Financial Self-Defense


by Connacht Cash

Where to Begin?
Medical expenses can mount very rapidly and without warning. Anyone who has ever reviewed a hospital bill line item by line item is amazed at the number of people who treated or came in contact with the patient, and at the charges for things you never noticed or heard of while being a patient yourself.

When you are in the midst of dealing with a serious medical crisis-either your own or that of someone you love-it is probably too late to try to deal with the cost issue. It is unlikely that any of us would withhold treatment while we wait for a cost estimate, which is all the more reason to be thoroughly familiar with your exposure before a crisis looms. You don't want to be burdened with this worry as well.

Three areas need to be addressed:

  • How to pay for ongoing general medical care for maintaining good health and/or for the treatment of existing illnesses
  • How to pay for serious acute illnesses, such as those requiring hospitalization or rehabilitation
  • How to pay for needed long-term care

You may never need to deal with all three situations, but you should give some thought to each one. Before being able to make a proper judgment call about what kind of Medicare plan to choose and/or what coverage you should have in addition to Medicare, you need to decide how much of your financial future you are willing to place at risk and how that would affect your spouse or other family members if the worst case were to happen. Answering the following questions will help provide a basis for decision making.

  • How good is your current health?
  • Do you smoke or engage in other activities that could have a long-term negative effect on your health?
  • What is your current financial situation?
  • What will be your future financial situation (in 5 years, 10 years, 20 years) and how secure is it?
  • What types and amounts of medical insurance coverage do you currently have?
  • What premiums do you pay annually for each type of coverage?
  • How much can you afford to spend on medical insurance annually?
  • How much can you afford to pay for medical costs without jeopardizing your finances?
  • If needed, does your family have other financial resources available to help with medical bills?
  • Can anyone provide long-term care in the home for you?
  • Do you have any idea what such care would cost?
  • If you are relying on being taken care of by a child, what kind of effect would caring for you in this way have on his/her life or on his/her family's life?
  • Are you being realistic about your choice of caretaker and have you discussed the possibility with the person you are thinking of?
  • What effect would the costs of nursing home care have on your finances and the finances of other members of the family?

These are tough issues to think about. And these questions will probably lead you to others. This review isn't one that is easily undertaken and it is one that most people will happily put off. Maybe it isn't quite as bad as doing your taxes, but it is probably right up there on the list of things you'd rather avoid. The issues involved are emotional ones for all of us. Our health and our finances are very personal issues.

The Possibilities
Gaps and omissions in Medicare can cause you financial distress. Paying for long-term custodial care is among the costliest omissions, but the cost of managing a long-term illness can be equally burdensome.

There are no easy answers. There are no absolutely right answers because no one can foresee the future. Rather than just shouldering the risk or ignoring it, however, there are some things you can do.

Unconventional ideas
Protect your health as best you can. This step is entirely within your control. Do everything you can to stay healthy. If you stay reasonably healthy, your financial risk is drastically reduced because you won't have high medical bills. This might sound a bit odd as financial advice, but from a financial standpoint what is better than avoiding costs? Caring for your health and protecting against health risks is within everyoneís control. It is probably the only type of risk management that is.

Another unconventional way to reduce your out-of-pocket costs is to discuss fees with your doctor. No one likes to do it, but everyone else seems to be doing it‹politicians, Medicare carriers, hospital administrators, insurance companies, and corporations. So the way has been paved for us, as patients, to open this kind of discussion with our doctors.

We all may be very reluctant to discuss costs, but medical treatment is so expensive that our ability to pay for it may have to play a part in our decision about which treatment to have. Maybe it shouldn't, but the reality is that out-of-pocket costs can be sizable and need to be addressed before they become an insurmountable burden to the patient and his/her family.

Doctors are probably more familiar with the issue of medical cost containment than just about anyone, so the topic probably won't be a shock to the doctor. Also, insurance companies negotiate fees with doctors all the time, so why shouldn't you as a patient have the same opportunity?

There are three ways to "negotiate" fees:

1. Use only Medicare participating doctors. If your doctor is a participating doctor, your work is already done for you. Participating doctors must accept assignment for all claims. You don't have to negotiate, you just have to ask if the doctor is a participating physician.

In many states, doctors are required to accept assignment as part of the licensing regulations. Other states are looking into adopting this practice as a consumer protection for patients. You can get a list of the participating physicians in your state by writing to the Medicare carrier in your area

2. Ask your doctor if s/he will accept assignment on some or all of your claims. When a physician or supplier agrees to assignment, he/she agrees to accept the Medicare approved amount. You will be responsible only for the co-insurance payment and deductibles. And your co-payment percentage will be calculated on the Medicare approved amount.

3. Discuss his/her fees with your doctor and see if you can limit your costs. This is probably the most difficult way to deal with the issue, but if you can be comfortable having this discussion you should.

Conventional ideas
The other ways to fill in some of the gaps are:

  • Buy a Medigap policy. This coverage will pay for deductibles, co-payments, outpatient prescriptions, and some other costs. You can choose among a number of policies with various amounts of coverage.
  • Join a Medicare+Choice plan if it provides some of the missing coverage you are concerned about.
  • Take advantage of an employer-sponsored health care program, if possible, if it provides better or additional coverage.
  • Explore the available insurance options to pay for long-term care.

Frequently Asked Questions
Q.What does it mean when a physician accepts assignment?
A. The physician or supplier agrees not to charge you more than the Medicare approved amount for services and supplies covered by Part B. Medicare pays directly, except for the deductible and co-insurance amounts for which you are responsible.

Q. How does the fee-for-service system work?
A. This is the traditional way to receive medical care. Under a fee-for-service system you can choose any physician, any hospital, any health care provider, or any facility approved by Medicare that agrees to accept you as a patient. A fee is charged each time you are treated and Medicare pays for its portion of the approved hospital, physician, or other health care expenses.

Q. Are there options for obtaining care under Medicare?
A. Yes. Medicare provides coverage under two different types of service plans: 1. Original Medicare is a fee-for-service (pay-as-you-go) plans and 2. Medicare+Choice includes several other types of plan, such as health maintenance organizations (HMOs), which have contracts with Medicare.

Q. Do Medicare beneficiaries pay anything out of their own pockets when they use covered services?
A. Yes. With the traditional fee-for-service plan, both Part A and Part B have deductible and co-insurance amounts for which you are liable. You also must pay all permissible charges in excess of Medicareís approved amounts for Part B services, and all charges for services not covered by Medicare.

In Medicare+Choice plans, your out-of-pocket costs will vary depending upon the type of plan you choose.

Q. How do I find a Medicare participating physician or supplier?
A. All current Medicare participating physicians and suppliers are in the Medicare Participating Physician/Supplier Directory. This directoryís listings are divided into geographic areas; the directory is available free of charge from your Medicare carrier. If you don't want to wait to receive it, you can also call your carrier and ask for the names of some participating physicians and suppliers in your area. Most Social Security offices should also have a copy available for review.

Q. If a physician is not a participating doctor, is there a limit to the amount s/he can charge a Medicare beneficiary for a covered service?
A. If you are in Original Medicare, physicians who do not accept assignment of a Medicare claim are limited as to the amount they can charge Medicare beneficiaries for covered services. Charges by non-participating doctors for visits and consultations are capped at a percentage above Medicare's prevailing charge. This amount is shown on the EOMB.

Q. If I am in Original Medicare, what happens if my physician will not accept assignment of a Medicare claim?
A. S/he may charge more than the Medicare approved amount. Medicare will reimburse you based on its approved amount, not the amount charged. You are liable for all permissible (there are certain limitations) charges in excess of Medicareís approved amount. You are also free to choose another medical provider before obtaining treatment.

Q. Does Medicare pay for long-term care in a nursing home?
A. No. Medicare only pays for extended care in a skilled nursing facility SNF). And it only pays for 100 days of SNF coverage per Benefit Period.

Q. Why does Medicare pay for skilled nursing facility care and not for nursing home care?
A. Skilled nursing facilities provide daily medical care. All Medicare coverage hinges on proving that the treatment is medically necessary. When staff and equipment are used to provide skilled nursing care, rehabilitation therapies, or other health care services related to a particular medical condition that can be improved by this care, a case can be made for its medical necessity. If the care is mainly personal care or custodial services, such as help in walking, getting in and out of bed, eating, dressing, and bathing, it is not covered, even if the services are provided in a skilled nursing facility.

Q. Are any services covered for patients in nursing homes?
A. Yes. If you have a medical condition that is being treated by a doctor or you are receiving therapy, Medicare Part B may approve these expenses. It depends on what the care is and why you need it. But Medicare will not pay for the daily room and board charges of the nursing home.

Q. This seems confusing; how do the two preceding questions differ?
A. Medicare will only pay for the daily room and board charges in a skilled nursing facility; the care must be medically necessary and must be required every day. Payment for medical treatment in a nursing home is handled the same as if the patient were living on his/her own‹payment is only made for the individual medical services.

Q. Does any federal program pay for nursing home care?
A. Yes. Medicaid may pay for nursing home care. The program varies by state; it is a program for people with little income and few assets. Many people who have assets before requiring long-term care end up covered by Medicaid because of the high cost of long-term care.

Q. Will long-term care insurance solve the problem?
A. Long-term care policies are sold by private insurance companies and vary widely in their coverage. They provide one way to protect against some of the costs of nursing home care, but the terms of the policy need to be examined carefully before choosing one.

Q.If I am in a skilled nursing facility, what happens after 100 days of Medicare coverage?
A. You pay all the costs.

Q. If Medicaid will cover the cost of nursing home care, why should I worry?
A. This depends on whether you have a spouse or someone who will still need to rely on your finances to live decently. Medicaid requires you to spend almost all of your money first.

From The Medicare Answer Book, by Connacht Cash. Copyright © 1999 by Connacht Cash. Excerpted by arrangement with Race Point Press. $19.95. Available in local bookstores, or call 888-446-5544, or click here.