Expert Commentary

Government Programs for Uninsurable Chronic Medical Conditions

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.


Personal Risk Management
February 2006

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.

COBRA

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.

HIPAA

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!

Social Security Disability Benefits

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.*

Medicare

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.


*If you are still working at age 65, and are covered for health insurance by an employer's group health insurance program, take only Medicare Part A. and defer Parts B. and D. until you retire and lose your group coverage.


Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

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