Paying for medical emergencies, short-term or long-term care, or residence in a senior living facility costs much more than many people imagine. The complex array of payment options became even more varied on January 1, 1998, when the first of several changes in the national Medicare system went into effect. No one knows how Medicare will look two or three years from now, but it will certainly bring more choices, more confusion, and more forms to fill out.

Here are the major financing options for senior care:

1) Medicare--Anyone over age 65 who has paid into the Social Security system for 40 quarters (approximately 10 years) is eligible for Medicare. Most county residents and their non-working spouses are eligible.

Medicare is a federal program designed to pay for skilled medical and nursing services for a limited period of time. The care must be restorative and rehabilitative, not custodial. Medicare will pay for in-patient hospital care, and for a portion of care in a skilled nursing facility in blocks of 100-day periods that may be renewed if a physician judges that the patient is still making progress towards recovery. Once a patient''s condition has stabilized, and no further progress seems likely, Medicare coverage ends.

Even while Medicare is in effect, it only covers about 80 percent of medical expenses. The remainder must be covered by personal funds, supplemental insurance (so-called MediGap insurance), or via managed care, i.e. an HMO.

Medicare will pay for home health care for a limited period when certain eligibility guidelines are met.

For Medicare guidelines and applications contact the Medicare Part B Claims Information Office at 1-800-952-8627.

1) MediCal-- This joint federal-state program pays for health care for California residents with very limited finances. It is a final safety net to ensure that no one is denied medical care because of inability to pay.

California is probably the most generous state regarding the amount of personal finances it permits MediCal nursing home recipients and their spouses to maintain. The institutionalized elderly person may keep a home, one car, a burial trust, $2,000 in cash reserve and $35 per month income. The recipient''s spouse may continue to live in the couple''s home, and may keep up to $76,640 in assets and almost $2,000 per month income. All other assets must be used to offset the cost of nursing home care. MediCal thus protects the institutionalized elderly person and the at-home spouse from impoverishment; it does not, however, protect assets for heirs.

Many elderly people are discharged directly from a hospital to a Medicare bed in a skilled nursing facility, and after Medicare payments cease, they transfer to MediCal for the remainder of their stay.

For MediCal information and application, call the Salinas office at 755-8500, or the Seaside office at 899-8001.

3) Health Maintenance Organizations (HMOs)--HMOs offer comprehensive health care and medical services for one monthly fee, but they restrict patient choice of provider and require greater patient responsibility. Enrollment in HMOs is very low in Monterey County. There is just one HMO program for the over-65 age group--Secure Horizons, with just 4,500 members.

4) Supplemental Long-Term Care Insurance (MediGap)--Individual supplemental insurance policies covering long-term care are becoming increasingly popular in California as state and federal agencies urge people to take greater financial responsibility for their health and medical care. As health care costs rise, and the portion paid by programs such as Medicare and MediCal decreases, elderly people must turn elsewhere to fill in the payment gaps.

Scott Bray, a certified financial planner with Monterey Insurance Agencies, specializes in long-term care insurance policies for the elderly offered by more than two dozen insurance companies.

He cautions that long-term care insurance is not for everyone. It is appropriate, he says, for people who don''t have enough money to pay for the care they need, yet have too high a financial profile to qualify for MediCal. For appropriate clients, supplemental insurance offers greater flexibility than MediCal or an HMO, because you have greater choice of where you can live and what kind of care you can receive.

Bray suggests that you look at your financial resources--income, savings, and home equity--and decide what you want to do with them. "If there is no gap between the care you need, and the money you have, you don''t need insurance," he says. "Also, if you have too little money to pay the premiums, insurance is not a good option."

If, for example, you have $30,000 in assets and savings and a monthly income of $1,000, the premiums for individual long-term care insurance--which increased 30 percent last year--would be prohibitive. It might be better to take advantage of MediCal.

If you''re single, with no children, says one health care expert, why buy an expensive long-term care insurance policy? Why not spend your money on yourself?

Policies vary widely. They can specify "nursing facility only," "home care only" or "comprehensive care." They may limit coverage to one year, or pay for a lifetime of care.

Prior conditions are covered by a reliable policy if they are disclosed when the policy is issued. If, however, you have signs of dementia when you apply, you most likely will not be issued a policy.

"People need to plan ahead and buy a policy before they need it," Bray says. "Once Mom has had a stroke, it''s very difficult to get insurance."

The Monterey HICAP office is at 655-1334; in Salinas at 758-2811. n