How long since you looked at your "A, B, Cs "? The Changing Language of Long Term Care Medicare, Medicare Supplement Policies, and Medicaid (The fourth article in the series) by Laurel Stauffer-Daly, CLU, ChFC, LUTCF The following article takes excerpts from the accredited continuing education course "Basic Long Term Care from A-Z (NYCR-207894)" offered through the New York Center for Financial Studies in New York City. For a schedule, call 212-221-3500. This article (the fourth in the series-access Archives on the Home Page for previous articles) brings us up to the middle of the alphabet of terminology relevant to the senior market. This segment looks at the "m's"- Medicare, Medicare Supplement coverage, and Medicaid. Often, people insist that their grandmother's nursing home was paid for by Medicare. Impossible I say- many people confuse Medicare with Medicaid (Medicare pays only for a short stay in a "Skilled Nursing Facility" under certain, limited situations but does not pay for custodial or chronic care in a nursing home setting). This article will by no means be exhaustive, but help clear up the confusion of which system pays for what, and why so many people should still take a serious look at whether or not a Long Term Care insurance policy is needed. Medicare is a federal program that provides hospitalization and medical care to "seniors" and consists of 3 parts which will be outlined below. Medicaid is also a federal program but administration differs on a state by state basis, depending on the number of people eligible (by low, or poverty level incomes). Medicaid does indeed pay nursing home bills for half to two thirds of residents but residents must qualify for such assistance. Long Term Care insurance is one of the ways to have long term, chronic care or custodial needs paid for, and still have control of your assets and income. The A, B, C's of Medicare For detailed questions about Medicare, go online to www.medicare.gov or call 1-800-MEDICARE. Medicare provides health insurance services to millions of seniors, those with renal failure, or classified as disabled and receiving OASDI Disability benefits for two years or more. Normally, those turning 65 qualify for Medicare because they have paid payroll taxes over the years. Currently, we are taxed a total of 2.9 percent on all wages (no cap or income limit) to fund Medicare. "Non-working spouses" are eligible for Medicare too based on payroll taxes paid by the working spouse, but not until the non-working spouse reaches 65. If the senior's spouse is currently covered as a dependent on the employee health coverage, the "dependent" spouse must be allowed to remain on the employee roll until he or she qualifies for Medicare by also reaching 65, even if the Medicare spouse gives up their employee medical coverage to rely solely on Medicare. For those new in the country and legal residents for at least five years, or seniors that otherwise would not qualify, it is possible to purchase Medicare Part A. "Part A" of Medicare covers hospitalization, limited home health care needs, "Skilled Nursing Facilities" and "Hospice". Many consider Part A "free" but seniors need to understand their financial responsibilities when using Part A services. Medicare is designed to help the senior population cope with periods of "acute" illness and crises like surgery or a heart attack. It helps with short-term health problems, not the chronic ones often typical in our last years. Services in-hospital are "free" after a deductible or out-of-pocket payment ($840 this year) and only for up to 60 days. During those first two months in the hospital medications, bed and meals are covered, as well as any lab testing, operations, and equipment required. Please realize though, that the government expects the patient to share a hospital room, and will not pay for telephone or television! Also, if the senior should need surgery, there is something I fondly call the "Vampire Deductible"- he or she must pay for the first three pints of blood unless the senior or someone else will replace the blood to the blood bank! If still hospitalized beyond 60 days, Medicare begins assessing a "coinsurance" of $210 per day Days 61 through 90, which then doubles to $420 per day after the 90th day. (The senior is crossing the line from an "acute" health care problem to "chronic illness".) After 150 days, the senior essentially becomes a "private pay" patient (paying 100% of charges) unless the patient uses some of their "Lifetime Reserve Days". These out-of-pocket charges are due and payable each "Benefit Period". A Benefit Period is defined as any period when the senior has been out of hospital for more than 60 days. Seniors will find themselves wanting to "pick up their beds and walk" so as not to deplete their pension checks at inpatient rates of $210 and $420 per day! A senior who is not quite recovered to the point of returning home, may, as an alternative, find it feasible to use Medicare to cover up to 100 days of care in a "Skilled Nursing Facility" (SNF). Admission requires a prior 3 day hospital stay (not counting the day of discharge) and again, daily coinsurance fees of $105 begin after 20 days in the SNF. Please note-to have Medicare classify a nursing home stay as a "Skilled Nursing Facility" requires a specific prescription for "daily skilled (medical) services". Skilled Nursing Facilities have RNs on duty around the clock because patients have medical needs (e.g. wounds requiring sterile bandages, drains from surgery needing cleaning and monitoring, IVs and oxygen...). Or, physical or occupational therapies are required. Again, seniors may feel compelled to "pick up their beds and walk" home for some "Home Health Care." Medicare will oblige as long as the home care is "intermittent" and the senior improves. Seniors are allowed physical, occupational, speech, respiratory therapy and services provided by home health aides or nurses for less than eight hours per day, and less than seven days a week over a 21 day period. The definition for "intermittent" care changes once the senior has been receiving services- it is later defined as skilled nursing or home health aide services combined to total less than eight hours per day and 28 or fewer hours each week. Prescription drugs are NOT covered, nor are meal delivery or homemaker services. "Hospice" care ("palliative care" to manage pain and the last stages of illness) can be provided at home by Medicare, for patients defined as terminally ill. Any drugs require a co-pay of up to $5. "Part B" of Medicare is optional and therefore must be purchased. Enrollment is at age 65 or, if later, during an annual "General Enrollment Period" that runs from January through March. Premiums for 2003 of $58.70 per month1 are conveniently deducted from OASDI pension checks. This portion is designed for supplementary out-patient care, emergency treatment and some preventive services. Lab work, flu shots, and "durable equipment" such as walkers and wheelchairs are provided. But beware- routine physicals, prescription drugs and hearing and vision exams are NOT covered. The Medicare Part B client is responsible for an annual out-of-pocket deductible (currently $100) and must pay 20% of health care charges (called "coinsurance"). Medicare + Choice- In 1996, Medicare introduced a third option called "Medicare + Choice", also known as "Part C". Part C gives the senior "managed care" choices such as HMOs, PPO, Private Fee-for-Service and Medical Saving Accounts. These choices may not be available in all areas. Medicare Supplement Plans/"Medigap" Because there are gaps in the health services provided by the Original Medicare Parts A and B, some seniors may wish to purchase "Medigap" insurance to supplement Parts A and B. (Medigap policies should not be purchased by people using Medicare + Choice.) Medicare Supplement Plans/Medigap are privately paid, individual insurance policies sold by regular insurance carriers. Products are standardized in design and except in Massachusetts, Minnesota and Wisconsin, must conform to ten models approved by the National Association of Insurance Commissioners. The plans are creatively (ha, ha) labeled Plan A, Plan B, C, D, E, F, G, Plans H, I and in most states, J. Each plan incorporates Plan A "Basic Benefits" and progressively adds more benefits (with higher premiums) as you compare plans B through J. "Basic Benefits" pay inpatient hospital care (Part A) coinsurances (recall the $210 and $420 daily rates) and add the choice to stay inpatient an extra 365 days during your lifetime. The "Vampire Deductible" is taken care of by Medigap and the policy will supplement the client by also paying the 20% coinsurance due for any Part B services. Medigap Plan B will cover Original Medicare Part A's deductible ($840) too. Plan C adds foreign travel emergencies and pays the Skilled Nursing Facility coinsurance fee (the $105 per day due after 20 days). For seniors looking for some relief from their prescription drug costs, Plans H and I offer "Basic" drug coverage, meaning that the Medicare Supplement Plan will pay 50% of the drug charges after an annual deductible, but only up to a certain annual limit. Plan J, if available, increases the maximum drug reimbursement payout for the year and similarly, pays 50% of the cost after an annual deductible. Again, details are fully outlined at the Medicare website. Clients should be given government published "Guide to Medicare" and a similar guide for Medigap. Seniors have 30 days to reconsider after purchasing coverage. Medicaid2 - In the New York City area, 50% of county taxes go toward Medicaid (medical) benefits for our indigent and low income populations! We are also financing the nursing home stays of middle class and wealthy people who have qualified for Medicaid by "spending down" (using up or gifting away their assets), their property and financial assets. The 1997 HIPAA Act (Health Insurance Portability and Accountability Act) made it illegal for advisors to specifically instruct wealthy clients how to "use the system" and Medicaid planning requires that assets be moved three or five years prior to qualification. What people need to realize is that assets of an estate of a Medicaid patient may be attachable after death. The homestead may pass to the children with a lien against it-the nursing home can legally recoup some of the costs of care for Mom or Dad. An alternative worth exploring, assuming the premiums will not crush a senior's budget, is the purchase of Long Term Care Insurance. Long Term Care Insurance- Long Term Care insurance (LTCI) is purchased privately or may be found through association membership, or more and more frequently, as a job benefit. This insurance is complimentary to medical insurance and Medicare, which provide medical coverage. LTCI provides a source of money to finance or reimburse a variety of services in old age- from home care (personal, homemaking or custodial care) to skilled (medical) care at home for chronic problems, ongoing care in a community-based facility such as an Adult Day Care Center, or a short or lengthy stay in a nursing home. There is no requirement that a person be rich or poor to get LTCI- just reasonably healthy and able to afford premiums for insurance coverage. Purchase of a "Qualified Long Term Care policy" (meaning that the plan design meets certain criteria of the HIPAA Acts of 1996 and 1997) will give many clients tax breaks-both premium deductions and income tax free benefits (within limits) when the policy pays a claim. In summary- Medicare (whether Plans A, B or C) provide medical coverage to seniors. Medigap policies, also known as Medicare Supplement policies, supplement Medicare Parts A and B so a senior has more extensive medical coverage. Medicare and Medigap DO NOT PAY NURSING HOME BILLS except for very limited time periods and specific circumstances! Medicaid is a government program that provides basic medical services to the poor. Medicaid may pay for a senior with very limited assets and income to stay in a public Nursing Home or it will take over the cost when someone runs out of money in a private one. Long Term Care insurance policies are privately purchased and will reimburse or pay for the widest range of senior services (non-acute) whether medically related, due to cognitive impairments like senility, or purely "custodialc or personal in nature. The senior will typically have a choice of whether to receive long term care services at home, or in a facility. Long Term Care does not pay hospital or Doctor bills. Many seniors will need medical coverage AND Long Term Care coverage. Long Term Care insurance will protect and preserve assets and income meant for retirement and as inheritances. Next month, we will get back to our alphabet of terms found in Long Term Care language. Mmm- I hope this clarifies our Medicare and Medicaid systems... 1Medicare Part B premiums are higher if the senior does not join when first eligible. Costs increase by 10% for each twelve month period the coverage was not taken. 2Medicaid funding and regulations vary by state. Laurel Stauffer-Daly, CLU, ChFC, LUTCF came into the financial services industry in 1987. She has a Masters (in Education) from Columbia University and this forms the foundation for all of her work. Her mission is to facilitate adult learning and peak performance through clearer communication- in fact- her corporate name and logo (Continuum... "learning for life") reflects that, as adults, we still must, and are, continually learning. Continuum trains both financial service professionals and their clients how financial products and services change lives. If financial service reps really know their products, and can explain them clearly to the public, this can have a huge impact in the world, because--- at least for right now--- money makes a difference! Laurel is a master trainer and coach. She has worked in large corporate settings, and managed the sales and training needs of insurance agencies. She works with people privately to improve their sales results. She also speaks regularly and gives seminars for the public, corporate and non-profit clients. Laurel is active in several trade associations, serving several terms on their boards. She holds three insurance designations and her NASD Series 7. Laurel may be reached at 212-717-8607 or continuum@nyc.rr.com Additional credit for this article goes to David Dreifuss, JD, MBA, CEO and EVP for The Alliance of Insurance and Financial Professionals. He can be reached at the NY Center for Financial Studies (see article header) or at ddreifuss@taifp.com