"Medical Care Planning"

A) Introduction to Medical Care Planning
B) Social Security, Medicare, Medicaid
C) Medicare: Nursing Home Care Coverage
D) Long-Term Care Insurance
E) Social Security Benefits

A) Introduction to Medical Care Planning

By the year 2025 it is expected one in five (20%) persons in the U.S. will be age 65 or older. This alarming statistic indicates that this age 65 plus population will effectively double in the next 25 years. Many of these people are or will be concerned the government will abandon them with reduced Medicare and Medicaid coverage and benefits. There is a growing fear that many elderly will be unable to afford medical, nursing home or assisted living care.

The average life expectancy for a man who reaches age 65 is 85 years. For women who reach age 65, the average life expectancy is 89 years. Men who reach age 65 have about a 30% chance of entering a nursing home, and women have a 50% chance. However, only 25% of the individuals who enter nursing homes stay longer than 1 year. Many others will choose to receive in-home care, which only increases the likelihood of higher expenses. Costs for nursing home care vary widely from state to state and community to community, but the average today (Year 2003) is about $4,000 per month or $48,000 per year. Unfortunately these costs are increasing at a rate faster than the general inflation rate.

B) Social Security, Medicare and Medicaid

Social Security: is a federal program that provides retirement, disability and survivor benefits to wage earners and their spouses, widows/widowers and children. A wage earner’s eligibility for retirement benefits is based upon their work history- essentially the years during which the wage earner paid taxes into the social security trust fund system. The amount of monthly retirement benefits Social Security pays is a function of primarily two factors: number of years worked and amount of earnings in those years worked.

Medicare: is a federal program that provides health care benefits for the following:
1) persons age 65 or older, and certain disabled persons under age 65;
2) certain spouses, widows/widowers of certain wage earners;
3) Disabled children of certain wage earners;
4) Those with permanent kidney failure.

Within the Medicare program there is Part A Medicare and Part B Medicare. Part A is the Medicare hospital insurance program; Part B is the Medicare medical (non-hospital care) insurance program; Part B is optional partly because it requires a monthly premium.

Medicaid: is a state run program that provides health care benefits for persons with limited or no means. The federal government provides funding assistance for each state’s Medicaid program, but each state makes its own eligibility rules.

C) Medicare: Nursing Home Care Coverage

There is a commonly held misconception that Medicare covers all the costs associated with long-term nursing home care. Medicare provides federal health insurance for all persons over age 65 who are entitled to Social Security or Railroad Retirement benefits. Medicare will pay the costs of a nursing home only for a limited time period: the first 20 days can be paid in full and an additional period (80 days) may be paid only after the insured pays a certain amount per day. Even during the 100-day limited coverage period, certain qualifications must be met in order to receive any Medicare benefits.

For example, the care received by the nursing home resident must be “skilled”; the nursing home patient must have spent at least 3 days in a hospital with similar treatments to those being received at the nursing home; the patient must be assigned to a bed that is Medicare-certified for reimbursement; and the nursing home must be Medicare-approved. Therefore, Medicare is not an available resource for paying the costs associated with intermediate to long-term nursing home care.

D) Long-Term Care Insurance

Long-Term Care Insurance is a relatively new product. The policies have improved greatly in the last few years but premiums can be expensive depending on your age and how many years of coverage premiums are paid for with little benefit derived due to short (average) care-facility stays. Further, unscrupulous agents focusing on sales commissions and poor-quality insurance products from companies that may well be out of business when you apply for benefits abound so the buyer must beware.

Every state government has set up a counseling system from which you can contact. Call your state’s Department of Insurance and find out how the program works in your state. The state’s counselors hopefully can assist in determining your particular needs. A very helpful brochure “A Shopper’s Guide to Long-Term Care Insurance” can be obtained by contacting the National Association of Insurance Commissioners, 120 West 12th Street, Suite 1100, Kansas City, Mo. 64105-1925.

E) Social Security Benefits

In the last several years the Social Security Administration (www.ssa.gov) has begun issuing annual statements of benefit that you should receive about 3 months before your annual birthday. If you have not been receiving these statements, obtain a Request for Earnings and Benefit Estimate Statement by filing SSA-7004 form with your local Social Security office. Mail it to: SSA, P.O. Box 3600, Wilkes-Barre, PA 18767-3600. For questions about the accuracy of your SSA earnings record call 1 (800) 772-1213.

Receiving social security benefits from early retirement can be achieved at age 62; however the benefit that one would receive is reduced by about 20%. In order to receive full benefits from Social Security, the age of 65 must be reached. The advantage of taking reduced benefits 3 years early is neutralized at a cross-over age of about age 86. Living past that age would allow you greater benefits if you would waited to age 65 before starting benefits.

Recent law changes extend the “full retirement age” from age 65 to age 66 and later depending on your particular birth date. Delaying the receipt of social security benefits to age 70 is possible. Penalization of benefits by having earned income while receiving social security benefits no longer exists for people age 65 and over.

To qualify for social security benefits, you earn “credits” through your work or Social Security wage base – up to four credits each year. One credit is earned for each $870 of wages or self-employment income. When $3,480 of wages are earned, you’ve earned four credits for the year. Most people need 40 credits, earned over their lifetime to receive retirement benefits. The maximum benefit is achieved by meeting the base set for social security contributions (FICA tax). This base benchmark has been increasing rapidly each year in the past several years.