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Americans Rely on a Patchwork of Options to Pay for Elder Health Care

senior lady in wheelchair
Paying for medical care as a senior can be complicated. Cecilie_Arcurs/Getty Images

Elizabeth Clark and Natalie Stewart have likely never met, but they share a title that more and more adult children are adopting these days: caregiver. As parents age, their risk of developing some pretty dreaded problems skyrockets, including cancer, diabetes, neurodegeneration and cardiovascular disease. With those diagnoses come some pretty hefty costs, which can be financially catastrophic if preparations haven't been made.

Clark and Stewart are two members of a legion of adult children who face keeping elderly parents comfortable, cared for and financially secure. Even with programs like Medicare available there are still loopholes, mistakes and fees that a lot of people don't foresee, costing both sleepless nights and big bucks. Clark and Stewart gives us an inside look at how they make the finances work.

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Elizabeth's Story

When Elizabeth Clark's father developed Parkinson's disease she took on the role of part-time caregiver, with her mom handling many of the responsibilities. Shortly after he passed away, however, her mother's cognitive decline symptoms worsened dramatically. This time, the caregiver role fell squarely on the shoulders of Clark, an only child. Over the past few years she's become a crash-course expert in the ins and outs of paying for the costs of old age, including Medicare, private insurance and prescription supplements. "I could write a book on it, probably," says the Tucker, Georgia-based high school teacher.

One of the most difficult decisions Clark has had to make involved removing her mother, Paula, age 78, from her longtime home and placing her in a memory care facility once it became medically apparent that she couldn't live unsupervised anymore. "You have to go through hospitalization to be officially diagnosed and then to be accepted at a facility," she explains.

Fortunately for Clark, her parents prepared for such circumstances. "My parents worked their whole lives, saved their money," she says. Bills are paid with her mother's retirement income and social security. A portion of the memory care facility fees are also paid by a supplemental Veterans Affairs (VA) payment, since Clark's father served in the United States Navy. Still, the fees are enough to make even the most committed saver quake – Paula's monthly prescription costs run about $200 per month (and that's with an AARP prescription supplemental plan that pays a large chunk), and the memory care facility costs are a whopping $4,300 per month. (The nationwide average is even higher -- at $5,000, though it varies by state.) Then, of course there are the monthly health insurance premiums that are deducted automatically. Paula's income sources cover most of the regular monthly costs, but it's also the norm for Clark to pay out a couple hundred a month from savings to cover extra, unexpected fees.

The best months run like clockwork. But inevitably, extras happen, and that's where it really gets tricky. Paula has had three serious hospitalizations recently, one for a fall and two for pneumonia. Medicare Part A and B, which she subscribes to, covered all the in-patient medical costs. However, once she was discharged and returned to the memory care facility Paula still required constant supervision for her own safety. Such a service is not included in the facility fee, and Medicare doesn't pay for it.

"Nobody watches her, so I'm having to hire people (certified nursing assistants, or CNAs) to come watch her while I'm at work," Clark says. "I've already decided when this happens again I will take my pajamas and work clothes and do it myself." It's easy to understand why she'd go this route next time, as each post-hospitalization period required two weeks' worth of round-the-clock care, at about $800 per week. Do this too often and a person's savings will dwindle pretty quickly.

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Natalie's Story

Natalie Stewart's 82-year-old mother-in-law Marie has lived with her family for 24 years in their Lawrenceville, Georgia, home. Her list of ailments (legally blind, diabetes, chronic kidney disease, broken bones, etc.) runs so long that Stewart and her husband eventually decided that it makes more sense for her to quit her job as an elementary school special education teacher to care for Marie, especially since she requires three days of dialysis every week, and has had multiple hospitalizations.

Marie's health issues started to crop up before she reached retirement age, so she qualified for disability and Medicare earlier than most. At that time, Stewart and her husband helped her select Medicare Part J to help with medical costs. "We picked it way back then because it would cover her prescriptions the most," she says, noting that insulin in particular was the main concern. "It's about a $250 deductible every year and she still pays a couple hundred a month in prescriptions. But considering the overall cost of her prescriptions it's not nearly what she should pay," Stewart explains. She also has supplemental Anthem BCBS coverage thanks to her previous employer. "Medicare was the best (option), but I knew she could get the supplement from her previous employer to fill in the gaps," she says. "Other people I know that don't have it (the private supplement) are paying for things that we aren't paying for."

Despite her physical limitations, Marie remains cognitively sound, and as a result can live at home with Stewart and her husband. "The fact that she can live with us is a huge help. Other people would have to pay out of pocket," she says, noting that Marie's retirement, social security and disability checks cover most expenses not covered by her insurance plans.

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What to Do at Age 65

So far you've heard about a few different Medicare plans and private supplements, but if you're like most people it's borderline painful to understand what's what. The good news is that, if nothing else, the government makes Medicare Part A a no-brainer. "When you turn 65 you're going to be auto-enrolled (in Part A) as long as you have work credits through yourself or a spouse," says Adam Hyers, an insurance broker in the Columbus, Ohio, area specializing in Medicare, noting that Medicare Part A is free, and that a card should be automatically mailed to you. Part A covers a nice array of services, including inpatient hospital care, hospice, lab tests, surgery, home health care and skilled nursing facility, but it falls short in many other areas.

This is where Part B, which covers a wider range of medically necessary services and preventive services, often comes in. These include routine doctor's visits, ambulance services and mental health services. "If you don't have another kind of insurance (such as a private policy purchased via a former employer) you want to enroll in Part B," Hyers says, noting that at age 65 insurance companies stop offering policies to people. Part B does come with a monthly cost that varies depending on income, but the standard amount for 2020 is $144.60 per month, which is often automatically deducted from a person's Social Security check.

Unfortunately, even Part B has some gaps in coverage. "Medicare Part B only covers 80 percent of outpatient expenses, meaning anything outside of a hospital. So, everyone needs a secondary policy to cover the costs, or be prepared to cover 20 percent out of pocket," explains Susan Garcia, a licensed medical social worker (LMSW), who works with elderly adults with chronic health problems, including Stewart's mother-in-law. In terms of a secondary policy, "The best option is to have a retirement health insurance policy from your former employer, but that's fairly uncommon," Garcia says. That's where higher-level Medicare plans, like the Part J plan (no longer available to new enrollees) that Stewart's mother-in-law enjoys, come in to play.

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Breaking it Down

To recap, at age 65, everyone is automatically enrolled in Medicare Part A, which is free, but doesn't cover everything.

People who don't have another private insurance plan (and most people don't), should also enroll in at least Part B. But there's a limited time window (begins three months before a person's 65th birthday, includes their birthday month and then ends three months after that).

"If you don't enroll in Part B – and people make this mistake – then you have to wait for the general open enrollment window," Hyers says, adding that the repercussions of missing the window are significant. "It delays when your Medicare starts and you get a premium penalty of 10 percent for each year missed," and this premium increase is a lifetime penalty. So, fail to sign up for 5 years and you'll pay 50 percent more in premiums per year than those who did sign up on time.

As Garcia noted, even Part B has coverage gaps, so many people who don't also have private insurance choose to purchase additional Medicare plans to cover their bases. As of 2020, the most robust supplemental Medicare plan is Part G, according to Hyers. Part G covers most of the out of pocket costs associated with original Medicare except for the Part B deductible. Part F would cover that but the premiums for F are a lot higher than for G. In any case, F is not available to new retirees as of January 2020.

With 10 supplemental plans (only eight are available to new retirees), how's a person to know which plan to choose? Often, Hyers consults with clients who have a family history of serious diseases. "They might buy up a little bit because of that," he says. However, "You can't time these things out. You have to take advantage of it while you can."

The ideal time for a person to speak with a Medicare professional is during their open enrollment window. "There's no guarantee that you can switch plans later," Hyers cautions. "Open enrollment doesn't guarantee that you can go from lesser to stronger coverage in your supplemental [later on]."

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Medicare Mistakes to Avoid

Not everyone has devoted caregivers like Clark and Stewart looking out for them. Whether you're thinking about Medicare for yourself or somewhere else, take steps to avoid these common mistakes:

  • Talk to somebody. "Don't assume that you know what it all means. If you're not 100 percent sure reach out and talk to people," Hyers. "There's a stigma with insurance agents that we're going to try to sell you something," he explains, adding that agents are well-versed in the subject and can help you. "Explore options and make sure you know how this works in your particular situation." Medicare.gov is also a great resource with lots of information on the various supplements and plans.
  • Never miss a payment. Often, monthly premiums are auto-deducted, which takes the worry out of bill-paying. But not always. "Many people sign up for Medicare and get a supplement, then maybe miss a payment a few years down the road," Garcia says. "The Medicare supplement policy terminates and if they have pre-existing conditions, they can't get a new one and are left with Medicare only for the rest of their lives."
  • Don't forget about your other health needs. "Medicare patients also need a Part D drug plan to cover prescriptions. And none of that covers dental or vision so go ahead and sign up for that too!" Garcia says. "You can see how this is expensive and confusing for people."
  • Don't fall for non-creditable coverage. Some people decline to enroll in Part B because they have creditable coverage, like insurance from a previous employer, the VA or Tricare coverage. However, plenty of people mistake other plans for being creditable, when they actually aren't. "COBRA is another trap," Hyers explains. "People think, 'I've left work, I'll take COBRA and I don't have to enroll in Medicare Part B.' The way the laws are now, that's not the case. COBRA is not necessarily deemed creditable. If you retire you can take COBRA, but you still need to enroll in Part B unless you want to pay these penalties."
  • It's not one size fits all. It's important to realize that the ideal plan scenario for one person isn't suited to someone else. So be sure to thoroughly consider your own needs and budget when figuring out post-retirement health care coverage.

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What Can Medicare Do Better?

Medicare is a saving grace for many people, but like all programs there could be room for improvement. "If the living situation is medically necessary then they need to cover more of that, which would require those facilities to bill in a different way," Clark says. "So their bills should be required to be itemized so that Medicare can pay the part that is medically necessary, like bathing, dressing, toileting, medication management," she says. "At the very least I should be able to claim it on her tax return."

That said, Clark is fully aware that her mother is well cared for thanks in large part to Medicare. "I lived in Ecuador for five years. Medicare has its flaws, however, in some countries there's no Medicare. They don't get the services we get and the family has to figure it out," she says. "I'm grateful for these programs. The government steps in and ensures that each person gets adequate and fair treatment."

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