It’s estimated that one in eight Americans is age 65 or older, comprising about 12% of the population. According to the CDC (Centers for Disease Control) by the year 2050, that figure is expected to increase to 20% of the overall population. As baby boomers age, health insurance alternatives become an increasing concern.
As it stands now, your health insurance alternatives when you reach age 65 are largely determined by your income, assets and budget. The less you have of all three, the fewer your options. Let’s look at what’s available.
Medicare – This is the government-administered health insurance program for people 65 and older, some younger people with disabilities and people with end-stage Renal Disease (ESRD). Approximately 40 million people are currently enrolled in Medicare. Basic Medicare is a traditional fee-for-services program, which simply means you can go to any health care provider that accepts Medicare. You pay deductible and your share of cost, and Medicare pays the rest.
There are two parts to Medicare: Part A and Part B. Part A is the “hospital insurance” portion that pays for things like inpatient hospital care, skilled nursing facility and home health care and hospice, within certain limits. Part B is the “medical insurance” portion that pays for X-Rays, prescription drugs, doctors, ambulance and the like.
Medicaid – is the jointly funded federal and state program that fills in some of the gaps under Medicare. Each state administers its own Medicaid program, setting its own guidelines for who is eligible as well as individual co-payments and deductibles. Because each state is responsible for its own eligibility criteria, there are variances from state to state as to who qualifies for Medicaid. A person may qualify in one state, and not qualify in another.
Medicaid is ‘means tested’, which means that an individual’s ability to pay determines their eligibility. All income and assets are examined to evaluate whether or not that person can pay for their own health care.
Private Health Insurance – This is frequently the most expensive alternative, depending on when the policy was taken out. Private health insurance can range from benefits under a group policy such as a former employer’s retiree’s benefits policy, or an individual health insurance policy, a high-risk pool if your state offers one, or similar coverage. One trend that’s developed in recent years is the younger generation adding parents to their health insurance coverage if the parent’s are dependent upon the children. A big downside of this plan is that many private and group insurers won’t allow this, but some do.
Medical Savings Account (MSA) – An MSA is a tax-deferred trust or custodial account, similar to an IRA, where you set money aside to pay for routine, out-of-pocket health care expenses, and build up money to pay for future medical costs. The problems with this type of plan are 1) it must be paired with a major medical insurance plan (typically “catastrophic” coverage with a high deductible, and 2)it can only be implemented by self-employed people or employees of a business with less than 50 employees.
Long Term and Specialized Care Insurance – These types of policies are for a specific type of illness, such as cancer treatment expenses, or long-term care in a facility such as a skilled nursing facility or even at your own home, under specific conditions. Costs vary widely from company to company, and when you take the policy out can have a huge impact on the premiums you pay.
Planning for medical care for the elderly takes a combination of pre-planning, consultations with a tax attorney or accountant, a financial planner and the complete cooperation of parents and offspring; but the effort is worth it in the end. With attention to detail, you can save thousands of dollars in health care costs.
What about Medicare ‘advantage’ plans, where you pay a co-pay?
What About It????
The “advantage” in about 90% of the cases is to the insurance companies. They get the money that Medicare would otherwise get, plus a supplement from Medicare, plus whatever extra you pay for most plans. They pay all doctors less. Therefore, many (perhaps your preferred) doctors will not participate. Those supplements reduce the amount available to all other people on Medicare. It is basically a scam and a step toward elimination of Medicare. That will not happen but they have been trying since 1965.