How is Medicaid different from Medicare?

My clients often get confused about the difference between Medicaid and Medicare. Their names are so similar, they are both government programs, they both cover health care, and they often seem to overlap. It’s only natural to confuse the two (or even to say one word when you mean the other). But Medicaid and Medicare serve different purposes and have different rules for eligibility and coverage, so it’s important to understand the difference. These details matter.

The best way to think of it is this: Medicare is like regular private health insurance—the kind that pays for doctor visits, routine care, and hospital stays. Medicaid, on the other hand, is like long-term care insurance.

Note: Although I’ve said Medicaid is like long-term care insurance, there is a part of Medicaid that works like regular health insurance. The rules for those Medicaid programs are different. This site is only about Medicaid for long-term care.

Differences in eligibility

Pretty much everyone is eligible for Medicare once they turn 65. It doesn’t matter how much or how little you have in terms of assets, either. (High income can increase your Part B premium, but few of my clients have to worry about that.)

For Medicaid, though, eligibility very much depends on how much or how little you own. For Medicaid to pay for long-term care, your countable assets must be below a certain level. Most people are only eligible for Medicaid after a “spend-down” of their resources above that level.

Differences in coverage

Medicare is like regular health insurance: through Parts A and B it generally covers doctor visits, checkups, medical procedures, hospital stays, and acute care. Part D can cover prescriptions. These are all exactly what we think of as the normal health care we all need throughout our lives.

The big thing Medicare does not cover, in most cases, is long-term care. Under some circumstances, Medicare can cover up to 100 days of rehab in a nursing home after a transfer from a hospital. But that short-term coverage is it.

The problem with long-term care is in the long-term part. The big risk is not that you’ll need a couple of months of care; it’s that you’ll need years of it. When paying out of pocket means $5-10,000 each month, you can see why long-term care is the biggest financial risk everyone faces in retirement. Simply put, neither Medicare nor any other kind of regular health insurance covers that risk.

That’s where Medicaid comes in. Medicaid is essentially the default long-term care insurance policy for everyone. It covers long-term care in a nursing home, assisted living facility, or at home, in a potentially unlimited amount. But it will only do so after you’ve spent down your own savings.

Note: Of course, you can get private long-term care insurance instead of relying on Medicaid, if you plan for it. I encourage my clients who are near retirement and planning ahead to consider this option. I believe it is, on balance, better than relying on a complicated government program. Unfortunately, because of the high cost of long-term care and the high risk of needing it, this type of insurance is expensive. Few of my clients decide they can afford it.

What can Medicaid pay for?

Wisconsin Medicaid can pay for long-term care in a nursing home, assisted living facility, or at home. Different programs apply to these different levels of care.

Note: Medicaid also has programs that pay for regular health care, replacing or supplementing traditional health insurance. Different rules apply to those programs. This site is only about Medicaid for long-term care.

Institutional MA

Institutional Medical Assistance is the program the pays for long-term care in a hospital or skilled nursing facility (in other words, a nursing home). This is the most expensive type of long-term care, averaging $9-10,000 per month.

Of course, most care in a hospital is covered by normal health insurance (including Medicare). Most people don’t need Medicaid for routine visits or emergency care. It’s only when a person stops getting better but still needs nursing-level help with activities of daily living that it becomes long-term care. The person’s recovery or rehabilitation has “plateaued,” as they say, and it looks like they will need the daily assistance of another person long-term.

Usually, a person who needs long-term care only remains in the hospital long enough to find a nursing home to transfer to. So this program is mostly about paying for a nursing home.

It’s also important to know that Medicare often covers the first 1-3 months of long-term care. It covers up to 100 days after a transfer from a hospital, while the person is in rehab. It’s common to see an older person admitted to the hospital because of an emergency or acute illness, then go directly to a nursing home to recover. Medicare coverage can stop short of the 100 days, though, if the recovery stops—if the person “plateaus.” Not everyone is admitted to a nursing home directly from a hospital, either. So Medicare can, and commonly does, pay for the first few weeks or months of long-term care—but not always.

Another important feature of institutional MA is that it can be backdated up to three months. When you submit the application, you can request retroactive coverage for up to the three months before the month of application. So if you submit the application in April, you can potentially get coverage for January, February, and March as well. Of course, you still have to meet all the Medicaid requirements in those months (for example, having less than $2,000 in countable resources if you’re single). But the ability to backdate can be important, and it somewhat lessens the consequences of missing a deadline, of delay, or of having to reapply.

Family Care

Family Care is the primary “community Medicaid” program in Wisconsin. The idea of community Medicaid programs is that if a person needs a nursing-home level of care but can function in a less institutional—and less costly—setting, that’s better for everyone. The State pays less and the person lives in a less restrictive, more independent environment.

A prerequisite for any community Medicaid program is needing a nursing-home level of care. This is determined by something called a functional screen. The functional screen is a detailed interview done by a county worker from the local Aging and Disability Resource Center (ADRC). It is primarily screening for how much help a person needs with activities of daily living (such as bathing and dressing) and instrumental activities of daily living (such as cooking and cleaning). Although “nursing-home level of care” might sound extreme, it is usually not difficult to establish if the person has high enough needs to be paying for professional long-term care to begin with.

Note: The ADRC is separate and independent from the county Economic Support or Income Maintenance division that processes Medicaid applications. The ADRC’s job is to help people get the benefits and resources they are entitled to.

Family Care can potentially pay for care in an assisted living facility, memory care facility, group home, or other community-based setting. It can also pay for in-home care to some extent.

Unlike Institutional MA, Family Care cannot be backdated. This makes the timing of the Medicaid application extremely important. Medicaid eligibility is month-to-month; you must get the application officially submitted—in most cases, that means actually received by the county or state during business hours—as soon as possible to start coverage. If you delay, you can easily lose coverage for weeks or months you otherwise would have been eligible for. That can be a multi-thousand dollar error.

The Family Care program delivers care differently from other programs, too. Instead of the facility directly billing the State, you enroll in a managed care organization, or MCO. This is a health care organization that contracts with the State to manage and deliver Medicaid services. You get to choose your MCO, though you might not have many options. Once enrolled, you’ll work with a team from your MCO to plan and arrange the care needed.

IRIS

IRIS is the main alternative to Family Care for community Medicaid. It stands for “Include, Respect, I Self-direct.”

Generally speaking, the idea of IRIS is to give you more control over your care. You get a budget based on your needs, and you can make your own choices on how to spend that budget. An IRIS consultant helps you develop a plan for your support. The tradeoff is that IRIS typically pays for less care overall than Family Care, and working within your allotted budget may be challenging.

As with Family Care, eligibility for IRIS starts with a functional screen. Also the same: eligibility for IRIS cannot be backdated prior to the month the application is submitted.

Note: See this chart by the Wisconsin Department of Health Services for a comparison of the services potentially covered by IRIS and Family Care.

Notices of Proof Needed

After you submit your Medicaid application, the county agency has 30 days to process it and either approve or deny. (This can be extended by 10 days if you ask for extra time.) Almost always, the first thing you’ll get is a piece of mail from the State titled “Notice of Proof Needed.” This usually comes 1-2 weeks after submitting your application.

This means that a county worker has begun reviewing the application and needs additional documentation. Usually, what’s requested is a document verifying an asset—its value on a certain date, the account number, the owner, or another important fact. Because Medicaid is a government benefit, it’s up to you to prove you’re eligible for it. That includes providing the correct documentation. Even if you’re otherwise eligible, if you fail to provide the needed documents before the deadline, your application can be denied.

So it is essential to respond to any Notice of Proof Needed, and to do so promptly. The problem is that these notices can be hard to comprehend. They are automatically generated and sent, and are often unhelpful or misleading in the example documents given. That’s why I always give my clients this advice: whenever you get a Notice of Proof Needed, call the consortium’s phone number. Once you’re talking to a person, they will generally be helpful and able to tell you what’s really needed. They will be able to cut to the chase.

Even once you know exactly what you need to get, it can be surprisingly tricky to get it in some cases. Getting a bank statement is easy (though even there, I’ve seen issues like a bank only putting the last 3 digits of an account number on the statement, when the county has to see the last 4). But getting the right life insurance statement that shows cash value on a specific date in the past, plus face value, owner, and original policy date? Navigating the customer service phone line to get that—if, by the way, you don’t need to send in a copy of the POA first and wait for them to process it before they’ll even talk to you—well, that can be a pain. Not always—but frequently enough to be a common problem.

That’s why one of the most common reasons Medicaid applications are denied is lack of proper documentation. It’s not always clear exactly what information the county needs, and it’s not always clear what hoops you have to jump through to get it.

This is one of many areas where an elder law attorney can help. A lawyer experienced in Medicaid applications will be able to anticipate the documents needed before a notice is sent, and also be able to know exactly what the issue is when looking at a notice. He or she will know what hoops to jump through to get the correct information—sending in a POA, asking the right questions, talking to the right people, filling out the right form—and to get it the first time. An elder law attorney will also know if the county is wrong about what it’s requesting. Sometimes county workers make mistakes (Medicaid is complicated, after all) that only a professional could catch.

Timing

When it comes to Medicaid, timing is essential. One day can make the difference between saving and losing thousands.

There are two essential timing issues:

  1. Being financially eligible by the end of the month, and
  2. Getting your application submitted by the end of the month.

Medicaid benefits are determined month-to-month

The deadline for these issues is the last day of the month. This is because Medicaid benefits are determined month-to-month. If you are nonfinancially and financially eligible as of the last day of the month, Medicaid will cover that entire month. This is a core principle when it comes to Medicaid.

This rule means that you can receive money at the start of the month—an inheritance of $20,000, for example—and, by doing various allowable things with that money, be under your Medicaid asset limit by the end of the month, meaning you keep your benefits without interruption. This money might have caused you to go over the asset limit and lose your benefits, but because you spent it down by the end of the same month, it’s no longer an issue. On the other hand, if you miss that end-of-the-month deadline, you’ll lose benefits for that month.

Note: Whatever you do with the money in an example like this, you must report receiving it within 10 days. This is an obligation of everyone who receives Medicaid benefits.

Also, elder law attorneys know the detailed rules and strategies for spending down or setting aside excess assets without creating problems. In a situation like this, you should always get professional advice.

Being financially eligible by the end of the month

For any month of long-term care you want Medicaid to cover, you must meet all requirements for eligibility as of the last day of that month. That means you must be nonfinancially eligible and financially eligible—including being below the applicable asset limit, which is usually the sticking point.

Once that month is over, there is no going back. Either you met the requirements on the last day of the month or you didn’t. This is why timing makes such a big difference. If you are close to the asset limit already, a transaction posting on July 1 instead of June 30 might mean you have to pay the nursing home another $9,000.

Submitting your application by the end of the month

Although there’s no going back when it comes to financial eligibility, the same rule doesn’t always apply to getting the actual Medicaid application submitted.

In general, you must submit your application for long-term care Medicaid by the end of the month. However, sometimes—not always—you can “backdate” your application. Backdating means asking for retroactive Medicaid benefits.

Here’s the key: in Wisconsin, backdating is only possible when applying for institutional long-term care Medicaid. That means you want Medicaid to pay for care in a nursing home or hospital. You still have to meet all the requirements for eligibility as of the last day of those past months. But if you do, and it’s to pay for a nursing home, you can go back up to 3 months. That means you can submit an application in July, backdate it, and potentially get coverage for June, May, and even April (if, again, you were financially eligible as of the last day of those months).

Note: You probably paid out-of-pocket for those backdated months. If your application is approved, the nursing home will actually owe you a refund. Usually, you have to contact the nursing home yourself, ask them to bill Medicaid for those months now that Medicaid will cover them, and ask for a refund.

Unfortunately, you cannot backdate Medicaid for assisted living, memory care, or in-home care. For these Medicaid programs, you must apply by the end of the current month. (Note: You also need something called a functional screen for these types of Medicaid.)

Finally, don’t overlook what counts as “submitting” an application by the deadline. You can apply for Wisconsin Medicaid by mail, fax, phone, in person, or online. The application is considered submitted (or, technically, “filed”) when it is actually received by the county agency in charge of benefits, or the next business day if it is received after the agency’s regularly scheduled business hours. The only exception is for online applications, which are considered filed the date the application is electronically submitted (meaning it can be submitted up to 11:59 p.m.).

Note: Also don’t overlook signing the application. This includes a spouse’s signature, too. The agency won’t consider the application valid unless it is properly signed.

What is asset protection?

When it comes to nursing homes and Medicaid, you often hear about “asset protection.” It’s a hot topic—who wouldn’t want to protect their assets? But asset protection is complex, and if something goes wrong your finances and your family could be in a lot of trouble.

Protecting an asset means giving up control.

At its core, asset protection means one thing: transferring legal control of your property to another person. It’s called protection because once you give up your legal right to an asset, you can’t be forced to pay it to your creditors—including hospitals, nursing homes, and the state itself. In other words, the asset is protected. Since so many people—about one third of the elderly—end up paying their entire savings to medical creditors for long-term care, finding a way to protect those savings is attractive. Even though it means giving up your own right to use them.

Note: There’s an important exception to protecting your assets by giving them away. You can’t do it to avoid a debt your currently owe. That’s fraud. Asset protection is all about planning ahead.

Asset protection usually involves an irrevocable trust.

So the idea of asset protection is to transfer legal ownership of your property now before you end up having to pay for long-term care later. The simplest way of doing this is to just give your assets to someone else. You might give your property to a trusted family member, who informally agrees to hold onto the money and give it back to you if you need it. In doing this, though, you give up all legal right to the property. The person you give it to could spend it all on a luxurious vacation. They could also be forced to pay it towards their own debts.

For these reasons, an outright gift is risky. But there’s another way to protect your assets while retaining some control: using an irrevocable asset protection trust. An elder law attorney can create a trust to hold your property under your own terms. You get to make the rules for who gets the property, when, and how.

The cornerstone of an asset protection trust is that you and your spouse cannot retain the right to use the property yourselves. But you can retain the right to say who else gets to use the property, and when. These other people (usually your family) are your beneficiaries.

Usually these trusts are designed to prevent the trust property from being used at all until you and your spouse die. The property isn’t just protected, it’s preserved. This is important because you might still need to dissolve the trust and take back the property.

Even an irrevocable trust can be undone.

But isn’t this trust irrevocable? Yes, but there’s still a legal procedure for dissolving it and distributing its assets—you just can’t do it alone. Doing this requires the consent of all beneficiaries of the trust. Those beneficiaries are probably your children or other family members. It’s a cumbersome procedure that should be done with an attorney and only in an emergency, but it can be done.

Why would you need to dissolve the trust and undo your asset protection? Perhaps an emergency depletes your other savings sooner than expected. Or you need to apply for Medicaid within five years of creating the trust.

Asset protection means divestment.

When you put property into an asset protection trust, you are divesting it. That means if you apply for Medicaid within five years, you’ll have to pay a penalty. But you can “cure” the divestment if the property is given back to you. Again, this requires the cooperation of your beneficiaries.

Asset protection always means giving up your legal right to use assets for your own benefit. That means asset protection always creates a divestment for Medicaid. If not done carefully, you could end up unable to pay for the care you need and ineligible for Medicaid. You do not want to be in that situation.

That’s why you need an elder law attorney to create an effective plan for asset protection. Only an attorney can look at your entire situation and ensure you are provided for, no matter what happens.

 

For an example of asset protection gone wrong, my next post will discuss an important Wisconsin case that permanently changed how it’s done.

Estate recovery: how the state gets paid back

Estate recovery is how the State of Wisconsin gets paid back for long-term care Medicaid benefits. If you or a loved one is elderly, blind, or disabled and might need help paying for long-term care, you should know about estate recovery.

The Estate Recovery Program operates under laws allowing the Wisconsin Department of Health Services (DHS) to step in after you die and take money from your estate—money that otherwise would go to your family. The state, through its Medicaid long-term care programs, pays out quite a bit of money for elderly or disabled residents who need long-term care and can’t afford it. The idea is to defray some of that cost at a time when it won’t affect the Medicaid recipient.

Who Should Worry About Estate Recovery?

Estate recovery doesn’t affect all Medicaid recipients. It applies only to the Medicaid programs that provide long-term care. Anyone who is not elderly, blind, or disabled and is not receiving long-term care services shouldn’t worry. That means estate recovery mostly affects (1) Medicaid recipients (of any age) who live in nursing homes, and (2) elderly Medicaid recipients who live at home or in assisted living and receive long-term care.

Recipients of Medicaid long-term care services shouldn’t worry about themselves, either—estate recovery doesn’t happen until the Medicaid recipient dies. If the recipient is survived by a spouse or a young or disabled child, estate recovery doesn’t happen until they die. So spouses shouldn’t worry they will be left destitute, and a young or disabled child’s support won’t be taken away. These are the most immediate concerns.

That leaves the rest of the family: the adult children and other beneficiaries who would inherit the property but for estate recovery. They still get the personal property (up to $5,000 worth, anyway). But an adult child may be surprised to learn he or she will inherit nothing of the cash or liquid assets, even though Mom and Dad may have saved their entire lives and been responsible, middle-class citizens. Unfortunately, the cost of long-term care can deplete those savings quickly, and estate recovery might take most or all of what’s left. It helps to know this ahead of time.

How Does Estate Recovery Work?

Estate recovery is not unlimited; the state can only recover up to the amount it paid out for the Medicaid recipient. But in most cases, where the recipient has received benefits for any length of time, the amount paid out will far exceed the property left in the recipient’s estate.

The type of property that’s left may affect recovery, however. Though DHS has the general power to recover from any of the recipient’s property, there are exceptions. Estate recovery works differently for three categories: probate property, non-probate property, and real estate.

First, DHS will recover from property that is subject to probate (in other words, controlled by a person’s will). DHS will be notified as part of the probate process, then come into the court proceeding and claim its share. If there is a surviving spouse, DHS will wait to make its claim until he or she dies.

Second, DHS will recover from non-probate property, which is property like life insurance or a joint bank account that doesn’t require a court proceeding to transfer ownership after death. The law allowing recovery from this type of property is new, though, and its application depends on when the property was purchased. For example, DHS will not recover from a life insurance policy purchased before August 1, 2014. This might mean you can leave something to your family after all—if you know to hold on to that insurance policy. Knowing these kinds of exceptions can change your overall plan for Medicaid and long-term care.

Third, DHS will file liens on real estate, both to secure its claim and to recover money when the real estate is sold. This is perhaps the most common form of estate recovery, because Medicaid recipients can usually keep their homes while receiving benefits. However, there are specific rules governing when DHS can file a lien and when DHS can enforce it. For example, DHS can’t file a lien on a home if a surviving spouse or disabled child still lives there. Even after a lien is filed and the recipient dies, a surviving spouse can potentially sell the home and keep the money. Again, knowing when exceptions like these apply can help your family.

Finally, you should know that family members and beneficiaries have their own rights when it comes to estate recovery. They can challenge DHS when it makes a mistake or steps beyond the law. They can also request hardship waivers. These are legal actions that should be done with the help of an elder law attorney.

Knowing the Rules Helps You Plan Ahead

Estate recovery is a simple concept: if there’s any money left when a long-term care Medicaid recipient dies, the state will recover it (up to the amount the state paid out in benefits). But, like many laws, there are common exceptions and specific rules that change how it applies in any person’s specific situation. Knowing these rules and getting good advice can help you and your family make the most of your resources.

Eligibility overview

You know that Medicaid can pay for long-term care and that it’s the long-term care insurance policy for the middle class. But can it pay for your care? Are you eligible?

Medicaid eligibility is complex. Your eligibility depends on the sub-program you need, your age, where you reside, the level of care you need, your assets, your income, and a host of other things. Remember that Medicaid is not a single program, but many, and the rules differ program-to-program.

This post is an overview of eligibility for the Medicaid programs that apply to most of my clients—the programs that pay for long-term care in a nursing home, assisted living facility, or at home for the elderly, blind, or disabled. When it comes to these programs, I like to break eligibility down into two categories: nonfinancial eligibility and financial eligibility.

Nonfinancial eligibility

These are the most basic requirements. They are about who you are, rather than what you have.

  1. You must be a citizen of the United States (or, in some cases, a resident).
  2. You must be a Wisconsin resident.
  3. You must be elderly (65 or older), blind, or disabled.

Other Medicaid programs cover residents who need help but are not elderly, blind, or disabled.

You must also have a medical need for long-term care. Exactly what counts as needing long-term care can get complicated, but this usually gets assessed before entering a nursing home or other medical institution.

Financial eligibility

Medicaid is a means-tested benefit, which means it is only available to people with income and assets below a certain level.

In general:

  • Your monthly income must be less than the average monthly cost of a nursing home in Wisconsin (currently about $9-10,000).
  • If you are single, you must have $2,000 or less in countable resources (in other words, assets).
  • If you are married, you and your spouse together must have less than $52,000 to about $139,400 in countable resources (the exact number depends on your specific situation, and the upper limit is adjusted each year for cost-of-living increases).

There are many exceptions and nuances to these rules, though. For instance, you usually don’t have to count the value of your house, your car, or your spouse’s retirement account. And you might have to count the value of things you normally wouldn’t think of, like an ATV, the cash value of life insurance, or that loan or land contract you had set up with a family member.

Financial circumstances are the largest obstacle to eligibility for long-term care Medicaid. Many people are told they’ll have to spend everything, or nearly everything, before qualifying. Many people think they’ll have to sell their home before qualifying, which is almost always wrong. And so, many people simply pay the bill each month, waiting until there’s nothing left.

But there are better ways to use those resources, and often ways to keep more than you’ve been told. Elder law attorneys help clients make the best use of their limited resources, plan ahead, and become eligible for Medicaid sooner without getting tripped up by hidden rules and regulations. Financial eligibility for Medicaid is something you can, and should, be proactive about.

But: It depends

It’s helpful to know the general rules, to know what’s possible. But, in the end, everything depends on your specific situation. Especially with Medicaid, for every general rule there is a multitude of exceptions, alternatives, and conditions to keep in mind. That’s why most people need an expert.

Who is Medicaid for?

Isn’t Medicaid for poor people?

This is a common question. Most people know that Medicaid is a social safety net program providing health insurance to people with very low incomes. How can someone in the middle class benefit from Medicaid? And how can anyone who would qualify for Medicaid pay a lawyer?

Although providing health insurance to poor people of all ages is an important part of Medicaid, it’s not the only part. Medicaid can also pay for the long-term care of the elderly, blind, or disabled, even those who have middle-class income and assets, if the cost of care exceeds their income. In fact, Medicaid pays for 50 to 60% of all long-term care in the United States; it’s the de facto long-term care insurance plan for the middle class. That’s the part of Medicaid I deal with.

Think of it this way: When facing a health care bill of $9,000 per month, we’re all poor.

Or consider that nearly a third of people turning age 65 will deplete their savings and need to rely on Medicaid, full stop. In other words, one third of people 65+ are or will be poor by Medicaid’s standards.

As AARP puts it:

Medicaid provides a critical safety net not only for low-income people, but also for formerly middle-income people who have spent their life savings paying for long-term services and supports.

Medicaid: long-term care for the middle class

So most of my clients are, in fact, middle-class. They (or their families) come to me once they know they will need long-term care. They look at the cost of a nursing home, look at their life’s savings, and face a simple fact: they may not be poor yet, but they will be. Someone tells them they should look at Medicaid. That’s when they know they need help.

These people still have money, but it’s evaporating rapidly. Without legal help, they will lose nearly all their savings—they’ll end up with $2,000 if single, or somewhere between $50,000 and $140,000 if they have a spouse. The rest of their money is going away—to pay for one more nursing home bill before Medicaid kicks in, if nowhere else.

That’s not to mention the many pitfalls in navigating a Medicaid application. Problems of divestment, timing, backdating, legal authority, documentation, correcting agency mistakes, and getting all of what you’re entitled to are common.

The good news is you don’t have to sit back helpless. You can be proactive. With planning, you can pass some of that money on to family, use it to prepay for a funeral, use it for your own current needs, or set it aside for your own future needs. With planning, you can address or avoid the many pitfalls in the application process. That’s what an elder law attorney does: helps you make the most of what you have while avoiding Medicaid problems. The savings in time, money, and frustration are well worth the legal fee.

What is Medicaid?

Medicaid is a government benefit that can pay for the health care and long-term care of the needy. The surprising thing is that, because of the cost of long-term care, “the needy” often includes the middle class.

The legal definition of “the needy,” when it comes to Medicaid, includes elderly, blind, or disabled people who fall into one of two groups. The first group can’t afford health care because they have very low income to begin with and no assets. This group is called “categorically needy” in Medicaid lingo.

The second group can’t afford health care because they have a monthly health care bill much larger than their income. This group is called “medically needy” in Medicaid lingo. This second group includes many middle-class older people who, despite working and saving all their lives, simply can’t afford a $9,000 nursing home bill every month. As I often tell my clients, when there’s a bill that large coming in the mail each month, we’re all poor.

Note: BadgerCare Plus is a similar program that provides health care to low-income Wisconsin residents who are not elderly, blind, or disabled.

That’s a quick summary of a complex program. Once you start getting into the details—like who counts as disabled or what counts as income—it gets complicated.

Why is Medicaid so hard to understand?

What we generally call Medicaid is a system that involves federal, state, and county governments. In this system, the state enacts and administers a plan for “medical assistance.” The federal government provides money to pay for the medical assistance program—if the state meets certain requirements. The counties are the gatekeepers, the “boots on the ground”; the county department of human or social services usually takes the application for medical assistance and decides whether the applicant is eligible.

Note: The terms Medicaid, Medical Assistance, and MA are often used interchangeably. I generally use Medicaid because most people recognize it—it’s even the term Wisconsin DHS uses on its website. In the context of this blog, Medicaid usually means Wisconsin’s Medical Assistance programs, specifically.

So we have federal law, state law, county workers, and a large state administrative agency involved. In fact, the Wisconsin Department of Health Services has several sub-programs for Medicaid, muddying the waters further. These sub-programs, such as Family Care, Community Waivers, and Medicaid Deductible, are mostly about where you receive care—in a nursing home or in the community—and what benefits are available to you.

Medicaid is complex, but it can be explained.

Medicaid is a complicated program, which is why it often takes a legal education to have a chance at comprehending its rules and operation. But anybody can understand the basics of how Medicaid affects them, and why, if it’s explained well.

And yet, a good explanation is hard to find. Many workers in the system—social workers, nursing home financial managers, and the like—know “the rules.” But few have the time or patience to explain why the rules are what they are. That’s important, because the rules can feel unjust and confusing.

“The rules” is in scare quotes because, as lawyers know, it’s rarely so simple. With Medicaid, the rules are complex and they come with many exceptions. Every person or couple’s situation is unique.

I once had a client who talked to social workers for months before hiring me. She never understood why she was getting a bill for thousands of dollars each month while her husband was on Medicaid. It felt so unfair. Wasn’t her husband getting a benefit? Why was she still getting a big bill?

It wasn’t until I took half an hour to draw her a picture (literally) that it finally made sense to her. She needed a careful, compassionate explanation of how Medicaid determines how much money it will pay and how a married couple’s finances are involved in the calculation. Of course, the social workers tried to tell her “the rules” many times. But they never explained the rules in a way that made sense. They were treating her like a child who just needed to accept what she was told.

Some atypical Medicaid advice: be frugal

An older woman and her daughter came into my office the other day. She was worried about having enough to support herself if her ailing husband ended up in a nursing home on Medicaid. It was a typical concern from a typical client—the kind of thing I deal with every day.

But this woman was not typical in one important way: I was able to tell her not to worry. She was already in good financial shape. She wouldn’t have to give up much before her husband qualified for Medicaid financially, and she would be able to enjoy nearly the same lifestyle while her husband received benefits.

When most people seek my advice as a Medicaid lawyer, I have to tell them that tens or hundreds of thousands of their hard-earned dollars are at risk. Not only that, but after spending down their savings and qualifying for Medicaid they will face a dramatic reduction in lifestyle, since the spouse at home will have to live on about $3,000 of monthly income (though in some cases I can get that number higher by lawyering).

What was so special about this woman? Why didn’t she need to hire an expensive lawyer to prepare for the dramatic financial changes that Medicaid brings?

It had nothing to do with estate planning or legal advice.

It was that this woman already had a low-cost lifestyle. She already lived on about $3,000 per month. She and her husband didn’t have many large assets (thanks in part to the fact that her husband had a pension for his retirement instead of a large IRA).

Most of this couple’s net worth was in their house and the wife’s IRA—both of which are exempt for Medicaid purposes if her husband needs long-term care. So I was able to tell her she’d still have her IRA, her house, some savings, and about $3,000 per month of income. And that was enough for her, because that wouldn’t be a dramatic change from how she was already living.

Of course, there were still things she needed to be aware of. What if she needed long-term care herself? Then her IRA would not be exempt, and she would have to spend all of it before qualifying for Medicaid. I also told her that even though she could exempt her house to qualify for Medicaid now, the house might still be subject to estate recovery after she dies—meaning the state could force her estate to sell the house and take the proceeds. And she needed to know about divestment and how to avoid it so she wouldn’t unknowingly create problems down the road.

I told her there are things I can do as a lawyer to protect her home and IRA from the risks of her own health and estate recovery. This woman understood and was okay with those risks, though, so she decided not to hire me. I’m okay with that, because my first job as a lawyer is to help clients understand the Medicaid system so that they can make informed decisions about long-term care planning and what’s worth it to them.

The moral of this story is that sometimes, the best Medicaid planning doesn’t have to involve a lawyer. If you’re worried about Medicaid, you can’t go wrong by reducing your expenses and getting used to a more frugal lifestyle. That will make the financial transition much easier, and you’ll be better able to deal with your loved one’s healthcare without that added stress.