Don't Let the State Make Your Healthcare Decisions

I came across this article in NPR. I don’t condone it, but I am not surprised. It usually boils down to money.

But let’s take a step back and understand what we can do to protect ourselves and our loved ones. We can start by looking at a timeline of what happens or can happen to us when we get sick. Unfortunately, most financial advisors do not cover this with their clients. It is morbid. It is not sexy. Sadly, it’s not something they can make a commission on or charge an asset management fee for. I’m being brutally honest.

If we are under age 65 and get sick, we will be covered by our Obamacare-compliant health insurance. There may still be deductibles and co-pays that could be onerous, but the marketplace provides opportunities for supplemental coverage (ancillary benefits) if you cannot absorb the out-of-pocket charges from personal savings.

If You Have a Long-Term Disability

In an extreme situation that results in disability, you may be able to survive financially if you planned with long-term disability coverage. Some policies have benefits that continue to pay even if you wind up receiving Social Security disability income (SSDI). Some policies have the "own occupation" verbiage, which means the benefits pay even if you find other work that was not your occupation before the injury/sickness. If you are disabled and are receiving SSDI for 24 consecutive months, you will receive Medicare. (For related reading, see: Choosing the Best Disability Insurance.)

What happens when we are Medicare beneficiaries at age 65 and beyond? Many nursing homes that offer rehabilitation therapies rub their hands together. Why? If your injury or ailment resulted in a hospital admission and you are discharged directly to a rehabilitation center, Medicare picks up most of the bill during the first 100 days. If you have a Medicare supplement policy, such as Part F or Part G, you will essentially be fully covered from what Medicare does not cover. I had this situation this past winter. The billing office at a rehabilitation facility within a nursing home said the following to my client’s granddaughter who had his healthcare proxy: “Your grandfather has excellent insurance. He can stay here for 100 days.”

Paying for Long-Term Care

Here’s where it gets tricky. If you need to stay longer than 100 days, someone must pay. That someone will be you, either through direct pay or a long-term care policy. If you wound up on Medicaid—either because you are legitimately poor or your made yourself poor by divesting what you accumulated, so to speak—the Medicaid reimbursement rate is lower than Medicare’s rate and it’s lower than private-pay rates. (For related reading, see: A Quick Guide to Medicaid and Nursing Home Rules.)

Now you see how we have situations as described in the NPR story I linked to above. But are all nursing homes like that? No. Anecdotally speaking, I have come across some facilities that thrive on Medicaid reimbursements and still have plenty of private-pay residents.

It’s important to note that not all situations with healthcare in retirement will result in a nursing home. Many may go back home after rehabilitation and live out the rest of their lives at home without any major incidents. Others may wind up using adult day care or home care. Others may move into an assisted living center or continuing care retirement community. (For more from this author, see: Healthcare Costs in Retirement: What to Consider.)

No one has a crystal ball, but the key is to have a plan. As General Patton said many years ago, a good plan today is better than a perfect one tomorrow. That good plan is a long-term care plan. Even if insurance is not part of it, for whatever reason, you need to know the ins and outs of what happens when you are ill in retirement. Where will you get care? Who will provide it? Where will you live? Will family be there? 

The last thing you want to do, in my humble opinion, is this: Throw your hands up in the air, and let the state take care of you. You may find that state very scary. (For more from this author, see: How to Plan Financially for a Chronic Illness.)