Government Programs for Uninsurable Chronic Medical Conditions
February 2006
As one with Parkinson's disease, I want to
enlighten those affected by chronic illness about information you need to know
about available government insurance programs. A previous article discussed insurance products and a subsequent article will
provide an in-depth illustration of how to use all these tools to help develop
a long-range insurance plan.
by Jack Hungelmann
Corporate 4
Insurance Agency, Inc.
The following are some currently available government programs that may assist
you in identifying your strategies for protecting yourself against the risks
of major medical bills, long-term disabilities, premature death, and long-term
care expenses.
A long-standing federal law, the Consolidated Omnibus Budget Reconciliation
Act or COBRA, makes it mandatory for employees who work for all but the smallest
employers to be given the option to continue their group insurance upon leaving
the job for whatever reason for certain period of time—typically 18 months—at
the employee’s expense. When your COBRA option ends (or if you're never eligible
for COBRA), you're then eligible to continue coverage under the newer federal
Health Insurance Portability and Accountability Act (HIPAA) law.
This Act provides for continuity of health insurance coverage regardless
of health to age 65. Availability of coverage begins the later of the date your
COBRA options expire or the date your employment ends if not eligible for COBRA.
The decision as to who provides the insurance for this portable product is left
to the individual states. But, regardless of who provides the continuation of
coverage, the guarantee is real. The beautiful part for people with an uninsurable
chronic illness is that the HIPAA law prohibits any exclusions or limitations
for preexisting conditions.
State Health Insurance Pools
Many states offer health insurance for those who medically can’t qualify
in the open market. Minnesota, for example, has the Minnesota Comprehensive
Health Association which guarantees a quality health insurance product to all
Minnesotans who have at least a 6-month residency. The rates are only about
20 percent higher than similar coverage would cost a perfectly healthy person.
The balance of the money needed to fund the claims is paid for with premium
taxes of 2 percent of premiums for the healthy. If you have a chronic illness
and are unable to get health insurance, check with your state insurance department
for the availability of a product like this. If your state does not offer such
a program and you really need the coverage, consider relocating to a state that
does offer a program.
Health Savings Accounts (HSAs)
A federal law effective January 1, 2004, allows people who buy private health
insurance the opportunity to save a significant amount on health insurance costs
(30 to 50 percent) by purchasing a government-approved high deductible health
plan (HDHP) and then prefunding up to 100 percent of the deductible each year
in a savings account where the contributions are 100 percent tax deductible
(much like an IRA contribution). You can use the dollars in your HSA to pay
your deductibles if you need to, but you can also use those dollars to pay for
just about any medical or dental expense that is not covered by your health
plan (i.e., laser eye surgery, alternative medicines, etc.) Any HSA dollars
not spent this year will carry forward into the following years and could become
supplemental retirement dollars. The major advantage of HSAs is that you get
to pay your deductibles and other uninsured medical expenses with before-tax
dollars rather than after-tax dollars.
I particularly like the HSA concept for caregivers who are in good health.
I don’t like it as well for those with chronic illness who are likely to have
enough ongoing medical expenses that meet or exceed the deductible every year.
There's a lot more personal administrative time involved in handling a high
deductible health savings account plan. In my own family, I have a full coverage
type group plan on myself with no paperwork and no administration and virtually
no deductible. On the other hand, my wife, who is in perfect health, recently
switched to an HSA plan with a high deductible health plan and saved, even after
fully funding her HSA, $200 a month—over $2,000 a year—over what she had been
paying before she changed. She doesn't like the paperwork, but she likes the
$2,000 in her pocket!
When they think of Social Security, most people think of retirement benefits.
But Social Security also contains benefits for total disability. However, Social
Security won’t consider you disabled if you can do just about any gainful occupation
or if you can work part-time. That is why people disabled with a chronic illness
who can still work part-time often have difficulty collecting the first time
they apply.
You’re eligible for benefits after 5 months of disability if your total disability
has lasted, or is expected to last, at least 12 months. Every year, Social Security
sends you a statement showing your current benefits if you were to retire or
become disabled. (For more information or to find out the amount of benefits
you have coming if you can't find your statement, go to www.ssa.gov or call toll-free at 800-772-1213 and request a paper copy of your Social Security
statement that will tell you the monthly amount of benefits payable for disability,
retirement, and to your survivors at death. For a good general information book
on Social Security disability benefits, look for publication 05-10029.)
Once you're on Social Security disability benefits for 2 years, you automatically
then become eligible for Medicare as well as eligible for the best Medicare
supplement you can find, regardless of your age. (See the discussions below
on Medicare and Medicare supplements.)
When you sign up for Medicare, be sure to sign up for all three parts: Part
A.—covering hospitalization; Part B.—covering doctors; and Part D.—covering
prescription drugs. Parts A. and B. are purchased directly from Medicare. Part
D. drug coverage is purchased from private insurance companies. I usually recommend
using the same company for the Part D. coverage that you use for your Medicare
supplement policy. Do not agonize over the Part D. decision. If the program
you pick to start isn't working out for you, you can change plans freely annually
on November 15.*
The federal national health insurance program for those age 65 and older
or for those collecting Social Security disability benefits. Eligibility begins
on the first of the month that you turn age 65 or have collected Social Security
disability benefits for 2 years.
The good news is that eligibility is guaranteed regardless of health. The
bad news is that Medicare has at least three significant shortcomings: (1) no
coverage traveling outside the United States or Canada; (2) no coverage for
medical charges that exceed what Medicare will allow (i.e., if Medicare allows
$30,000 toward your $50,000 heart surgery bill, you’re out $20,000); and (3)
a 90-day limit on hospitalization (plus 60 bonus days that can be used once
in a lifetime). All three shortcomings can be covered by a good Medicare supplement
policy. Be wary though. A high percentage of Medicare supplements being sold
on the market do not protect you for all three gaps.
Medicaid
This is a federal program designed to provide health coverage and long-term
care for the poor. A person needing long-term care without long-term care insurance
must first spend down virtually all their assets to minimal “poverty level”
amounts, at which time Medicaid will pick up the care costs for the balance
of the recipient’s lifetime.
This completes the introduction of the government programs. See the March article for examples from my own client
files illustrating how to apply all these programs to the life of a young person
with a chronic illness—in this case Parkinson's—and caregiver.
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