Medicaid: A Beginner's Guide

Quick summary

Medicaid is the government's program to deliver health insurance to people with low income and few or no assets.

Many people confuse Medicaid with Medicare, because Congress introduced them both in 1965 and they have similar-sounding names. Actually, they have completely different eligibility requirements and benefits, and they serve different purposes.

Almost anyone over the age of 65 qualifies for Medicare, while Medicaid is available only to people who are over 65, are blind or have a disability, and who meet income and resource limits. Even if your parents aren't extremely low-income and do have some assets, they may still be eligible for Medicaid, particularly if they have high medical costs -- so it's important to be familiar with the program. This is particularly true if either of your parents needs long-term care, for which Medicaid can provide coverage even if your parents own their home. Here's what you need to know about Medicaid:

What is Medicaid?

Medicaid is a federally-supported but state-administered program intended to provide health insurance to low-income, low-asset individuals and families, including people with disabilities and people over the age of 65.
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Who qualifies for Medicaid?

Medicaid eligibility guidelines vary from state to state, but all plans are required to provide coverage to people over the age of 65 who have limited income and resources, as well as people who are disabled or blind and have low income and few assets. Certain portions of your parents' income would not be counted in determining their Medicaid eligibility, nor would their home and car. You can find the specific Medicaid requirements for your parents' state online at the Medicaid/Medicare section of GovBenefits.gov.

Even if your parents make more money than Medicaid income limits allow, they might still qualify if they have substantial medical bills. This is because most state Medicaid programs subtract applicants' medical bills from their income to determine eligibility. The details of these calculations, called "Medicaid spend-down" rules, vary from state to state. There are also special, more lenient income and asset rules if one of your parents lives in a nursing facility while the other remains at home.

Can my parents use both Medicare and Medicaid at the same time?

Yes, and Medicaid might cover certain items or services that Medicare won't, such as eyeglasses, hearing aids, and dental care. If your parents meet eligibility requirements, Medicaid also pays Medicare premiums, copayments, and deductibles.

What does Medicaid cover?

If they qualify for Medicaid benefits, your parents are entitled to coverage for a variety of medical expenses, including hospitalization, outpatient care, ambulatory services, labs and X-rays, nursing facility services, dental care, home health services, part-time nursing care that's in-home, and some medical supplies. (Prescription drugs are covered through the Medicare prescription drug benefit, though Medicaid may pay your parents' Part D plan premiums and copayments and also pay for some drugs not covered at all by the Part D plan.)
For many people, one of the most significant benefits of Medicaid is that it covers long-term custodial care in a nursing facility, as well as long-term home care, neither of which is covered by Medicare.

What doctors can my parents see?

You -- or your parents -- will have to check. Medicaid doesn't pay money to your parents; instead, it sends payments directly to their healthcare providers. But because of low Medicaid reimbursement rates, many doctors and some other healthcare providers don't accept Medicaid patients. So it's very important to determine whether the doctors or other providers your parents want to see actually accept Medicaid before your parents make an appointment with them.

What isn't covered by Medicaid?

Just as Medicaid eligibility requirements vary from state to state, so does the list of what is and isn't covered. But generally, Medicaid doesn't cover any elective procedures or cosmetic surgeries, medical procedures related to obesity (such as gastric bypass surgery), or prescription drugs for people who are enrolled in Medicare. Also, depending on the state's rules, your parents may have to pay a small part of the cost (a copayment) for some medical services that Medicaid does cover.

What if my parents' income is too high to qualify for Medicaid?

Even if they don't meet the income eligibility requirements, your parents may still qualify for some Medicaid benefits. For example, a specific Medicaid program (the Specified Low-Income Medicare Beneficiary Program, or SLMB) that pays the monthly Medicare Part B premium has higher monthly income limits than most states' basic Medicaid coverage. Also, if either of your parents is disabled or blind, the income eligibility limits for them might be higher than for people who qualify based on age alone.

How does Medicaid spend-down work?

If your parents' assets would qualify them for Medicaid but their income is over their state's Medicaid limit, in most states they can still qualify for Medicaid coverage if their medical bills add up to more than the amount by which their income exceeds the Medicaid limit. This spend-down provision, called "share of cost" in Medicaid jargon, is similar to a deductible under a typical health insurance policy, because it's the amount your parents have to pay out of their own pocket before Medicaid coverage kicks in.