Guest Author - Gary King

Alternatives to Medicare

You can, of course, decline Medicare coverage. If you have private health insurance, compare its cost and coverage to that of Medicare. Federal law requires an employer with a staff of 20 or more to offer his/her employees over age 65 and their spouses the same group hospitalization coverage he gives to any younger employees. When comparing policy costs, note that all Medicare premiums and copayments are adjusted annually and that you will have to pay a 10 percent penalty for every year after age 65 that you do not enroll.

Medigap Insurance

Even if you have Medicare insurance, you can purchase private health insurance for items and services Medicare does not include, as well as for Medicare deductibles and coinsurance. Such policies are known as Medicare supplemental insurance, or simply Medigap. To prevent fraud and duplication, federal law limits Medigap policies to 10 standard plans, which are variously available in different states. Your state department of aging can give you specific information about Medigap policies in your state.

Qualified Medicare Beneficiary Program

Because Medigap insurance is too costly for many low-income individuals, Congress authorized the Qualified Medicare Beneficiary (QMB) program. To qualify for this program, a person must both be eligible more Medicare and have an annual income that falls below the national poverty level. (In Alaska and Hawaii the income guidelines are somewhat higher.) The beneficiary's assets, such as stocks, bonds, and bank accounts, cannot exceed $4,000 for a single person or $6,000 if he/she is married. If you qualify for the program, your state will pay the deductibles and coinsurance for both Part A and Part B of Medicare.

The QMB program is administered by the state agencies that provide Medicaid assistance, and specific eligibility rules vary from state to state, as they do for Medicaid. If you think you are eligible, apply to the State Medicaid office.

Medicaid

Midicaid is a government program that helps people with low incomes and limited assets to cover their health-care costs. Medicaid is funded jointly by federal and state governments and is usually administered by a local department of social services, health, or welfare. The federal government has issued broad guidelines for Medicaid, but within them, each state forumlates its own regulations on eligibility, coverage, and benefits.

Eligibility

When you apply for Medicaid, an eligibility worker will take up to 45 days to determine whether you are eligible to receive benefits. He/she will make that decision based on your income and assets. Your eligibility will be reviewed periodically, and your coverage can be dropped if you cease to meet state requirements.

In general, Medicaid classifies income as money that you receive from any source, including Social Security, the interest on savings or investments, and money from rental property, wages, pensions, and annuities.

Medicaid considers as assets any money that you have in checking and savings accounts, savings bonds, the cash surrender value of life insurance policies, stocks, bonds, and IRA's, as well as some real estate and motor vehicles. If you are married and live with your spouse, his or her assets and, usually, income are also considered to be your assets. (Special rules will apply, however, if one spouse is in a nursing facility.)

Income and asset limits vary greatly from state to state. But in general, to be eligible for Medicaid, a single person's monthly income can be no more than $400 to $500, and a married couple's can be no more than $600 to $700. Depending on the state, an applicant may be eligible for Medicaid even if his or her assets include a home, a car valued at up to $4,500, a wedding ring, household goods, a life insurance policy with a cash surrender value of no more than $1,500, and additional cash and assets of up to $2,000 ($3,000 for a married couple). An applicant for Medicaid is also permitted to have set aside limited funds for his or her own burial expenses and a cemetery plot.

In many states a person can qualify for Medicaid if he or she is eligible for certain government income-assistance programs, such as Supplemental Security Income or Aid to Families With Dependent Children. Women who are pregnant and children up to age one who do not qualify for an income-assistance program but whose income is no more than one-third higher than the state poverty level may also qualify for Medicaid.

Some states will also make Medicaid coverage available to people whom they consider to be "medically needy." These are people whose incomes and assets are above state eligibility levels but are being reduced, or spent down, by their large medical espenses. Some states, however, do not have this spend-down provision. Known as income-cap states, they deny Medicaid coverage if an applicant's income is even $1 over the limit.

Medicaid recipients have the right to choose their health-care providers, including doctors, hospitals, clinics, and laboratories. However, the providers must participate in the Medicaid program. Although participation is voluntary, a health-care professional who wishes to participate must be certified by Medicaid, and he/she must accept Medicaid's reimbursement as full payment. Providers must comply with Medicaid regulations--if a doctor fails to offer an appropriate standard of care, for instance, or files a fraudulent claim, his/her medical license can be revoked and he/she may face criminal charges.

Medicaid Payments

Health-care providers bill their local Medicaid office for services they have rendered to Medicaid patients. The patients themselves generally do not pay any fees. Some states, however, may require those persons who have been designated as "medically needy" to pay monthly premiums and copayments. Some states also require a copayment from Medicare recipents for particular medical services.

Services Covered

All state Medicaid programs are required to cover mandatory services, such as physicians' care, necessary ambulance service, laboratory tests, X-rays, home health care, outpatient hospital care, and inpatient nursing home or hospital care.

In some states Medicaid will also cover so-called optional services, such as care provided by dentists, optometrists, chiropractors, and podiatrists; eyeglasses, prescription drugs, speech and physical therapy, and rehabilitation; diagnostic testing and preventive screening; and inpatient psychiatric care for patients 65 and over.

Sometimes Medicaid will cover amounts that have not been covered by Medicare or private insurance, including copayments and deductibles.

In the future, Medicaid services may be handled by "managed care" programs, such as health maintenance organizations (HMO's). I will cover HMO's in this article.

Nursing Home Care

Medicaid will pay for long-term hospitalization and nursing home costs, as long as the care is medically necessary and the patient is eligible for Medicaid. For those who already receive Medicaid benefits, entering a nursing home poses few financial problems.

For persons who are not already eligible for Medicaid, however, careful financial planning in advance of the need for long-term care can ensure that your income and assets do not disqualify you from Medicaid coverage. Otherwise, you could spend your life savings on nursing home care before Medicaid began to pay the bills.

Suppose doctors have determined that Uncle Bill, who is 76 and in failing health, needs to be placed in a nursing home. Uncle Bill's only income is a monthly Social Security check of $400, which falls within his state's income limits for Medicaid. Bill also has assets: a house, a car, and $50,000 in a savings account. The Medicaid rules in his state permit Uncle Bill to own his home and a car. These are considered "exempt assets." However, the money in his savings account exceeds his state's $2,000 limit on assets.

To qualify for Medicaid, Bill will first have to spend $48,000 of his assets ($50,000 in savings minus $2,000 allowable savings) on nursing home costs. Then his Social Security check will go toward the cost of his nursing home, with Medicaid paying the remainder of his monthly nursing home fees. Bill will be able to keep only between $30 to $75 out of each monthly Social Security check for personal use.

In this example Bill is single. If he were married, special regulations would apply. Bill's spouse would be allowed to retain all of her own income. However, if more than half of the couple's income was in Bill's name, his wife would be allowed to keep only a portion of their income--up to a maximum of $1,700 per month. She would also be permitted to keep any of their assets up to $70,000 (excluding the home).

In the hope of preserving as many of their assets as possible, many elderly people transfer their money or property to relatives or place their money in a special trust fund. However, you must transfer your assets 30 months before applying for Medicaid benefits.

There are also a number of short-term strategies you can use if a nursing home stay is imminent. For example, you can buy a home, a car, or an annuity for your spouse and avoid a Medicaid penalty, provided that she/he does not transfer these assets for 30 months. Because these strategies and Medicaid rules are complex, consult a specialist, such as an elder-law attorney or accountant who knows Medicaid eligibility requirements, before you begin to transfer or divest yourself of your assets.

Many people feel uneasy about moving money and property around to increase their Medicaid eligibility. Others fear that they may be affected by subsequent changes in the law and that it is not worthwhile. But keep in mind that it is certainly legal to take advantage of these strategies.

Denial of Eligibility

If a person receiving or applying for Medicaid is denied benefits, he/she has the right to appeal that decision. Appeals procedures are governed by state regulations, which vary widely. If you appeal, your Medicaid coverage generally continues during the appeals process, but if the final decision goes against you, any benefits you received must be repaid.

A decision will be made within 90 days of your appeal. If y ou are not satisfied, you can request that it be reviewed by a court. The notice denying benefits will indicate how long you have to request a review, which will be handled by either a federal or a state court, depending on whether the denial of benefits was based on federal or state Medicaid regulations.

Health Maintenance Organization (HMO)

Established in the 1970's in response to the increasing cost of health care, health maintenance organizations (HMO's) are health plans whose members pay a fixed monthly premium for access to a range of medical services, including visits to physicians, hospitalization, and surgery. The biggest difference between HMO's and traditional health insurance is that the HMO patient pays few or no additional fees himself/herself.

Health-care providers affiliated with HMO's receive a set fee for each patient no matter how often they treat him/her or how many tests they order for that person. Therefore, the HMO staff has an incentive to contain costs, and to this end, most HMO's place an emphasis on early detection and preventive health care. Monthly premiums usually cover checkups and other preventive measures not often included in a traditional insurance plan.

A market for HMO's was assured in 1973 when Congress enacted the Health Maintenance Organization (HMO) Act. This law makes federal grants and loans available to groups that wish to develop HMO's, and requires employers with more than 25 employees to offer HMO's as an alternative health-care choice.

Types of HMO's

There are essentially two types of HMO's. Under the so-called staff model, HMO's directly employ staff physicians, who work together in one facility. The patient chooses the primary physician from among the staff. If they need specialized care, the primary-care physician refers that person to a specialist on staff. If the group lacks a particular specialist, the HMO may contract with nonstaff physicians for those services.

Other HMO's, known as individual practice associations, contract with physicians to treat HMO patients in their own offices on a prepaid basis. Each patient enrolled in the program is provided with a list of participating doctors, from which they can then choose a primary-care specialist.

Advantages

HOM's offer members a number of advantages, including:

Fixed coses. Members pay a monthly premium in exchange for virtually unlimited access to health care services, at no extra charge. (A few services may require an extra fee.)

Reduced paperwork. All paperwork is handled by the HMO's staff. Patients do not have to file any claims forms.

Prompt attention to medical needs and easy access to treatment. At well-run HMO's, members have access to health care 24 hours a day, 365 days a year. Moreover, because many HMO's employ specialists and have centers with laboratory and treatment facilities, members do not have to go from one office to another for treatment and tests.

Disadvantages

HMO's have certain drawbacks, however, including:

A limited choice of specialists. Members are unable to choose their own specialists or seek outside opinions. In addition, emergency care at a nonaffiliated hospital may not be covered.

Treatment by medical personnel other than doctors. To hold down costs, much of the basic treatment at HMO's may be provided by nurse practitioners or doctors's aides.

Limited service. HMO's typically perform fewer tests and offer fewer services than non-HMO group practices.

Shopping For An HMO

When choosing an HMO, be sure to ask the questions on the checklist following. In addition, try to select an HMO that has been in business for a while and has a relatively low staff turnover. If you can, examine the credentials of each of the physicians who work there.

Find out what hospitals the HMO uses and whether they are accredited by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). Also, talk with current HMO members to see if they are satisfied with the service. Finally, check whether the HMO is a member of the Group Health Association of America (GHAA). This association has strict criteria and will not accept an HMO for membership unless it conforms to association standards.

Checklist -- Evaluating an HMO

Altrhough an HMO can help reduce out-of-pocket costs for medical care, you should ask the following questions before you join one:

What services and procedures are covered? Does the HMO cover pre-existing conditions, and are such services as psychological counseling or drug- and alcohol-abuse programs included?

Where do I obtain medical services? Is the provider's office nearby? If y ou become ill or suffer an injury while out of town, will the HMO pay for your medical care? Will you be assigned to a regular primary-care physician, or will y ou get whatever doctor is on duty when you need care?

How long does it take too get an appointment? Will you have to wait more than two weeks for an appointment? (Longer waits may mean that the HMO is understaffed.) If you have an emergency, what procedures will you need to follow to get authorization for an ambulance and emergency care?

How are complaints handled? What can the HMO do if you are unhappy with the care you receive or if you believe you need a second opinion from another physician?

Preferred Provider Organization

As an alternative to traditional heal insurance and health maintenance organizations (HMO's), some insurance companies now offer preferred provider organizations, or PPO's. They are organizations composed of doctors who have agreed to provide lower-cost medical services in return for becoming the exclusive health-care providers for an insurer or other sponsor, such as an employer. Since PPO doctors have all agreed to a reduced-fee schedule, PPO's help employers and insurers control health costs.

Unlike HMO doctors, PPO doctors do not work exclusively for the PPO or under a single roof. When you join a PPO, you can go to any doctor listed on its roster to be treated and your insurer will usually pay most or all of the costs of your visit. If you use a non-PPO doctor, however, your insurer may reduce your reimbursement or reject your claim.

Some PPO's are quite large, giving you a wide choice of doctors. If you are considering joining one, ask the sponsor for a list of the physicians available and their credentials. Be sure to read your PPO policy carefully, especially in regard to emergency treatment or the services of a specialist. Some plans require that your primary-care physician obtain permission from the insurer before admitting you to the hospital or referring you to a specialist. If you do not get advance permission before entering the hospital, or if you choose your own specialist, you may receive reduced benefits.

Like other health insurance plans, PPO's are usually regulated by state insurance departments.

Supplemental Security Income

A federal program created by Congress in 1972, Supplemental Security Income (SSI) provides a guaranteed monthly payment to persons with a low income who are also blind, disabled, or over age 65. Although this program is administered by the Social Security Administration, it is not funded by Social Security taxes but by the federal government's general revenues. States may contribute to the program as well. As a result, the benefits available from SSI often differ from state to state, depending on the state's contribution.

The purpose of SSI is to provide every needy American with a guaranteed source of income. Before its enactment, state-run programs, "poor houses," and mental institutions were often the only alternatives available to the needy.

To provide a minimum income for people in need, the federal government measures a person's income against a poverty-level index. This index takes into account the cost of food and housing as well as the size and needs of the household. If a person's income falls below the poverty level, that person may be eligible for SSI benefits.

Who is Eligible?

Under federal law, to be eligible for SSI benefits you must:

Reside within the United States or within the Northern Mariana Islands.

Be a U.S. citizen, a lawfully admitted alien, or an alien living in the United States who is in the process of receiving authorization from the Immigaration and Naturalization Service to remain in the United States.

Be 65 or older, blind (defined as having vision no better than 20/200, or a limited visual field of 20 degrees or less with corrective lenses), or be unable to work because of another physical or mental impairment (if you vision is poor but does not fit the above categories, you may qualify for SSI under this category). The impairment must be expected to last for at least 12 months or be terminal.

Have income and other resources that fall below the poverty level.

Income

Income is defined as anything you can use to pay for food, shelter, and clothing. Included are cash, checks, and "in-kind" income, such as food and housing you receive, whether as a gift or in payment for services.

For those especially in need, SSI does not count some kinds of income, such as food stamps or assistance in the form of food, clothing, and housing from nonprofit organizations or government-sponsored programs. Disabled or blind persons can also deduct the cost of any essential medical devices, drugs, medical services, and other disability-related expenses from their income.

Resources

As with income, not all of a person's financial resources are considered in determining the amount of SSI benefits. Real estate is considered, for example, but not the house you live in or the land on which it sits.

Personal property such as cash, bank accounts, stocks, and bonds is considered, but not household goods or small life insurance policies. A car is considered, but only its value in excess of $4,500.

After deducting all the exceptions, your resources must be $2,000 or less if you are single, or $3,000 if you are married, in order to be eligible for SSI benefits. In 1995 the basic federal SSI payment for a single person was $458 per month, and $687 for a married couple. If you are under 18, the income and resources of your parents or legal guardians will be considered.

Aid to Families With Dependent Children

When Bill's wife died, he was left alone to care for his two young children, Sue and Tim. Then, to compound the tragedy, he broke his back while trying to repair the roof and is now unable to earn a living. Since Bill has no insurance or other means of support, how can he and his family cope?

Such cases of misfortune and need are what inspired the federal welfare program called Aid to Families With Dependent Children, or AFDC. The program is designed to help provide children and their families with the basic necessities of life while also trying to ensure that they families it supports stay together.

Although the federal government supplies the money and the basic guidelines for the program, it is administered at the state and local levels. It is the child or children who determine whether a family is eligible for AFDC. The child must be under 18 and live in the home of a parent or other relative who cannot support him or her. A child may be considered deprived of parental support if the family's principal wage earner is:

(1) dead
(2) absent from the home
(3) physically or mentally disabled, or
(4) unemployed.

In the example above, Sue and Tim are deprived of Bill's support because of his disability.

How Benefits Are Determined

Each state determines not only whether a family is eligible for benefits but also what amount it should receive. In doing so, the AFDC office compares the family's financial resources to the amount that state had decided a family of that size requires in order to live.

Applicants must provide the AFDC office with accurate information about family wages and other sources of income. From time to time, families that receive benefits may be re-evaluated to confirm that they are still eligible. Families must also cooperate with the AFDC office in other ways--for example, by revealing the whereabouts of an absent parent.

One of the goals of the AFDC program is to help families to become self-supporing again. To accomplish this, the state may require parents to take part in job training or employment search programs to remain eligible for benefits.

How to Apply

If your family is having trouble making ends meet for reasons beyond its control, you have a right to seek AFDC assistance. To do this, simply fill out an application at the local office of your state's welfare agency.

The next article will begin coverage of prescription drugs and the laws.