What health care benefits are available in retirement?
Health care in retirement is available from many sources. Government programs (such as Medicaid and Medicare) offer
numerous health care benefits. However, you may need to purchase supplemental health insurance or Medigap, as well. Most
Americans are eligible to begin receiving Medicare benefits at age 65, but qualifying for Medicaid may require some planning
on your part. In addition to these resources, you may also be entitled to military health care benefits if you are a veteran,
retired servicemember, or the spouse or widow of a veteran or retired servicemember. Continuing care retirement communities
and nursing homes also offer health care services for older individuals. Depending on your specific needs and circumstances,
you may use any number of these resources during your retirement years.
Medicare is a federal health insurance program created in 1965. Medicare primarily assists those who are 65 or older, but if
you are disabled or have kidney disease, you may be eligible for Medicare coverage no matter what your age. Medicare
currently consists of Part A (hospital insurance), Part B (medical insurance), Part C (which allows private insurance companies
to offer Medicare benefits), and Part D (which covers the costs of prescription drugs), with each part having its own eligibility
requirements. You may qualify for one or more parts, or you may choose to accept or decline coverage if you are eligible.
Many health policies limit coverage for Medicare-eligible individuals regardless of whether they have accepted Medicare
Medicare benefits for disabled individuals
Under certain conditions, the disabled are eligible to enroll in Medicare before age 65. If you have been receiving (or have
been entitled to receive) Social Security disability benefits for at least 24 months (not necessarily consecutively), you may be
eligible to enroll in Medicare. To enroll, you must be entitled to benefits in one of the following categories:
In addition, Medicare may be available at any age if you are disabled as a result of chronic kidney failure requiring dialysis or a kidney transplant.
Qualified Medicare Beneficiary program
If you have limited means, you may be eligible for the Qualified Medicare Beneficiary (QMB) program. Here, your state’s
Medicaid program may pay for your Medicare Part B premium, Part A and Part B deductibles, and coinsurance requirements.
Eligibility rules may vary from state to state, but in general, you must meet the following three criteria:
There are also other related programs that have somewhat less restrictive eligibility requirements.
Medigap is supplemental insurance specifically designed to cover some of the gaps in Medicare coverage. Although the name might lead you to believe otherwise, Medigap is provided by private health insurance companies, not the government. However, Medigap is strictly regulated by the federal government.
There are 10 standard Medigap policies available. All plans may not be offered in your state, yet all are standardized and
certified by the U.S. Department of Health and Human Services so that each plan provides exactly the same kind of coverage
no matter what state you live in (except for Massachusetts, Minnesota, and Wisconsin, which have their own standardized
plans). Every Medigap policy offers certain basic core benefits, such as coverage of certain Medicare Part A and B coinsurance and co-payments. Other plans offer additional benefits, such as coverage of Medicare Part A and B deductibles, and charges that result when a provider bills more than the Medicare-approved amount for a service.
Medicaid provides medical assistance to aged, disabled, or blind individuals, or to needy, dependent children who could not
otherwise afford the necessary medical care. Medicaid pays for a number of medical costs, including hospital bills, physician
services, home health care, and long-term nursing home care. Each state administers its own Medicaid programs based on
broad federal guidelines and regulations. Within these guidelines, each state performs the following: (1) determines its own
eligibility requirements; (2) prescribes the amount, duration, and types of services; (3) chooses the rate of reimbursement for
services; and (4) oversees its own program.
Applying for benefits
To apply for Medicaid, you must use a written application on a form prescribed by your state and signed under penalties of
perjury. Give the application to your state Medicaid office. Typically, you will need to provide proof of age, marital status,
residence, and citizenship, along with your Social Security number, verification of receipt of government benefits, and
verification of your income and assets. A responsible individual can complete the application on behalf of an incompetent or
To qualify for Medicaid, you must meet two basic eligibility requirements. First, you must be considered categorically needy
because of blindness, disability, old age, or by virtue of being the parent of a minor child. Next, you must be financially needy,
which is determined by income and asset limitation tests. States have much discretion in determining which groups their
Medicaid programs will cover, but as participants in Medicaid, they must provide coverage for all residents who are considered
Caution: State and federal rules regarding Medicaid eligibility change frequently.
Transfer of assets
Because Medicaid eligibility is based on your income and other resources, state Medicaid authorities are interested in knowing
whether you have tried to transfer assets out of your name in order to qualify for Medicaid. When you apply for Medicaid, the
state has the right to examine your finances and those of your spouse as far back as 60 months before the date you applied
for Medicaid. Only certain transfers are prohibited. Fair market transactions will typically be considered legitimate, but if you
transfer assets for less than fair market value around the time you apply for Medicaid, the state will presume that the transfer
was made solely to help you qualify for Medicaid.
Planning goals and strategies
As mentioned earlier, the state has the right to look into your financial transactions to determine whether you have transferred
assets solely to qualify for Medicaid. However, the state may count only the income and assets that are legally available to you
for paying your bills. Consequently, several methods have been developed to help you shelter your assets from the state and
facilitate Medicaid qualification. Proper planning can help you to qualify for Medicaid, shelter “countable” assets, preserve
assets (including the family home) for loved ones, and protect the healthy spouse (if any).
Medicaid qualifying trusts
To qualify for Medicaid, both your income and the value of your other assets must fall below certain limits (which vary from
state to state). A trust helps you to qualify for Medicaid because it can shelter your income and assets, making them
unavailable to you. The state Medicaid authorities cannot consider assets that are truly inaccessible to the Medicaid applicant.
Therefore, anything that stays in an irrevocable trust will lie outside of your financial picture for Medicaid eligibility purposes. If
you are looking for a strategy to shelter your resources, one of the following may be appropriate: (1) an irrevocable income-
only trust, (2) an irrevocable trust in which the creator of the trust is not a beneficiary, (3) a Miller trust, or (4) a special needs
Protection of principal residence
In certain cases, the state may be entitled to seek reimbursement for Medicaid payments by forcing the sale of your principal
residence if you are a Medicaid recipient. Medicaid planning tools have been devised to protect your home, but their
effectiveness varies. Therefore, it is important to weigh the costs and benefits of each device carefully. If you are looking for a
strategy to preserve your home for loved ones, one of the following four methods may be appropriate: (1) an outright transfer
or gift of the home, (2) a transfer subject to life estate, (3) a transfer subject to special power of appointment, or (4) a transfer
Medicaid and long-term care insurance
Long-term care (LTC) insurance can be useful as part of your Medicaid planning strategy. Your LTC policy can subsidize your
nursing home bills during the Medicaid ineligibility period caused by your transfer of assets to third parties. Thus, it may be
possible for you to give your assets away to loved ones, have the security of paid nursing home bills during the ineligibility
period, and qualify for Medicaid when the LTC policy runs out.
Medicaid liens and estate recoveries
Federal law requires states to seek reimbursement from Medicaid recipients for Medicaid payments made on their behalf. Cost-
recovery actions against the assets of Medicaid recipients may come in two forms: (1) real or personal property liens and (2)
recovery from decedents’ estates. A Medicaid lien makes it impossible for you to sell or refinance your house without the
state’s knowledge and ability to collect what it is owed. As for recovery from decedents’ estates, states also can seek
reimbursement from your probate estate after you die. States have the option to expand the definition of estate to include all
nonprobate assets as well.
Divorce and Medicaid
From a purely financial perspective, divorce can be a practical move and may actually be used as a Medicaid planning tool.
When a spouse enters a nursing home and applies for Medicaid, the couple’s assets must be pooled together and totaled to
determine what portion the healthy spouse may keep. After this Spousal Resource Allowance has been determined, the
Medicaid applicant must transfer assets representing the amount of the allowance to the healthy spouse. The remaining
assets must be spent on the institutionalized partner’s medical care. A divorce court order can supersede the normal Spousal
Resource Allowance rules prescribed under state Medicaid regulations. You should consult your legal advisor for further
Disability benefits, health-care benefits, and long-term care benefits are available through various military programs
sponsored by the Department of Defense and the Department of Veterans Affairs (VA), formerly known as the Veterans
Administration. Health care for veterans is typically available at VA hospitals and health-care facilities. In general, active
service members, retirees, and veterans other than those who were dishonorably discharged are eligible for military benefits.
Survivors of servicemembers and veterans are also generally eligible for some of the same benefits. However, the rules
surrounding these benefits can be complex and may change frequently. It is best to check with your military personnel office or
local VA office if you have questions about any of these benefits.
Choosing a continuing care retirement community
Continuing care retirement communities (CCRCs) are retirement facilities that offer housing, meals, activities, and health care
to their residents. These communities appeal to people who are currently in good health but who worry that they may need
nursing care later on. The CCRC and the resident sign a contract guaranteeing that the CCRC will provide housing and
nursing home care throughout the resident’s life and that, in return, the resident pays an entrance fee and a monthly fee. In
choosing a CCRC, you should consider factors such as the entrance fee and monthly fees, insurance requirements, the
financial stability of the CCRC, its facilities and activities, and the quality of medical care provided to residents.
Choosing a nursing home
A nursing home is a licensed facility that provides skilled nursing care, intermediate care, and custodial care. Although you
may prefer in-home care, you may have to enter a nursing home if you need round-the-clock care, especially if you can’t get
help from family or an in-home caregiver. When choosing a nursing home, you should consider factors such as the cost of the
home, the quality of medical care provided, the appearance and the safety of the facilities, the ratio of staff to residents, and
Paying for nursing home care
Nursing home care can be extremely expensive, and paying for this care is a problem that weighs heavily on the minds of older
Americans and their families. There are several resources you can use in planning for this expense, including self-insurance,
long-term care insurance, Medicare (limited benefits), Medicaid, and military benefits.