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Saturday, November 19, 2011

The Medicare Maze

I spent most of yesterday trying to understand and navigate the complexities of Medigap coverage.

You see, this week Mr. AOW's Medicare card arrived in the mail.

Even though Mr. AOW will not reach the age of sixty-five for nearly three more years, he is automatically enrolled in Medicare thirty months after the qualifying event that disabled him in 2009 and has confined him to a hospital bed with a bedside commode in our living room.

Frankly, we've been looking forward to Medicare: Mr. AOW's private health-insurance premiums have risen from $500 a month to $700 a month over a two year period. The next premium hike for Mr. AOW is scheduled for June 2012, at which point the premium will be $908 a month. Mind you, the private health-insurance policy that Mr. AOW has is of the catastrophic type without prescription coverage and with a high deductible — two features which keep the premium far below that of gold-plated health insurance.

So, what's the point of this post? Shouldn't I be dancing for joy that, in a few months, Mr. AOW's health-insurance premium will drop from hundreds of dollars a month to $117.00 a month? Not exactly.

Mr. AOW's policy has one excellent feature: a maximum annual out-of-pocket amount. Therefore, when he had a brain hemorrhage in 2009 and ran up medical bills of some $180,000 within less than ten weeks, we were not burdened with the usual 80/20 split of the bill and instead had to pay only $5000. Do the math! 20% of $180, 000 is $36,000! The following year, even though the medical bills were not in the six figures, Mr. AOW's medical care again easily reached the $5000 annual out-of-pocket limit; without that limit, another sizable medical bill would have loomed, a bill in the high four figures.

The annual out-of-pocket maximum is a critical feature of health insurance and the feature that limits expenditure as well as the amount a medical provider can attach as a lien on one's home.

Medicare coverage has no out-of-pocket limits. I repeat: Medicare coverage has no out-of-pocket limits. Instead, Medicare is an 80/20 plan. No wonder that many who have Medicare only find themselves in medical bankruptcy! No wonder some elderly couples divorce after a catastrophic medical event! No wonder that eighty percent of those in nursing homes are on Medicaid!

Medicare's 80/20 split is the reason that you often see advertisements for Medigap coverage, typically affordable policies and a good investment.

Catch 22! Because Mr. AOW is not sixty-five years of age, he does not automatically qualify for Medigap plans! Thus, if we cannot find a Medigap plan, our budget will have a significant vulnerability should another catastrophic medical event occur. Furthermore, all property is vulnerable; here in Virginia, husband and wife cannot separate assets, no matter the origin of those assets.

Most people believe that health insurance will prevent medical bankruptcy. Not so!

The 80/20 provision with no out-of-pocket limit poses great peril — and not only for the elderly. Some years ago, a family that I personally knew lost everything when their sixteen-year-old daughter sustained a grave head injury in an automobile accident. Health insurance, an 80/20 policy with no out-of-pocket maximum, could not save them financially: they lost the family home. And their daughter died anyway. The few years that she "lived" were hideous because of the closed head injury she sustained in an accident not her fault. More to the point of this post, the insurance policy of the man who caused the accident barely paid for the first few minutes in the emergency room, and the parents' insurance policy exceeded its allowable limits over a period of less than two years.

Late yesterday evening, I called a particular health-insurance carrier for which I saw an advertisement on television. Over the phone, the company representative insisted that the company did indeed have a Medigap policy for Mr. AOW and at a reasonable cost ($128 a month). Of course, I won't know if the company representative was telling the truth until I examine the packet; the policy may well exclude those with pre-existing conditions. There is no federal mandate for affordable Medigap coverage for those under the age of sixty-five. never mind that one can be totally disabled before that magical number — and never mind that one has paid and paid premiums all of one's working life.

The Democrats aren't correct about much, but they are correct about the following:
...work together to form something that might be palatable to – to help the 40 some million that don’t have insurance or the vast majority of other folks who are one medical catastrophe away from bankruptcy?
I am a conservative. And if you're a conservative, you're probably shaking your head as you read this post. Perhaps you're even angry that I'm saying all this.

But I'm telling you right now that a monster is lurking and will consume many of you if our nation doesn't come to terms with viable health-insurance reform before the Baby Boomers reach the point of skilled nursing care. For your information, a nursing home can easily cost around $18,000 a month (extensive home care often costs nearly as much); Mr. AOW's five weeks in a nursing home over two years ago cost over $15,000. Do the math, and remember that Medicare doesn't pay for residential care! How many people can put aside enough of a nest egg to pay for care for one year in a skilled nursing facility? And what if — God forbid — one of your children should end up in a skilled-nursing facility?

And how will Medicaid, choice of last resort, be sustainable with the coming tsunami of aging Baby Boomers?

Who is discussing the dangers that I've pointed out in this post? Not many, as far as I can tell.

One who has discussed this topic in some depth is Jane A. Gross, the author of A Bittersweet Season: Caring for Our Aging Parents — and Ourselves, a book that I highly recommend. The book primarily discusses the trials of taking care of an aging parent, but the principles can apply to a couple and their children as well.

Remember this: if you are married, the odds are that at least one of you will become seriously disabled or seriously ill before leaving this life. How will your care be paid for? Without leaving behind an impoverished widow or widower, that is.

27 comments:

  1. An excellent and informative post. Can you place your real estate assets in an irrevocable or other trust? I'm asking, I don't know.

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  2. A house of cards, and neither side has any good solution, really.

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  3. This has nothing to do with ideology. Practicalities must be observed and dealt with whether we are progressive or conservative.

    We have a problem caused by increasing active ages, it's a good problem.

    No one wants to deal with it in a forthright manner because every outcome envisioned deals with sacred cows, and they are afraid they will not get reelected to positions from which they enrich themselves with legal but unethical and immoral inside trading?

    It inspires individuals OUTSIDE that group to consider and some to commit acts otherwise unacceptable to SURVIVE.

    Having a life of work made pointless by lack of proper govt policy is as obnoxious as having it stolen by MF Global.

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  4. A terrible dilemma, AOW. I wish I had an intelligent answer, but I don't.

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  5. Epa,
    My conservative friends have fits when I bring up this important topic in conversation.

    Or, they stick their heads in the sand. They're going to have a huge wake-up call one of these days.

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  6. The only "solution" I've ever been able to come up with: that adult children and adult grandchildren become financially and legally responsible for their elders. Of course, such a requirement would mean that these adult children and grandchildren would (1) have to step out of the work force to do caregiving and (2) lose their own homes and (3) lost their own opportunity for advancement via employment and education. All three of these were the case when the time came to caregive my paternal grandmother, who did up in a nursing home because of severe dementia and her need for IV-administered vasodilators. Her two living children -- my father and my uncle, as well as their children -- took a significant financial hit over a period of the four years that Grandma was in the nursing home.

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  7. @FJ - I believe that would be considered fraud.

    I have no answer. Hubby and I hate Medicare. I feel like a welfare person every time I go to the doctor. And the only reason we even have a doctor (no one wants to take Medicare patients) is because one of my hubbies long time students (20+ years) is a doctor who accepts Medicare patients.

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  8. FJ,
    I consulted an attorney well before Mr. AOW had his life-changing medical event. Why? Because he had had brain surgery some 14 years before, and we always knew that he was at significant risk of having a brain event. My attorney told me that a trust would be of no use as far as sheltering my inherited assets goes.

    If one is cash rich, one can give annual gifts of over $10,000 to any number of trusted individuals. Problem is that once the money is given, the capital is gone and cannot be legally tapped in a catastrophic medical situation.

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  9. That's discouraging. But then I suppose that ultimately, I'd rather have my health, than my wealth.

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  10. I'm afraid I don't know enough about it. The situation is scary. Let us know what you find out about the packet you receive.

    Debbie
    Right Truth
    http://www.righttruth.typepad.com

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  11. Farmer, yes you can.

    Consult an attorney.

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  12. FJ,
    I suppose that ultimately, I'd rather have my health, than my wealth.

    True enough.

    It seems to me that medical bankruptcy should include only 1/2 of a couple's assets (Everything is "on the table"). Otherwise, you end up with two people on Medicaid.

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  13. I think you may be over simplifying things a bit. You have to understand that a hospital's charge for a hospitalization is meaningless as far as a Medicare patient is concerned. If a Hospital charges say $50,000 for a hospital stay, the hospital will not be payed $40,000 or 80 percent of the $50,000. Instead they will be payed on a thing called a DRG (diagnosis related group) which is more or less a lump sum payment based on the discharge diagnosis. The DRG is usually drastically less that the hospital charge. This is why hospitals try and get Medicare patients out as soon as possible. No matter how long or how short the stay, they will only be payed the DRG amount.

    In like fashion, the patient would not be responsible for 20 percent of $50,000. There is a rather nebulous figure called the "Medicare Allowed Charge" which is applied to each diagnosis. The Medicare allowed charge is once again usually drastically less than the original charge. Even though the original charge might be $50,000, the Medicare allowed charge (determined by the gubment) might only be $20,000. So instead of the patient owing $10,000. The patient would actually owe $4,000. Still a tidy sum, yes, but much less than it would appear at face value.

    Complicated? You bet! And it is by design. The gubment wants you to think you're getting a real deal with Medicare when in fact they are cutting payments to the bone for hospitals and providers trying to take care of you. It won't last forever in its present state. Many providers are retiring or otherwise bailing out of Medicare.

    It is the same with private insurance. The insurance won't pay the hospital $45,000 (50K minus your 5K deductible) but rather some "negotiated amount" which is a lot less.

    Hope Mr. AOW makes progress.

    Grouch at Right Truth

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  14. Grouch,
    Thank you, thank you for stopping me by and cluing me in!

    This is something I understand as Mr. AOW and I have BCBS and use the provider network and know about the BCBS "discount" with providers:

    It is the same with private insurance. The insurance won't pay the hospital $45,000 (50K minus your 5K deductible) but rather some "negotiated amount" which is a lot less.

    Questions:

    (1) Doesn't Medicare also have some kind of deductible?

    (2) Also, isn't there something about an admission-requirement length? I've read that patients can actually be in the hospital for two days but not actually admitted?

    As you can see, I am brand new to this maze!

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  15. Medicare usually has a $250 deductible, AOW and with a few visits to your PCP it will be met.

    Let me caution, DO NOT let them switch you to Humana, it is great coverage for prescriptions, but horrid for medical coverage. If there is any way, stick with Medicare most doctors, including Chiropractors, accept it. And co-payments can be as low as $4, instead of $30 if you have Humana.

    I hope this helped a bit.

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  16. oh, man, what a mess. I had NO IDEA that there is no cap on yearly expenses on medicare, like most health insurance.

    I wonder why it is most conservatives don't want to discuss this problem? I guess b/c we are so far removed from any free market solutions. Ever since we started using insurance packages as part of employee benefits, which we did because they aren't subject to the payroll tax, we have been distorting the medical care market.

    Folks ignored the rising costs of medical care first, and then health insurance seond, because they didn't bear the brunt in most cases: the insurance company pays the medical bills, and the employer pays the insurance company.

    Meanwhile, we've steadily grown used to the idea of not being on the hook for medical costs, to the point that most Dems feel confident asserting that health care should be a "right."

    Add in the baby boomer tsunami you mentioned, and woo boy. We are in for a hurtin. I fear we will go the way of Great Britian, where the hospitals deprive elderly of care if they think the person is too old and sick to be worth it.

    And I don't know how to fix this collossal problem, either. I know how to start, though: with the idea that noncatastrophic care be paid out of pocket by the patient himself. If we could only bring this culture back to the idea of being in charge of their own non-catastrophic healthcare, maybe, just maybe, costs would start to lower.

    my best to you and the Mr. as you weave thru this minefield. just keep us abreast of developments.

    Linda

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  17. Yes, ma'am there is a deductible. $250 I think.

    There are "observation" type admissions, supposed to be 24 hours, which are billed as an outpatient service. The hospital is usually reimbursed a lot less for these than inpatient. As far as patient responsibility it would still be 20% of the "Medicare allowed charge", only a fraction of the actual hospital charge.

    I would be willing to bet that some of the people selling these medigap policies do not make clear the concept of Medicare allowed charges and frighten seniors into buying there expensive products. If the salesman leads you to believe you'll be stuck with 20% of the hospital's actual charge, go find another company. Force them to explain ALLOWED CHARGES.....BIG DIFFERENCE!

    GROUCH

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  18. A $250 deductible is a drop in the bucket compared to what Mr. AOW pays for his private health insurance policy ($700/month right now and rising to $908/month in June). Not to mention the $2500 deductible he presently has.

    Questions:

    (1) Is that $250 deductible for Medicare B only?

    (2) Is there a Medicare A deductible for hospital admission? At some point, Medicare.gov mentioned to me over the phone something about $1300 for each admission separated by either 61 or 91 days.

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  19. Leticia,
    Humana doesn't even offer Medigap insurance for those under age 62 and on Social Security Disability.

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  20. Grouch,
    I will definitely ask about "allowed charges." Great tip!

    You said: frighten seniors into buying there expensive products

    The AARP's commercials do indeed do that!

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  21. No One of Any Import,
    I had NO IDEA that there is no cap on yearly expenses on medicare, like most health insurance.

    Here's another zinger for you: Medicare doesn't pay for a residential nursing home either. Oh, Medicare does pay for some rehab in a nursing home and does pay actual medical bills. But residential care (room, board, etc.)? Nope.

    Medicaid does pay for a nursing home, but one has to be a pauper for Medicaid to kick in.

    I again refer you to the book I mentioned near the end of the post. A must read for us all!

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  22. AOW I can appreciate your plight. Most healthcare providers do not want to forclose or otherwise bankrupt individuals. The important thing is to contact the provider as soon as the bill arrives, and try and work out an aceptable payment. It is when people disregard the bill that they run into trouble. Even if folks send $10 or $20 a month after the arrangement, most will be left alone. It is the disregarding that causes the problem

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  23. I have Regence Blue Shield plan J, which so far has covered all the charges and deductibles I would otherwise have to pay. It's $206.00 a month and it's auto-deducted from my checking account. Since my SS is auto-deposited there, I just figure that it's being taken off my SS and is therefor paid for by the government. Likewise I have Humana drug insurance, which IS taken directly out of my SS payment before the bank gets it. Humana covers most of my drug costs although there is one hell of a donut hole after a certain point. But it's those visits to the doctor that really eat the dollars, and Blue Shield Plan J is the way to go.

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  24. I'm under 60, disabled, unable to work, new to Federal aid, and my conservative friends think I'm a hypocrite for obtaining SS disability/Medicare and my liberal friends think all my problems are solved as the gov't will take care of everything. I have never felt so helpless and endangered in my life. The practicality is that when one is starving and the only food offered is steak and arrugala, you eat the damned steak and arrugala no matter how much one dislikes the force used.

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  25. Black Sheep,
    BCBS didn't mention any such plan to me. Maybe because Mr. AOW isn't 65 yet?

    Several Medigap insurers do not cover those under 65 for a decent cost.

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  26. Indigo Red,
    I've had those same reactions from my conservative and liberal friends. They don't have a clue about the realities of disability!

    Most people also don't seem to realize what a Herculean task it is for Mr. AOW and me to attend even a short social event. Such visits are of the crisis management type -- not to mention the prep for going out.

    Also, people seem to think that once Social Security Disability/Medicare kick in (They have no clue as to the waiting period of six months for SSDI and 30 months for Medicare), "someone" will come in "for free" to help with activities of daily living. It ain't so! "For free" happens only under Medicaid, which requires pauper status.

    Mr. AOW and I never imagined how dependent we could become on government help -- until the unthinkable happened.

    As you pointed out, the disabled must accept government help to stay alive.

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