If you’ve ever found yourself confused about Medicaid and Medicare, you’re in good company. Even though sounding nearly identical, these two government programs serve very different purposes, and understanding the distinction can mean the difference between protecting your life savings and watching them disappear into long-term care costs.
We see this confusion all the time at our firm. A family comes in thinking their parent’s Medicare coverage will handle nursing home expenses, only to discover that Medicare provides minimal long-term care benefits. Or someone assumes Medicaid is only for younger, low-income individuals, not realizing it’s actually the primary payer for nursing home care in America.
Here’s the reality: approximately 70% of people over 65 will need some form of long-term care during their lifetime. And with nursing home costs averaging over $9,000 per month in many states, understanding how Medicaid planning differs from Medicare isn’t just helpful, it’s essential for protecting your family’s financial future.
Understanding Medicare Coverage
Medicare is a federal health insurance program primarily designed for Americans aged 65 and older, though it also covers certain younger individuals with disabilities or specific medical conditions like end-stage renal disease. Think of Medicare as your standard health insurance, it covers doctor visits, hospital stays, prescription drugs, and preventive care.
The program is divided into several parts:
- Part A (Hospital Insurance): Covers inpatient hospital care, skilled nursing facility care (limited), hospice, and some home health services
- Part B (Medical Insurance): Covers outpatient care, doctor services, preventive services, and durable medical equipment
- Part C (Medicare Advantage): Private insurance plans that combine Parts A and B, often including prescription drug coverage
- Part D: Prescription drug coverage
What many people don’t realize is that Medicare was never designed to be a long-term care solution. While Part A does cover skilled nursing facility care, it’s limited to 100 days following a qualifying hospital stay, and even then, you’ll face significant copays after day 20. Once that coverage runs out, you’re on your own.
How Medicare Eligibility Works
Medicare eligibility is relatively straightforward compared to Medicaid. You automatically qualify when you turn 65 if you’ve worked and paid Medicare taxes for at least 10 years (40 quarters). Your income and assets don’t matter, whether you’re a millionaire or living on Social Security alone, you’re entitled to the same Medicare benefits.
Most people are automatically enrolled in Part A when they turn 65 and start receiving Social Security benefits. If you’re not receiving Social Security yet, you’ll need to actively enroll during your Initial Enrollment Period, which begins three months before your 65th birthday and extends three months after.
The key takeaway? Medicare is an entitlement program based on age and work history, not financial need. This is fundamentally different from how Medicaid operates.
Understanding Medicaid Coverage
Medicaid is a joint federal and state program that provides health coverage to individuals with limited income and resources. Unlike Medicare, Medicaid is specifically designed as a safety net for those who can’t afford medical care, including long-term care in nursing homes.
Here’s what makes Medicaid particularly important for older adults: it’s the primary payer for nursing home care in the United States. While Medicare won’t cover extended nursing home stays, Medicaid will, provided you meet the eligibility requirements.
Medicaid covers a broad range of services, including:
- Nursing home care (custodial care, not just skilled nursing)
- Home and community-based services
- Personal care assistance
- Medical equipment and supplies
- Some prescription drugs
Because Medicaid is administered at the state level, benefits and eligibility requirements vary significantly depending on where you live. Some states offer robust home care programs, while others focus primarily on institutional care. This state-by-state variation is why working with an attorney who understands your specific state’s rules is so important.
How Medicaid Eligibility Works
Medicaid eligibility for long-term care is where things get complicated, and where proper planning becomes crucial.
To qualify for Medicaid coverage of nursing home care, you must meet both income and asset limits. In most states, the income limit is around $2,829 per month (2025 figures), though some states use different methodologies. Asset limits are typically just $2,000 for an individual, though certain assets like your primary residence (up to certain equity limits), one vehicle, and personal belongings are usually exempt.
Here’s what catches many families off guard: Medicaid has a “look-back period” of 60 months (five years in most states). This means Medicaid will review all financial transactions you’ve made during that time when you apply. If you’ve given away assets or sold property below market value, you could face a penalty period during which Medicaid won’t cover your care.
The look-back rule exists to prevent people from simply giving away all their assets the day before entering a nursing home. But it also means that last-minute planning options are severely limited, which is exactly why we encourage families to start Medicaid planning well before a health crisis occurs.
Key Differences Between Medicaid and Medicare
Now that we’ve covered the basics, let’s put the differences side by side. Understanding these distinctions is critical for making informed decisions about your long-term care strategy.
| Factor | Medicare | Medicaid |
|---|---|---|
| Primary Purpose | General health insurance | Safety net for low-income individuals: long-term care coverage |
| Eligibility Basis | Age (65+) or disability | Financial need (income and asset limits) |
| Income Limits | None | Yes, varies by state |
| Asset Limits | None | Yes, typically $2,000 for individuals |
| Long-Term Care Coverage | Limited to 100 days of skilled nursing | Unlimited nursing home coverage if eligible |
| Administration | Federal program | Joint federal-state program |
| Premiums | Yes (Part B, Part D) | Usually none or minimal |
The most important distinction for families planning for aging? Medicare is not a long-term care solution. We can’t stress this enough. If you or a loved one needs ongoing nursing home care, the kind that could last months or years, Medicare simply won’t cover it after those initial 100 days.
This is where the confusion often creates real financial damage. Families assume their loved one’s Medicare will handle everything, only to discover they’re facing $10,000+ monthly bills with no plan in place. By then, options for protecting assets are extremely limited.
Another critical difference: you can have both Medicare and Medicaid simultaneously. In fact, many nursing home residents are “dual eligible,” meaning Medicare covers their standard medical expenses while Medicaid pays for their room and board and custodial care.
What Is Medicaid Planning?
Medicaid planning is a legal strategy designed to help individuals qualify for Medicaid benefits while protecting as many assets as possible for their spouse or heirs. It’s a specialized area of elder law that requires understanding both federal Medicaid rules and your state’s specific regulations.
The goal isn’t to hide assets or commit fraud, that’s illegal and can result in serious penalties. Instead, Medicaid planning uses legitimate legal tools and strategies to restructure assets in ways that comply with the rules while minimizing what gets spent on nursing home care.
Why does this matter? Because without proper planning, a married couple could see their entire life savings depleted by nursing home costs before the healthy spouse passes away. We’ve seen situations where families lost hundreds of thousands of dollars simply because they didn’t know their options.
At Meurer & Potter Law Firm, we’ve been helping families navigate Medicaid planning since 1991. We understand that every situation is different, what works for one family may not work for another. That’s why we create personalized Medicaid plans and spend-down strategies designed to protect your life savings while ensuring you or your loved one receives the care they need.
Common Medicaid Planning Strategies
Several legal strategies can help protect assets while qualifying for Medicaid. Here are some of the most common approaches we use:
Irrevocable Trusts: Transferring assets into an irrevocable trust can remove them from your countable resources for Medicaid purposes. But, this must be done at least five years before you need Medicaid to avoid look-back penalties. The key word here is “irrevocable”, once assets are in the trust, you give up control over them.
Spousal Protections: Medicaid rules include provisions to prevent a healthy spouse from becoming impoverished. The Community Spouse Resource Allowance (CSRA) allows the spouse remaining at home to keep a certain amount of assets, often over $150,000 depending on your state.
Spend-Down Strategies: If you have excess assets, strategic spending can help you reach Medicaid eligibility while still benefiting from those resources. This might include paying off debt, making home improvements, purchasing exempt assets, or prepaying funeral expenses.
Caregiver Agreements: Paying family members fair market value for caregiving services can reduce countable assets while compensating loved ones for the care they provide.
Promissory Notes and Annuities: In certain situations, converting countable assets into an income stream through Medicaid-compliant annuities can help achieve eligibility.
Each strategy has specific requirements and potential pitfalls. What we always tell families: don’t try to do this on your own. A single mistake, like making an improper transfer during the look-back period, can result in months or years of ineligibility for Medicaid coverage.
When to Start Planning for Long-Term Care
Here’s the question we hear most often: “When should we start thinking about Medicaid planning?”
Our answer? Earlier than you think.
Ideally, Medicaid planning should begin at least five years before you anticipate needing long-term care. This gives you maximum flexibility to use strategies like irrevocable trusts without triggering look-back penalties. For most people, this means starting the conversation in your early to mid-60s, or even sooner if you have a family history of conditions like Alzheimer’s or if you’re already showing early signs of decline.
That said, it’s never too late to plan. Even if a loved one is already in a nursing home, there are still strategies that can protect assets for a healthy spouse or preserve some inheritance for children. Crisis planning is more limited, but it’s not hopeless.
Here are some signs it’s time to talk to an elder law attorney about Medicaid planning:
- You or your spouse is approaching retirement age
- A parent or spouse has been diagnosed with dementia, Parkinson’s, or another progressive condition
- You’re concerned about protecting assets for a surviving spouse
- You’ve accumulated assets you want to pass on to your children or grandchildren
- A family member has already entered a nursing home without a plan in place
The cost of waiting can be substantial. We’ve worked with families who lost their entire life savings because they waited until a health crisis forced their hand. Proactive planning gives you options: reactive planning limits them.
At Meurer & Potter Law Firm, our elder law attorneys specialize in helping families plan for nursing home and long-term care costs. We’ll work with you to create a strategy that protects your assets from being completely depleted while ensuring you receive the care you need.
Conclusion
The distinction between Medicaid and Medicare isn’t just semantic, it has real financial consequences for families facing long-term care needs. Medicare provides valuable health coverage for older adults, but it was never designed to pay for extended nursing home stays. Medicaid, on the other hand, is the primary payer for long-term care, but qualifying requires meeting strict income and asset limits.
Medicaid planning bridges this gap. Through legal strategies like irrevocable trusts, spousal protections, and strategic spend-downs, families can protect significant portions of their assets while still qualifying for the Medicaid coverage they need.
The most important takeaway? Start planning early. The five-year look-back period means that last-minute planning options are severely limited. By starting the conversation now, while you’re healthy and not facing an immediate crisis, you give yourself the greatest range of options.
If you’re concerned about protecting your life savings from devastating long-term care costs, we’re here to help. Our team at Meurer & Potter Law Firm has been guiding families through Medicaid planning for over three decades. We’ll create a personalized plan that fits your unique situation and gives you peace of mind knowing your family’s financial future is protected.
Reach out to schedule a consultation. The best time to plan for the future is before you need to.
