Medicare Supplemental Insurance and Medicaid

Last updated: June 08, 2020
Medicaid Long Term Care | Questions and AnswersCategory: EligibilityMedicare Supplemental Insurance and Medicaid
medicaidplanner Staff asked 4 months ago

Can the cost of Medicare supplement insurance premiums be used to reduce the income amount to gain eligibility? Or would I not want to maintain supplemental insurance if I were on Medicaid?

1 Answers
medicaidplanner Staff answered 4 months ago

Yes, in the states of New York and California the cost of Medicare supplement insurance (also called MediGap) premiums can be used to reduce one’s monthly income to meet Medicaid’s income limit, and hence, gain Medicaid eligibility. This strategy may also potentially be used in one or two other states, but at the time of this writing, it is undetermined if this is true, and if so, in which other states it is allowed. Please note that NY and CA are the exception rather than the rule. To be clear, in the vast majority of the states, the ability to use MediGap premiums to reduce monthly income is not a viable option.
 
It is not advised that persons eligible for Medicaid maintain a MediGap health insurance policy. This is because Medicare supplement insurance helps to cover the costs that original Medicare does not, such as deductibles, coinsurance, and copayments. When one has original Medicare and MediGap, original Medicare is the primary payer, meaning that original Medicare pays the portion of the bills for which it owes first. The remaining portion of the bill is then sent to MediGap, who is the secondary payer. However, for persons who qualify for Medicaid, Medicare supplement insurance is not necessary. This is because original Medicare will continue to be the primary payer, while Medicaid will be the secondary payer. Essentially, Medicaid takes the place of a MediGap policy.
 
Therefore, there is no need for Medicaid beneficiaries to have a Medicare supplement insurance policy. However, in the rare case that a Medicaid beneficiary does have a MediGap policy, original Medicare is the primary payer, MediGap, the secondary payer, and Medicaid, the final payer. That said, it is actually illegal (in most cases) for insurance companies to sell Medicaid beneficiaries a Medicare supplement insurance policy.
 
For persons who have income over Medicaid’s income limit, there are other ways for one to meet Medicaid’s income limit. However, the way in which this can be done is based on the state in which one resides. This is because there are categorically needy states (also called income cap states) and medically needy states (also called spend down states). In income cap states (approximately half of the states), Medicaid applicants can deposit their “excess” income (the income over Medicaid’s income limit) into a Qualified Income Trust (also called a Miller Trust) in order to meet Medicaid’s income limit. (Essentially, income deposited into the trust no longer counts as income for Medicaid eligibility purposes). On the other hand, in medically needy states, Medicaid applicants are able to “spend down” their “excess” income on medical expenses. Once one has spent their income down to the Medicaid income limit, he / she is eligible for Medicaid for the rest of the spend down period.
 
For those who are over Medicaid’s income limit, it is highly suggested that they contact a professional Medicaid expert for assistance in lowering their countable income. If not done correctly, the approval of Medicaid benefits can be delayed or denied. Find a Medicaid planner in your area here.
 
*Persons eligible for Medicaid and Medicare are called “dual eligible”. Learn more here.
 
*To see income limits, and other Medicaid eligibility criteria by state, click here.

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