What Medicaid Covers – Part 2

       In last week’s post I was telling you about a call I received revealing a very common misconception about Medicaid. Julie will lose her alimony payments in 6 months, dropping her income from $5000 per month down to $1000 per month. She is 69 years old and in good health. She does not need any long term care at this time.

       The reason for her call was to ask me about applying for Medicaid. Her thought is that Medicaid could replace her income. It’s that thought that is so common and also so wrong. That’s because the Medicaid program does not provide income. It also does not provide any money directly to a recipient. Instead, it is an insurance program that pays the cost of medical and long term care – depending on which program a recipient is eligible for.

       In some cases, people become eligible for Medicaid because they are also eligible for SSI. Supplemental Security Income does provide income to certain low income disabled individuals. They also get Medicaid health insurance coverage when they start receiving SSI payments. In Julie’s case, however, she won’t qualify for SSI. She already gets a Social Security benefit as a result of her own work history, having paid into the system long enough to qualify.

       So where does that leave her? As I told you last week Julie expects to net $200,000 from the sale of her home. Combined with her savings she’ll have $400,000 to live on. Luckily, she also has a solid long term care insurance policy that will pay her $300 per day for 4 years when she needs care. That means that she doesn’t have to worry about using her savings to cover her care.

       But what should she do now? She is only 69 and could live a good number of years. If she starts drawing down on her savings she risks running out of money. I told her that she would need to get her expenses down but that she would need to start using some of her savings. One way to reduce her costs would be to look to senior housing. Typically, a formula is used to calculate rent so that it does not exceed a certain percentage of her overall income. She’ll still need to use some savings for food, clothing etc. but at a less rapid rate. And I told her that no matter what, she should not drop her long term care insurance policy.