Let's just assume that you've been coasting along on an all-expenses covered, cushy, employer-provided health plan. Or not. U.S. citizens are accustomed to complicated world of deductibles, premiums, and surprise charges that make up our health care system. Obviously, these pitfalls can have an enormous impact on your finances. So as people approach their sixties, we usually have them start thinking about the unique challenges of health costs after 65. Here are some of the things you need to know.
Apply for Medicare at 65 (whether you need it or not)
Thanks to one of Medicare's stranger regulations, you will want to apply during the three-month period before you turn 65 for Medicare only (you can wait to apply for social security or spousal benefits later). This is true even if you are still working and covered under your employer's health insurance policy. If you don't apply at 65, you could end up with problems when it is time to use your Medicare, including the possibility of higher premiums. Fortunately, applying for Medicare can be done pretty simply by going online here.
Medicare Might Not Cover As Much As You Think
What if...? It's a typical insurance sales opening intended to get your anxiety up so that you are more willing to buy insurance. Unfortunately, it's also a necessary question when it comes to health care. And let's face it, the likelihood that you will have not any particular medical problems after 65 is pretty small. Most people in my experience figure that Medicare will solve this problem. It does, sort of, but not the degree you'd think.
Like private health insurance policies, you will have to think about copayments and deductibles when deciding what sort of Medicare plan you want. While the government itself provides the baseline Parts A and B, private insurers offer Medigap plans that follow strict rules to fill in where the government won't. Those Medigap plans come in alphabetical order (Medicare Part B, Part C, Part G, etc...) and mean you will pay some level of premiums to get better coverage. Most people who can afford it will choose to buy a supplemental program.
You can see the problem when you look at Medicare's own partial list of things people assume are covered...but aren't:
- Long Term Care (i.e. nursing home or assisted living)
- Most dental care
- Eye examinations related to prescribing glasses
- Cosmetic surgery
- Hearing aids and exams for fitting them
- Routine foot care
Putting aside foot care and hearing aids for a minute (seriously?), the one that really stands out is long-term care—there is no Medigap plan that covers this after the first 100 days. Keep in mind that we aren't just talking about being in a nursing home; long-term care can also include home health care or a skilled nursing facility if you have a chronic illness or an accident (i.e. the broken hip). Medicare pays for your nursing care in such a situation for 20 days. After that, you get Medigap coverage for another 80 days. And then you're on your own.
How can this be, you ask? All those people who can't afford care after 100 days get routed to Medicaid. And that program is only for the financially needy. Given that the average cost of nursing home care in the U.S. was over $6,000 per month back in 2010, people who weren't financially needy when they started often become so.
The only solutions we've found to this problem so far are these: 1. be prepared to lose everything but your home and about $2,000 in cash to get covered by Medicaid; 2. avoid old age; 3. buy long-term care insurance.
I won't go into the particulars of long-term care insurance in this post. Suffice to say that it's expensive to buy and more expensive to not buy. We recommend that couples start looking at a policy as they approach their 60's and single people look a little earlier.
For more information on Medicare and its associated programs, go to Medicare's plan choices site.
For more on programs if you do need to find long-term care for someone, try this site called "Paying For Senior Care."
Health insurance is one of those things that makes Americans wince, and with good reason. Thanks to the Affordable Care Act, the vast majority of us now have some kind of health insurance (definitely a good thing), but that doesn't mean that we are any less confused about it. The fact is that our private health insurance industry has created a Rubik's Cube of deductibles, copays and coinsurance that leaves even the most sophisticated of us feeling frustrated. Whether you are getting coverage through your employer or going through one of the health care exchanges, start evaluating your plan by highlighting the numbers on these 9 key points:
What are your plan essentials?
- Co-pays. If you have a qualified plan under their ACA, your plan will cover health basics like an annual check up and immunizations. But you may be responsible for a copay (usually between $10 and $20) for each visit;
- Prescription Coverage. Check the prescription coverage, especially on any regular prescriptions you or someone in your household regularly takes, and note if there are co-pays. Note that currently, all ACA plans must pay for standard birth control methods;
- Individual deductible. For anything not covered under those medical basics, the insurance company will require you to pay—up to a certain amount. Deductibles are running very high right now: employer plans average around $1200 but individual out-of-pocket deductibles can run higher;
- Family deductible. If you think about it, those individual deductibles look even worse if more than one member of your family gets sick during the year. The household deductible tells you how much the family as a whole would pay in deductibles before the insurance company started to cover your costs;
- Co-insurance. You would think that you'd be in the clear after paying all of those deductibles, but health insurance has one obstacle. Co-insurance means that you will continue to pay a percentage of your medical bills after you have paid your co-pay and your deductible. So someone with a 20% co-insurance provision who shelled out the full amount of her deductible would also pay 20% of the remaining medical costs up to the out-of-pocket limit;
- Out-of-Pocket Maximum. There is some good news; there is a limit to how much you will have to pay in copays, deductibles and co-insurance. Your insurance plan will list the out-of-pocket limit (but beware— your plan might exclude copays from this number!). For 2015, the legal cap for an individual's out-of-pocket expenses is $6,600 and $13,200 for a household;
- Health Provider Network. Your insurance plan has negotiated with a multitude of health care providers to pay lower fees in return for including the provider in the insurer's network. As the patient, you generally have to use the "in-network" providers or pay extra—and your out-of-pocket maximum won't help you in that case. Make sure you note who and where your network is;
- "Hidden" Benefits. Check for discounts included in your plan on things like gym memberships, Lasik surgery or weight loss surgery, programs to quit smoking, newer birth control, durable medical equipment (like crutches and breast pumps), or alternative health care. These are probably not enough to sway your decision on choosing a policy, but you want to take advantage of them if you can;
- Premiums. This is the number you see first, but they only make sense in light of what you've noted above. The premiums are what you will pay every month and are generally lower if you are paying more out-of-pocket.