quite difficult.

Medicare pays for 20 days of full coverage if you go into a skilled nursing facility after at least three days in the hospital, so long as you are receiving skilled care and not custodial care. If you still need skilled care after the first 20 days, you can get up to 80 additional days of partial coverage from Medicare, but that coverage comes with strict requirements in order to quality. If you are receiving rehabilitation, you must make progress each day. If you reach a point where you are no longer making progress Medicare will stop paying. When the Medicare coverage ceases, you will have to pay out-of-pocket unless you have private long-term care insurance or qualify for Medicaid (“Medi-Cal” in California) benefits.

If you need “custodial care” rather than care associated with an injury or illness Medicare won’t pay a dime. Custodial care is defined by Medicare as help with activities of daily living, like dressing, bathing, going to the bathroom and eating. This is the kind of care that can be safely and reasonably provided by people without professional skills or training – like your family. Custodial care is also called “long-term care” and is the type of care that most people will need as they approach the end of their lives.

If you need custodial care there are a couple of alternatives to pay for it. First, you could purchase long-term care insurance – provided you are healthy enough and can afford the premiums. Many policies can also be used to pay for assisted living and in-home care, as well as skilled nursing care. Second, you can pay for everything directly out of your pocket. Third, if you qualify, Medi-Cal will pay for your care under certain circumstances. Finally, Veteran’s and widow(er)s of veterans may receive a Special Monthly Pension called “Aid & Attendance.” This benefit is based on a person’s assets and income. If approved for Aid & Attendance, the person will receive additional monthly income to help pay for the cost of health care.

As you can see, planning for long-term care requires thinking about possible future health care needs. It is important that you look at all of your choices. You will have more control over decisions and be able to stay independent if you do.  It is important to think about long-term care before the need for care arises or before a crisis occurs.

So do you really need a Medi-cal Planner or can you figure all of this out on your own? Some will say that they are healthy and can put this type of planning off until they get sick. Others will have more peace of mind knowing that planning in advance for any sickness or disability allows them to avoid surprises and risk to their estate. The correct answer is that doing planning in advance can and will always turn out better than waiting until a loved one falls ill and is facing a forced spend down of their assets to pay for care.