One of the primary concerns on the minds of many community leaders, policy makers, advocacy groups and American citizens over the past few decades has been health care reform. It appears that this concern is well warranted, considering projections by the National Coalition on Health Care (NCHC) that the United States will spend nearly $4.3 trillion on health care, amounting to about 20 percent of the gross domestic product, in the year 2017.

To me, $4.3 trillion is unfathomable. To make this number make more sense on an individual level, consider that the NCHC suggests that a couple planning to retire will need approximately $300,000 in savings, just to be able to pay for their basic medical coverage. If the couple wants to be prepared for the expenses of long-term care, they should set aside another $10,000 for every month they expect to need such assistance. And if that couple sets aside only enough to pay for their medical care, there is likely to be nothing left in their respective estate to leave a legacy.

Rather than trying to understand what our world has come to and how we let things get so bad, it is arguably more important to understand how to defend yourself and your loved ones against the devastating impact of the high-cost of health care. In many cases, the first step is to understand the differences between Medicare and Medicaid.
Knowing the difference between Medicare and Medicaid can empower people to understand what expenses the government may cover and what expenses they will need to finance personally.

To most people, few things are more painfully boring than reading technical explanations of detailed government programs. That is why this article will provide no such explanations. Instead, this article proposes that the primary difference between Medicare and Medicaid is that Medicare ends with an “e” and Medicaid ends with a "d."

The significance of Medicare ending with an "e" is that the "e" stands for "entitlement," "employed,” and “elderly.” The significance of Medicaid ending with a "d" is that the "d" stands for “disabled” and "destitute."

In very general terms, the "e" in Medicare can help you to remember that people are "entitled" to receive benefits if they have been "employed" for a period of about 10 years and are now "elderly," which means about 65 years old. It is possible to qualify for Medicare without meeting this description, but such cases are not as common.

Medicare helps eligible beneficiaries pay for outpatient services and acute conditions that either will or are expected to eventually go away. It is important to note, however, that Medicare has a very limited long-term care benefit.

Similarly, the "d" in Medicaid can help you to remember that people who are too "disabled" to work and who are too "destitute" to afford their own care can qualify for Medicaid benefits. For purposes of this program, “disabled” generally means that the person is unable to work and earn much money, and “destitute” means that the person has less than about $2,000 of countable assets.

Because Medicare pays for basic medical costs, Medicaid is not frequently used as a benefit for basic or acute medical conditions. On the other hand, because Medicare has a very limited long-term care benefit, Medicaid commonly pays for the bulk of long-term care expenses.

One extremely important detail, however, is that while Medicare is relatively easy to receive (just work for 10 years and retire around the age of 65), Medicaid is sometimes called the “last resort," and is a program for which it can be quite difficult to qualify. One cannot simply give everything they own away and expect to qualify for Medicaid because they are now “destitute." In fact, giving away assets within a certain period of time can actually make a person ineligible for benefits. Qualifying for Medicaid takes careful planning, which should be done prior to the need for Medicaid benefits.

Just by knowing these key differences between Medicare and Medicaid, a person approaching or enjoying retirement can begin to plan and prepare for future health care needs. An estate-planning attorney familiar with such benefit programs can be an invaluable resource.

Scott C. Suzuki, J.D., M.P.H., is a Hawaii-licensed attorney in private practice. This column is a simplified discussion of general legal issues and is not intended as legal advice.