Cannon Financial Institute

I Don’t Need to Know Anything About Medicaid. All My Clients Are Wealthy.

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While your clients may never need Medicaid, you can be reasonably certain that people they know are—or will be—on Medicaid. These individuals could include their elderly parents as well as other family members and loved ones. Almost 70 million Americans—22% of the population—are enrolled in Medicaid *. Hence, as part of your role as a holistic advisor, we suggest you know the basics about Medicaid and how to help your clients obtain needed information.

Let me begin by asking this question: do you enjoy complex puzzles? Good. You are now prepared to dive into the seven (7) things FAs need to know about Medicaid.

One: What exactly is Medicaid? According to the official US Government website: “Medicaid provides health coverage to millions of Americans, including eligible low-income adults, children, pregnant women, elderly adults and people with disabilities. Medicaid is administered by states, according to federal requirements. The program is funded jointly by states and the federal government.”**
Unlike Medicare, Medicaid is administered and partially funded by each individual state. Hence state governments have significant authority over the Medicaid program in their state.

Two: The key takeaway from US government’s definition of Medicaid is the word “eligibility.” Reason? Different states have different eligibility standards and these can be markedly different from state to state. Most of your clients will not know this since many people confuse Medicaid with Medicare and assume the programs work the same way.

Three: One reason for the confusion is this: while Obamacare expanded the number of people eligible for Medicaid, states could opt out of this expansion. As of this writing, nineteen states have opted out of the Medicaid expansion. Thirty-one (plus the District of Columbia) have elected to participate in the expansion of Medicaid coverage. This illustrates one of the ways eligibility rules for Medicaid differ from state to state. Every state is required to the same formula to calculate who is eligible for Medicaid in their state and who is not. Eligibility is based on a percentage of an applicant’s MAGI to determine his or her eligibility status. States who elected to participate in the Obamacare Medicaid expansion are mandated to use the same percentage of an applicant’s MAGI (Modified Adjusted Gross Income) to determine eligibility. States which opted out set their own percentage of an applicant’s MAGI to determine eligibility.

Four: Medicaid eligibility rules will probably change because of the ongoing changes in health care policy in the US although as of this writing it isn’t clear what those changes might be. Nonetheless, the existing framework of Medicaid will continue unchanged. However, two changes outside the basic framework could change. First, there could be a reduction in the number of various medical conditions which the Federal government mandates must be covered, as opposed to optional medical conditions which can be covered. Second, the per capita Federal contribution which assists states in paying for Medicaid could change.

Five: This is important to remember: if your state did not expand Medicaid, it doesn’t mean your state doesn’t have a Medicaid program. Every state has a Medicaid program. It is the eligibility rules which differ from state to state.

Six: There are two types of benefits under Medicaid.
A) Mandatory benefits as specified by the Federal government. These are mostly what you think they would be: visits to physicians, hospitalization, and diagnostic tests (with exceptions, of course).
B) Optional benefits: There is a menu of optional services states can offer under Medicaid including prescription drugs, visits to dentists, chiropractors, podiatrists and a dozen other services. But this is where things really get murky.
Just because a state participates in the expanded Medicaid option of Obamacare doesn’t mean that state has necessarily added a lot of optional benefits. It only means that they expanded the mandatory benefits to the more low-income adults which are what the Obamacare expansion was about. However, states which did not participate in the expansion of Medicaid eligibility could be offering optional benefits to those enrolled in its Medicaid program which are not offered by states who opted out of the expansion. The best website for learning about Medicaid benefits, which ones are mandatory, and which of the optional benefits are offered by your state is the official website here: https://www.medicaid.gov/index.html.

Seven: This entire debate over Medicaid is being driven by the increase in Federal and state spending on Medicaid because of our aging population. This ensures that the debate over every aspect of Medicaid will continue. The hard, cold facts of the “new reality” for Medicaid are shown by these figures, released on 22 June 2017 by the US Census Bureau: “new detailed estimates show the nation’s median age—the age where half of the population is younger and the other half older—rose from 35.3 years on April 1, 2000, to 37.9 years on July 1, 2016. Residents age 65 and over grew from 35.0 million in 2000 to 49.2 million in 2016, accounting for 12.4 percent and 15.2 percent of the total population, respectively.”***

These numbers from the Census Bureau are the reason why Medicaid costs are rising. As the late Senator Everett Dirksen of Illinois once famously said, “a billion here, a billion there, it adds up.”****

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Sources/Resources:

* https://www.medicaid.gov/medicaid/index.html
**  https://www.medicaid.gov/medicaid/index.html
***  https://www.census.gov/newsroom/press-releases/2017/cb17-100.html
****  http://www.nytimes.com/1981/12/01/us/reagan-vows-to-not-retreat-one-inch-on-policies.html

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