Financing the Cost of Elder Health Care

Articles by Judith S. Parnes

Financing The Cost

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The most frequently identified concern of older adults and their families is the cost of elder health care. People over the age of 65 are living longer, are healthier and are more active than their parents were 20 - 30 years ago. We are all thankful that advances in medical science and technology have added years to life expectancy, but a dramatic side effect is the sky rocketing cost of health care.

Previously, I have written about Medicaid, a program designed for individuals who cannot afford the cost of long-term care or for those who have depleted their assets due to health care costs. In the next three columns I wish to deal with other programs and methods for financing the cost of elder health care.

In 1965, "Medicare" was introduced by Congress as a new health insurance program for people age 65 and over. This dramatically changed the United States health care delivery system, providing health insurance to a segment of the population who had historically found it difficult to obtain insurance. Today, Medicare alone is no longer sufficient insurance against elder health care costs. Over 90 million Americans receive Medicare benefits and are still vulnerable to the financial realities of Medicare cost sharing and long-term costs.

Most Americans age 65 and over are covered by Medicare. Medicare is comprised of separate programs: Part A, Part B, Part C and now Medicare D. The original Medicare plan includes Medicare A & B. Medicare Part A is hospital insurance that pays for inpatient services, and Medicare Part B covers professional services. Medicare C encompasses Medicare advantage Programs like HMOs and PPOs. This option combines Part A and Part B insurance. Generally, you need to see doctors in the specific plan. Most recently, Medicare D was introduced. Medicare D is the plan that provides access to prescription drug coverage regardless of income, prescription drug use or health status. Medicare pays for acute care, basing health coverage on skilled services rather than long-term care needs. Although letters are often part of the individual Medicare Identification Number, this does not indicate Part A or Part B. However, on the bottom of the Medicare card itself, the specific program(s) will be identified.

MEDICARE PART A: Hospital Insurance

This program covers inpatient hospitalization and skilled nursing or rehabilitative care. If you are eligible to receive social security and are at least 65 years old, Medicare Part A is free. It pays the entire hospital health care costs, less a deductible for the first day in the hospital. In 2007, the Part A deductible is $992. Medicare covers skilled nursing home care, often called "Sub Acute Care," for a very limited time when skilled, around the clock nursing care is required. It does not cover nursing home care when custodial services are needed, resulting in out of pocket expenses for long-term care.

Long-term care, as the name implies, is the daily care needed for a condition or illness that is expected to last for an indefinite period of time. As one ages, the likelihood of needing long-term services increases. However, Medicare is not designed to pay for long-term care unless specific conditions are met, detailed below.

When skilled nursing care is needed at home, Medicare covers limited home services, such as physical therapy and minimal home health aides.

NURSING HOME CARE

Conditions for Medicare Coverage:

Require daily skilled nursing or rehabilitative services

Administered by a registered nurse or licensed therapist

Prescribed by a physician

The skilled nursing facility must be Medicare approved

Have a prior hospital stay of at least 3 days and be admitted to the nursing home within 30 days of discharge from the hospital

Medicare Part "D

Having reviewed Medicare and Medicaid in previous columns, this week I would like to present the newest component of Medicare coverage. Medicare has a prescription drug program also known as Medicare part "D". This program can help to considerably lower the costs of your prescription drugs and help protect against higher costs in the future.

The following are some key factors to remember when considering Medicare Part D coverage
Eligibility and Enrollment:

Medicare prescription drug coverage is available to everyone who has Medicare. You are eligible to enroll in Medicare Part D at the same time you enroll in traditional Medicare coverage. If you do not enroll at that time, Medicare limits the time of enrollment to

November 15 and December 31 of each year. Medicare also allows enrollment outside of this time frame based on meeting specific, limited criteria, such as if you move out of your plan's service area, if you enter, live in or leave a nursing home.

Cost:

There are several factors to consider when determining the cost of your prescription drug coverage. Each plan has a premium or monthly cost to participate in the Medicare drug plan. Some plans also have deductible or a set dollar amount you pay before the plan coverage begins. Another consideration is the co-payment or the actual cost to you after your drug plan pays their part of the drug costs. All these components vary by plan and some plans have no deductible or co-pay based on individual circumstances. Some individual may qualify for "extra help", a low-income subsidy which will help pay for Medicare "D" drug plan's monthly premium. The amount of extra help is based or you income and assets. You can apply for extra help by calling Social Security at 1-800-772-1213

Coverage:

It is essential to make sure that all the prescription drugs you currently take are on the Medicare drug plan formulary. A formulary is a list of drugs that a Medicare drug plan covers. Formularies include brand name as well as generic drugs. Most prescription drugs used by people with Medicare will be on a plan's formulary. Formularies differ from plan to plan in order to ensure that people with different medical conditions can get the treatment they need. Some plans may also have drugs on their formulary that require prior authorization. This means that in order for the plan to cover these prescriptions your doctor must first contact the plan and show why there is a medically necessary reason for you to have that particular drug.

Coverage Gap:

The Medicare Prescription Drug Plan offers coverage until you spend $2,400 in total drug costs. You are then responsible for 100% of your prescription drug cost until you spend $3,850 out-of-pocket. This is called the coverage gap or "donut hole". If you have high drug costs you may want to consider a plan that offers additional coverage during this "gap" period.

Even if you don't take a lot of prescription drugs now, you should still carefully evaluate your need for a Medicare part "D" prescription drug plan. As we age most people need prescription medications to stay healthy. Joining as soon as you're eligible means you will pay a lower monthly premium and avoid paying any penalties in the future.

Financing the Cost of Elder Health Care: Medigap Policies and Medicare C

The original Medicare Plan (Medicare A and B) pays for many health care services and supplies, but there still remain many costs that are not covered. To help pay for these extra health care costs, Medigap policies are available.

MEDICARE SUPPLEMENTAL INSURANCE aka Medigap

This type of insurance was designed to help fill in the payment gaps caused by Medicare deductibles and copayments. It is sold by private insurance companies to fill the ?gaps" in the original Medicare Plan coverage. Additionally, such insurance can help during a serious catastrophic illness that requires extensive hospital and/or skilled nursing care. If you are in the original Medicare Plan and have a Medigap policy, then Medicare and your Medigap policy will pay their share of covered health care costs. These policies do not cover custodial or long term care needs in nursing facilities. However, these Medicare supplemental policies must follow Federal and state laws. Because the benefits are any Medigap plan do vary, it is important to understand and compare the policy coverages.

MEDICARE ADVANTAGE PLANS aka HMO

This health plan option is actually called MEDICARE C although not frequently referred to by this name. (It is the reason why the Pharmaceutical coverage described in the last column was named Medicare D.) Often times individuals and their families may be unaware that this is the type of Medicare insurance plan that was selected. It can require referrals to see specialists, with these plans often having networks of physician providers. This does mean that you may have to see specific doctors who belong to the plan, or go to certain hospitals or skilled nursing facilities to receive covered services. This type of Medicare benefit is typically less costly to purchase than traditional Medicare and paying for a supplemental Medigap policy.

Understanding the complexities of Medicare typically does not become a necessity until someone is sick and needs to access health care benefits. It is then that the financial realities facing you or your loved one require careful review.

Part B: Medical Insurance

This program covers partial payment of physicians' fees and other professional medical services, outpatient care and some home health services. Individuals may enroll and purchase Medicare Part B, with the monthly premium in 2007 of $93.50. This amount is automatically deducted from the monthly social security check. In addition, there is a $131 per year deductible that must be met before Medicare Part B begins to pay for any health care benefits.
Medicare sets certain "allowable" amounts for services rendered. Medicare Part B will then pay 80% of the reasonable and customary charges (referred to as their "allowable amount") for the specific services. Physicians and suppliers who "accept assignment" have signed an agreement to become Medicare participating providers and agree to accept the Medicare allowable amount as payment in full for services rendered. (That is, the 80% and the 20% not covered by Medicare equal the 100% allowable amount). For example, a physician may charge $100 for the service rendered; Medicare may have set $50 as the allowable amount and will then pay 80% of the allowable amount, or $40 for the service rendered. If the physician accepts assignment, the doctor will accept the $50 as payment in full, resulting in your co-payment of $10 (or 20%.) If the physician is "nonparticipating", he/she would accept $100 as payment, although reimbursement from Medicare is still only $40.

EXAMPLE OF MEDICARE PART B COPAYMENT
Doctor Fee Allowable Amount Medicare Pays You Pay
Accepts assignment $100 $50 $40 (80%) $10 (20% co-pay)
Non-participating $100 $50 $40 (80%) $60*

*You pay $10 (20% co-pay) plus $50 over allowable amount

THE POWER OF POSITIVE THINKING

Studies have shown that a positive attitude can lead to greater productivity and help us stay healthy and heal more quickly. Learning to channel our thoughts in a more positive direction can improve our interactions with others and lead to more satisfying and enhanced quality of life.

Are you a positive thinker? We can all benefit from a periodic self assessment of our attitude and how we present ourselves to others. Here are a few questions that may help you decide if it's time for an "attitude adjustment."

Do you feel good about your work and personal life?

Do you usually expect a positive outcome or often fear that the worst will happen

Are you excited/energized by challenges, or do you feel overwhelmed and anticipate defeat?

Do you often overact to minor annoyances or criticisms?

Do you surround yourself with people of good humor, or are you drawn to those who constantly complain?

If your answers reveal a trend toward negativity, it may be time to begin the journey to more positive thinking. We have the power to control our mind, even when we feel we can not always control our life circumstances. Cultivate an attitude of gratitude. You can chose happiness, it doesn't choose you.