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What are they and what do they pay for?
Statistically, a person age 65 can expect to live another 18
years or more. Most of us assume that some combination of
investments, Social Security, Medicare, Medicaid and our insurance
will take care of retirement medical expenses, but few people
understand what these programs pay for and what they don't.
Medicare
The Federal health insurance for people over age 65, and for
some disabled people under age 65. Enrollment is automatic at age
65 if the person is receiving Social Security.
Medicare has two parts:
Part A pays for
- hospital bills
- a limited amount (up to 100 days) of nursing home care for
skilled nursing care (which must follow a hospital stay of at least
three days)
- limited home health care, and hospice care.
Part A is free to those who qualify.
Part B is optional insurance that pays for:
- doctor's bills
- emergency room services and ambulance transport
- durable medical equipment
- outpatient care and some medications.
The Part B base cost is $96.40 per month (in 2008), which is
deducted from the monthly Social Security check, and also has a
$135 annual deductible.
Part D is optional insurance that pays for
prescription drugs, and is offered by private companies that have
been approved by Medicare.
Medicare was designed to help pay for major medical expenses,
but not to pay for all medical expenses, and there are many
expenses that are not covered, for example:
- Private hospital rooms
- Outpatient prescriptions
- Routine physical exams
- Dental care and dentures
- Eyeglasses and hearing aids
- In-home care - personal care or homemaker or meals (unless it
follows a hospital stay of at least 3 days)
- Nursing home (unless it follows a hospital stay)
Medicare will pay for some skilled care in the home or in
approved nursing homes, but only in certain situations. Medicare's
skilled nursing facility (SNF) benefit does not cover general
nursing home care, but rather relatively intensive skilled care
after acute care hospitalization.
Won't Medicare pay for a nursing home?
Medicare pays for 20 days for recovery after a hospital stay, and
will pay a portion of the cost for an additional 80 days. But
Medicare won't pay for "custodial" care, and that's the type most
people will need - help with eating, dressing, bathing, because of
physical limitations, dementia or Alzheimer's disease. Medicare
also does not pay for homemaker services, nor does it pay for
custodial care provided by home health aides.
Medigap Insurance is private insurance to fill
the "gaps" in Medicare and pay the co-pays. Most people on Medicare
will need supplemental insurance, unless they choose to join a
Medicare HMO. Medigap policies were standardized into 10 policies
(Plan A through Plan J) to make it easier to compare policies from
one insurance company to another. Medigap insurance does not pay
for nursing homes or assisted living. However, Plans D, G, I and J
do contain an at-home recovery benefit that may pay up to
$1600/year for short term at home assistance for those recovering
from an illness or injury or surgery.
Medicaid is for low-income persons and is
funded partially by the federal government and partly by the
states. People apply for Medicaid in their county of residence, and
counties have different application procedures. Medicaid
eligibility is based on income and assets. It covers the costs of
medical care, assisted living, some in-home care, nursing homes and
personal care. The states determine their own rules and also limit
the number of beds in nursing homes that will be paid for by
Medicaid, so one may not be available when you need it or where
your need it (i.e., in a facility of your choice).
You may not know that Medicaid isn't a gift. When a person
accepts Medicaid, a lien is placed against their property and, when
the person dies or the property is sold, Medicaid may recover the
amount it has paid out. For this reason, It is advisable for
homeowners to consult with an elder law attorney before filing for
Medicaid.
So, in order for Medicaid to pay for nursing homes or any other
care, you need to deplete your savings and assets to poverty level
--$2000. Many people have to pay for nursing home care out of
pocket and spend down their assets until they become eligible for
Medicaid. Many people also plan to transfer their assets to their
children in order to qualify for Medicaid. Medicaid will look for
this kind of transfer, and may delay or deny eligibility. However,
there are legal estate planning tools (such as Medicaid trusts)
that can be used so that the remaining spouse bears little
responsibility for the Medicaid expenses of the deceased
spouse.
Medicare Assistance Programs are State- managed
programs to help Medicare recipients who cannot afford Medicare's
premiums and other costs but whose income or assets are too high to
qualify for Medicaid. Eligibility is based on income, as is the
amount they pay of Medicare costs.
Long Term Care Insurance is private insurance
to pay for in-home care, assisted living or nursing home expenses.
It typically goes into effect after the person has demonstrated an
inability to perform at least two activities of daily living
(ADLs), such as bathing, eating, dressing.
Policies can cost between $900 to $8,000/year, depending upon
the age of the buyer and the benefits chosen.
Roughly one in four people who apply don't qualify because of
preexisting health problems. Insurance companies usually won't
provide long term care coverage for people who have M.S.,
Alzheimer's, Parkinson's, and a variety of other ailments; or who
are already bedridden with physical or mental disorders. But most
policies do cover these conditions if they are contracted after
signing up.
Long Term Care Insurance isn't right for
everyone
Long term care insurance is a growing industry, and it can be a
terrific way to preserve assets and not burden the children, but it
is not right for everybody. Consumer Reports advises against Long
Term Care insurance policies for those who qualify for Medicaid or
will qualify soon after entering a nursing home. It is not
advisable for those who do not have a fair amount of assets they
wish to bequeath to their heirs. It is also not advisable for those
who are unlikely to be able to continue paying the premiums for the
rest of their lives. There are no hard and fast rules about who
should buy a policy, but the United Seniors Health Cooperative
suggests the following guidelines:
- At least $75,000 is assets, not including home and car
- Retirement income of $35,000; i.e., sufficient to cover living
expenses
- Ability to pay LTC premiums for the rest of your life, even if
rates increase. No more than 7% of your annual income should go
toward the cost of LTC coverage.
For more information:
- General Information: Seniors! Inc at (303) 300-6940
- Social Security: 1-800-772-1213 or www.ssa.gov
- Long Term Care Insurance: Contact the Colorado Division of
Insurance at (303) 894-7499, x355 for "Shoppers Guide to Long Term
Care Insurance."
- Medicare: 1-800-MEDICARE or Health Care Financing
Administration - (303) 844-4024 or www.medicare.gov
- Medicare Supplements ("Medigap" policies): Colorado Division of
Insurance - (303) 894-7552
- Medicaid: http://www.cms.hhs.gov/home/medicaid.asp