The proposed legislation would establish a state-wide health care system run by a mammoth new bureaucracy, the California Healthcare Agency (CHA).  This new government agency would take the place of all the health insurance companies in the state.  In fact, the bill would outlaw the sale and use of any health insurance, preventing any health insurance company from doing business in California.

Dubbed the “Medicare for All” plan,  the law provides health care benefits for all California residents, based solely on their physical presence in the state.  An enrollment system would ensure that all such people, regardless of their ability to read, speak or comprehend English, understood their right to health care under the new system.   In addition to doctor and hospital coverage, the law would include vision, dental, mental health, and drug benefits.  Incredibly, the bill’s supporters claim it will save money.

The consequences of providing health care to anyone who shows up asking for it should be obvious.  The sickest, neediest people in the U.S. and Mexico, if not the world, will move to California.  All the monies currently spent on health care by the state, and by people and their employers within the state, would be re-directed to run this behemoth.   Instead of buying health insurance premiums to cover their own health care expenses,  residents and their employers will bear the brunt of the burden in extra state taxes to provide health care for everyone.  It doesn’t take a psychic to envision a long line of companies leaving the state.

Supporters of the law say that won’t happen because a state-controlled health care system, an only-game-in-town type health care system, would have the power to exact lower prices from health care providers.  We only have to look at Medicaid, the state-controlled health care system for the poor, to see how this would turn out.  To make health care  ‘affordable’, Medicaid pays health care providers only 56% of the discounted amount Medicare pays.  As a result, Medicaid patients find it difficult to find doctors who’ll accept them.  Consequently, they fill hospital emergency rooms waiting for care or go without health care entirely.  Given no alternative to a single-payer system,  many doctors will either require cash and credit or leave the state.  And there goes your “quality” health care.

Another claim that a public single-payer health insurance plan saves money is based on Medicare’s supposedly small administration costs of 2-3% compared to the 15 – 20% of that of private health insurers.  However, that’s like comparing bananas to cucumbers.  For one thing, many administrative tasks supporting Medicare such as collecting premiums and taxes, accounting, auditing, maintaining facilities, and conducting fraud investigations  are actually conducted by other government agencies and not counted.

Moreover,  Medicare patients are elderly and have much higher patient care costs than private insurers serving the general population.  As a result, administration expenses as a percentage of the much higher total of Medicare costs will be a smaller number, giving a false picture of efficiency.

Actually, referring to SB810 as “Medicare For All”  should have shut this bill down from the start.  Medicare is the biggest driver of the U.S. government’s whopping debt.  This is a fact even though the government collects payroll taxes and monthly premiums from people to pay for it.  How can that happen?  It’s because Medicare benefits cost the government 3 times more than what people contribute.  On top of that, original Medicare doesn’t cover vision and dental expenses.  So how could this “Medicare For All”, aka SB810,  possibly work for California?

Thankfully, a health care and financial disaster was averted; and SB810 was narrowly defeated.  However, it will be introduced again in 2013; and its supporters are already lining up new support.

The Consumer Electronics Show held annually in Las Vegas is the world’s largest consumer technology trade show.  It’s where leading companies announce their latest products and the place you’ll find the interests and products of the future.

A big surprise this year at the show was the booming interest in a relatively new product category:  Health and Fitness.  The participants, products, and display space in that product category more than doubled over last year!  Until recently, the only health related products found anywhere were either aids for the enfeebled or training tools for fitness fanatics.  So what changed since last year?

The big factor driving this trend is the cost of health care.  People are paying more – much more – for their health care this year.  To bring down their costs, employers are offering incentives; encouraging their employees to exercise, manage weight, and lose unhealthy habits.  People are more motivated than ever to take care of themselves and avoid doctors, hospitals and expensive drugs.

United Health Group responded with a huge exhibit display space.    Separate sections were set up to demonstrate tools, online applications, touch screen questionnaires, smart phone apps, exercise devices,  and health programs:  all designed to educate and motivate people to make healthier choices.  Representatives were on hand to promote United Health’s special health insurance policies that reward people for healthy lifestyles.

Much exhibit space in the Health and Fitness area of the show was also given to body monitoring devices.  Once sold solely to avid fitness junkies, these tools are increasingly being sought by average people.  What’s changed is that these devices now do much more than record heart rates.  And unlike the old bulky uncomfortable chest straps, they are worn comfortably on the wrist or waist.  As a result, they stay on all day… and night! They measure steps, stairs, calories, general physical activity and even sleep.  The results are transferred  to your smart phone or PC for analysis and review over time.  Best of all, the cost is reasonable considering their capabilities: $99 – $199.

Basis, a multi-faceted health/fitness monitoring tool, won a coveted Consumer Electronics Show Best of Innovations award.  It’s a watch that accurately computes and collects calories burned, physical activity, heart rate and sleep patterns.  Results are wirelessly transmitted to PC or smart phone.  Striiv and Fitbit are similar tools but they challenge wearers of their products to compare and compete with anonymous groups of people or friends that use the same product.  Body Media, an arm band device, collects 5000 data points a minute including body temperature, sweat level, and heart rate while accurately calculating calories burned!

After perusing all the Health and Fitness exhibits,  I came home from the Consumer Electronics Show and purchased my own FitBit. I’ll report back with my own experiences of wearing a monitoring device 24 hours a day every day (and night).  Is it worth $99?  Will I be more active?  Lose some weight?  Get more sleep?   We’ll see.

Also called primary care, mini, walk-in, or convenient care clinics, retail clinics are located in retail stores, pharmacies and supermarkets.  They’re staffed by nurse practitioners, registered nurses with advanced education and training; and physician assistants, health care professionals licensed to practice medicine under a physician’s supervision.  Although the services provided by retail care clinics form a narrow range, they concern the most common family medical needs:  bronchitis, colds, flu, ear nose & throat infections, preventive care, childhood diseases, headaches, pink-eye, head lice, diarrhea, preventive-care, physicals, lab tests, etc.

The use of retail medical clinics increased  ten-fold between just 2007 and 2009.  A major driver of this increase is cost.  Health care costs are increasing at twice the rate of inflation and employees’ share of company health insurance costs have increased dramatically with higher co-payments and deductibles.  As a result, people are more careful spending their health care dollars.

Retail clinics are responding with big savings in routine primary care. In one example, an earache treated in an emergency room cost $184,  $95 in a doctor’s office,  but only $59 in a retail clinic.  Generally, medical care at a clinic is 30-40% less than a doctor’s office and 80% cheaper than the same medical service delivered in a hospital emergency room.  Physicals, commonly required for schools and athletic programs, cost $25-$49 at a retail clinic but $50-$200 at a doctor’s office.  And unlike most other health care providers, retail clinics post the services they provide and the prices they charge on their web sites.  Moreover, major insurance companies, as well as Medicare and Medicaid, cover most services provided by retail clinics.  Retail clinic coverage by Aetna, alone, increased ten-fold between 2007-2009 in a study conducted by the American Journal of Managed Care.

If you or your child wake up Sunday morning with an ear ache or you sprain your ankle playing flag football Saturday afternoon, a doctor appointment is not an option; but a visit to a retail clinic is.  They’re open 12 hours a day, 7 days a week, a god-send when your doctor is not available.  In most cases, there are no long waits and walk-ins are accepted.  The alternative is a trip to the hospital and an average 4 hour wait in the emergency room.

One of the reasons  retail clinics can run so efficiently is their limited  focus on just non-emergency primary care.  They’re not staffed or outfitted to treat concussions, broken bones, or heart attacks.  In fact, they will refer you to another care facility if there’s a temperature of over 103; and they won’t treat babies under 18 months old.

But what they do cover fills such a need that there are now more than 1250 retail primary care clinics throughout the U.S. from just 175 in 2006.  2/3s of these are in drug stores; the remainder in retail settings such as Wallmart, Target, and major super markets.  Minute Clinics, located in CVS drugstores, is the largest chain of primary care clinics with over 600 in 24 states.  According to the experts, retail clinics will continue to increase their presence on the medical provider scene.  In fact, Minute Clinics and Wallgreen’s Take Care Clinics have seen double-digit. growth this past year; and CVS expansion-plans call for 450 more clinics by 2015.

A recent survey by the Deloitte Center for Health Solutions of health care consumers found that, once given information about these primary care clinics,  half of those interviewed would be receptive to using retail clinics for primary non-emergency medical care.  Furthermore, respondents felt comfortable being treated by nurse practitioners and physician assistants.  Interestingly, those having higher incomes, $59,000 and up, were the most open to being treated at a retail clinic.

It’s no surprise that primary care physicians see retail clinics as competitors.  Citing the fact that clinics often operate without a physician in attendance, the American Medical Association has chastised insurance companies that encourage the use of retail clinics with reduced or eliminated co-pays.  However, the rising cost of medical care has already loosened the steel grip of doctors and all things medical.  Recently, pharmacists were given leeway to administer vaccinations; and nurse practitioners have, for some time now, been licensed to conduct examinations, treat illnesses, conduct tests, and write prescriptions.  Similarly, for the last 35 years physician assistants have been authorized  to set bones, conduct x-rays, interpret laboratory tests, and perform the basic tasks required of any primary doctor.  The cost-savings of seeing these medical professionals, when appropriate, is making the practice wide-spread.

If retail clinics seem like a viable medical care option for you, check them out now, before you need one.  Southern California is the home of several CVS Minute Clinics.  And other retail clinics can be found on Google or in the phone book.  Check their websites or, better yet, visit them yourself and ask for a tour.  In either case, get answers to these questions:

• What are their hours?
• What services do they and don’t they offer?
• Do they accept your health insurance?
• How are they staffed?
• Do they accept walk-ins/appointments?

Retail clinics aren’t the only options available when you need medical attention and a doctor is not available.  We’ll look at the others in future blogs.

The national rate of cesarean births was just 4.5% in 1965.  Today, it’s over 30%,  The National Center for Health Statistics found,  in a recent study, that surgical delivery of babies jumped 50% since 1996.  This dramatic increase raises the risk of all the complications associated with c-sections:  infection, surgical injury, blood clots, adhesion formation, serious problems in future pregnancies, and placental implantation issues  among others.  Babies not delivered naturally have a higher incidence of respiratory problems.  Ominously, a committee investigating the increase of pregnancy related deaths over the last decade cited the increase in cesarean births as a major contributor.  Given these odds would prospective mothers knowingly undergo a c-section without a good medical reason?  If not, then what’s behind the dramatic increase?

One popular argument is simply that more women are requesting c-sections over a vaginal birth or that wealthy women in particular would want them.  But studies investigating the increasing numbers  of c-sections disprove this.  Also, in hospitals located just miles from each other, the rate of c-sections over natural births varies widely, from 9% to 47%.   In another study, of the 5 hospitals in California with the highest rate of C-sections, 4 are found in the poorest parts of Los Angeles County where African-Americans and Hispanic populations are among the highest in the state.

Evolving factors could account for more c-sections being medically warranted.  These include more older women having babies, more multiple births because of  in-vitro fertilization and higher obesity rates.  However, higher numbers of cesarean births are occurring across all age groups, ethnicities, economic levels, and geographic areas.  Moreover, it doesn’t explain why hospitals serving the same population have such a wide difference, 9% vs 47%, in percentage of cesarean births.

Several studies point to a surprising answer.  After reviewing the data, the California Maternal Quality Care Collaborative sees this large disparity is due to staffing,  management practices, and standards favoring c-sections in hospitals having the highest percentages.  One practice, in particular, leads to c-sections.  A large study  published last year in the journal Obstetrics & Gynecology shows that fully 44% of women who expected normal delivery had their labor induced.  A high percentage of these were done at the beginning or before labor began.  Births by these women resulted in twice as many c-sections as those from normal labor.  Furthermore,  the study showed that significant numbers of  c-section deliveries unrelated to inducement were initiated  before labor was under way.   Why would such a pattern of early inducements and c-sections take place?

To begin with, in contrast to cesarean deliveries, natural births are unpredictable, making them, often times, inconvenient.  Even after labor has started, there are few clues indicating how long it will last.  It could be just 30 minutes or many hours.  Complications can come as a surprise as well.  As a result, a hospital must be staffed and equipped and the doctor on hand to handle what ever happens, when ever it happens.  In contrast C-sections are deliberative and more or less the same in most situations.  They’re over in 15-30 minutes.  Staffing and facilities and schedules can be more efficiently, and profitably, managed.

According to a California Watch study,  hospitals can, indeed, be run more profitably by scheduling c-sections instead of natural births.  Because surgery is involved and the patient and baby must remain under care longer, they can charge more.  The Pacific Business Group on Health estimates that hospital revenue is increased  82% by each surgical delivery.

There’s a reason this phenomenal rise in c-sections started in 1996.  It’s in 1996 that the federal government mandated that all employers in the U.S. offering health insurance benefits must include maternity coverage.  In addition 22 states, including California require that all  health insurance policies cover maternity costs.  Medicaid, the health insurance for the poor now covers c-sections in most states, as well.

Because of the sudden affordability, cesarean deliveries have become more acceptable despite the risks. The cost of such a delivery is no longer  part of the conversation and few people challenge a doctor or hospital’s judgment in the matter.  The result today is that 1 in 3 births are surgical.  We not only pay for this with higher health insurance costs, our state and federal taxes are also higher because of Medicaid covered c-sections.  Incredibly, in  California, one half of all births are covered by Medi-Cal.  As  a result, the number of increased cesarean births there cost California taxpayers an estimated $240 million in 2011 alone.

Although many parties are aware of this problem, few have offered substantive ideas other than education to change the continuing rise of cesarean births.

These facts became dramatically clear to me when a friend reported that her husband’s out-of-pocket cost under his current 2011 Medicare Part D plan would more than double in 2012.  Assuming his prescriptions remain the same, they would be paying $2991 instead of the $1140 they paid in 2011.  Last month when his current plan’s Notice of Change came in the mail, my friend and her husband noted the premium’s change from $52 to $62. At first, they accepted this as reasonable.  After all, they were happy with the plan.  It satisfied his needs and the network pharmacies were convenient.  Moreover, the plan hadn’t changed in the 3 years that he had coverage.  Luckily, however,  an online newsletter called my friend’s attention to the big changes many drug plans were making to their formularies, the listing of the drugs each plan covers.

The Medicare Part D drug plan finder web site is a relatively easy place to check and compare drug plans and their formularies; and that is where my friend and her husband went to determine if his drug plan still worked for them.  As directed by the plan finder, they entered his Medicare information, his current medications, and their zip code.  The site first presented them with their current drug plan and then all the other drug plans offered in their area.  Each plan’s premiums, deductibles, and the cost of the drugs that had been entered by my friend and her husband were listed along with a customer satisfaction rating.

With the plan finder, they were able to make a side-by-side comparison between the current drug plan and the other plans available.  They discovered that, not only was the premium of the current drug plan higher than the other plans, the drugs most needed were no longer listed in the plan’s formulary.  As a result, they were able to find a much cheaper plan with the same participating pharmacies and a higher rating than the current drug plan.  Next year, my friend’s husband’s drug costs, given the same medications, should total $664.80.  This is almost half of what they paid this year and four and a half times less than what they would have paid if they had stayed with the same plan!

Seniors with Medicare Part D coverage have until midnight, December 7 to make sure they’re covered by the best possible drug plan.   In making that choice it’s important to not to focus solely on a plan’s monthly premium.  Each drug insurance plan has a different drug cost structure and the premium is just one part of the costs involved.    Independently of each other, insurance companies negotiate with drug manufacturers for discounts on drugs deemed effective in treating given problem areas.  These are then labeled as “preferred” drugs.  Both brand-name and generic drugs are designated by each plan as “preferred” or “non-preferred” and assigned a 1-6 tier level according to cost.  All drugs covered are listed  in alphabet order in each plan’s Drug Formulary.  No plan covers all 2,300 of Medicare-approved drugs.  Of these, 80% is the most any plan covers and some cover less than half of the total.  This being the case, the best plan will be different from person to person depending on their drug needs; and unless the necessary drugs are covered in the top tiers,  the plan with the cheapest premium may end up the most expensive.

Another important factor in choosing a good drug plan is the deductible.  Over half of the plans require that beneficiaries pay a specific out-of-pocket amount ($320 is the maximum deductible allowed) before plan coverage kicks in.  However, the Medicare plan finder lays out the estimated costs month by month making it relatively easy to judge the effect of  a deductible on the total cost.

For many, the location of convenient network pharmacies is another important element in their decision making.   For this, the Medicare drug plan finder web site lists each plan’s participating pharmacies.

People whose drug costs, during the year, exceed $2930 fall into the Medicare Part D coverage gap which is another factor to consider.  Normally, they are expected to cover their own drug costs until those costs reach $6658, after which coverage is resumed.   A few plans offer a degree of coverage for people in the gap; and this may provide some relief assuming other costs in the plan aren’t a lot higher.  Starting in 2012, brand name drugs in the gap will be discounted by 50% and generics by 14%  so gap coverage is becoming less of an issue.

If people take no action, they will be automatically re-enrolled in their old plan for the next year.  This year’s deadline for enrolling in a different plan has been accelerated from December 31 to December 7th so that drug companies have more time to process new enrollees before January 1 when the 2012 plans take effect.  Unfortunately, that change, coupled with the greater-than-usual plan changes, makes it more probable that people will be left unhappy with their Medicare Plan D drug plan.

I never gave Medicare Advantage much thought until another couple at a dinner party we attended last summer raved about their Medical Advantage plan amidst others’ complaints about health care insurance and benefits.  On investigation, I learned Medicare Advantage is quite popular.  Since 2005, enrollment in Medicare Advantage plans has risen every year.  One in four people on Medicare are in Medicare Advantage; and in California, the ratio is one in three! Altogether, 11.7 million people in the U.S.  have enrolled in 3,900 Medicare Advantage plans.

Unlike original Medicare, Medicare Advantage health insurance plans are offered by private insurance companies.  They’ve been Medicare certified to offer all the benefits that Medicare Parts A and B offers.  Why is this form of Medicare (officially called Medicare Part C) so popular?  For one thing, unlike original Medicare, many Medicare Advantage plans offer vision, hearing and dental benefits.  Some even offer fitness club discounts and access to wellness centers.  Almost all of them include a drug benefit similar to Medicare Part D as well.  If you’re in Medicare Advantage, you won’t need to buy a Medicare supplement or Medicare ‘gap’ insurance.

Medicare Advantage plans also come in several forms:

Health Maintenance Organizations (HMOs)
Preferred Provider Organizations (PPOs)
Medical Savings Accounts (MSAs)
Private Fee for Service (PFFS)
Special Needs Plans (SNPs)

Most operate as a closed network requiring members to see network-specific doctors and hospitals.  There is, in fact, a cost penalty to see an outside doctor unless it’s an emergency.  The HMO plans are more restrictive in this regard than the PPO plans.  Another type of plan, the MSAs, deposits money into special savings accounts to be accessed for the beneficiary’s every-day medical needs.  These dollars will then roll over into the next year if they’re not used.  Expensive medical care in this type of insurance plan is paid by the plan after a deductible is met.  However, most Medical Advantage plans are in the form of HMOs.  They constitute 65% of the total with PPOs following at 19%.

Many might object to a system that limits their choice of doctors to those in a network.  This would be especially true if a favorite doctor wasn’t in a HMO or PPO network.  Another drawback some see is that Medical Advantage networks often require patients to see a referring physician before they can see a specialist.  But many seniors aren’t deterred by these limitations.  Instead, they see this as an advantage with  all the health providers involved sharing the patients’ medical information and coordinating medical decisions.  Studies of various health organizations shows that this approach does, in fact, result in fewer errors and better health outcomes as well as fewer unnecessary hospitalizations and re-admissions than the usual silo system.

Medicare Advantage members pay the Medicare Part B premiums; but they don’t buy a Medicare Supplement or Medicare ‘gap’ plan.   The additional cost of a Medicare Advantage plan differs from plan to plan.  Each may or may not charge a premium, have high or low deductibles, require co-payments or charge extra for special benefits.  Each plan has to be evaluated to determine which will provide the most value.

90% of people enrolled in original Medicare also purchase supplemental health insurance to cover what Medicare doesn’t.  This is an example of a “Pay Now” system in which you pay ahead for benefits you may or may not use.  With most Medicare Advantage plans, on the other hand, you pay out as you use the benefits through deductibles, co-payments, or extra charges for special benefits, making these plans “Pay Later” systems.  There’s another difference between the two Medicare coverage options:  Medicare Advantage, unlike original Medicare,  provides beneficiaries an annual ‘cap’ on their expenditures.  For 2012, this ranges from $3,400 to $6,700.  This means that, worst case, you’ll never pay more than that out-of-pocket.

To make selecting a plan easier, Medicare Advantage plans have each been rated 1 to 5 stars based on patient satisfaction, best practices, healthy outcomes, efficiency and management.  This year, plans achieving 3, 4, or 5 stars will receive bonuses from Medicare that must be used to enhance plan benefits, thereby making them more attractive to prospective members.  That said, the number of stars should not be your only criterion for considering a plan.  Instead, check the Summary of Benefits for the plan’s offered services and payments.  If you don’t want to leave your favorite doctor, make sure he’s in the plan’s Providers Directory.  Finally, check the plan’s Drug Formulary to make sure your drugs are available and affordable through the plan.

Obviously, given all the options available, it isn’t easy to decide which Medicare Advantage plan fits your needs or whether any Medicare Advantage plan is in your best interests.  Plan information, including the star ratings, is available at the Medicare.gov website.  However, your best bet would be to talk to a health insurance agent specializing in Medicare who can ask you the relevant questions that will guide your decision.

The good news is that, although Dec. 7 is the deadline for your decision, if you change your mind or are unhappy with your Medicare Advantage plan you can move back into original Medicare anytime between Jan. 1 and Feb. 14.  And you can change to any 5 star Medical Advantage plan in your area any time during the year!

Long-term care refers to the services required to care for people unable to care for themselves:  maintaining personal cleanliness, feeding oneself, dressing oneself, preparing meals, transportation, etc.  Depending on the degree of disability, these are services performed by visiting nurses, adult day care ‘sitters’, home services, assisted living facilities and/or nursing homes.  This all comes at a price.

A 2011 survey of long-term care prices by Met Life Mature Market Institute reported a 4.5% increase in the cost of long-term care in just this last year.  Today, according to the survey, a semi-private nursing home room averages $6420 a month, an assisted living apartment, $3477 a month and adult day care services, $70 a day.   Long-term care is now the fastest growing category of health care spending.

That’s no wonder!  The “oldest old” is the fastest growing segment of our population according to the U.S. Census Bureau.  Today the chances are far greater that a family will face long-term care and the huge costs that come with it.  The Department of Health and Human Services (HHS), in fact, sees 40% of today’s 65 year olds can expect to enter a nursing home sometime during their life times with 10% facing a 5 year stay!

Right now, almost 1/2 of all the people now in nursing homes are covered by Medicaid,  a joint state and federal program to help the poor with medical expenses.  To qualify for Medicaid benefits, an individual’s income and assets must meet certain state poverty guidelines.  However, the equity invested in a person’s home, if it meets certain limits, can be exempt from the calculation if the individuals or their spouses remain in the home or plan on returning to it after recuperation.  $500,000 is the most amount of equity most states allow one to have in their home and still qualify for Medicaid.  However,  California is among the few that allow $750,000 as the limit, widening the window for some middle-income people.

People over the home equity limit, however, have other options, assuming their other income and assets are below Medicaid’s maximums allowed.  Reverse mortgages allow a people to draw down specific monthly amounts against their home equity.  Payback doesn’t occur until the house is sold, allowing the infirm and their spouses to keep their home in the meantime.  The monthly reverse-mortgage checks can help finance long-term care needs until the home’s equity falls below the requisite $500,000 or $750,000 limit.  At that point,  Medicaid can take over long-term care coverage.

There’s another option that middle income people can consider.  California is one of several states that participates in Partnership for Long-Term Care, a program that gives people credit for purchasing long-term care insurance.   Most long-term care policies pay a fixed benefit amount on a daily, weekly, or monthly basis.  The benefit is a reimbursement of actual expenses and can be applied toward  in-home services, special enabling-devices or equipment, and assisted-living or nursing home facilities.

If the policy holder in the Partnership for Long-Term Care program is unfortunate enough to reach the time or amount limit stated in the insurance plan, the total value of the policy is deducted from the assets used to determine Medicaid eligibility.  Thus, a policy paying $150,000 in benefits, for example, will allow the policy holder to shelter $150,000 and still qualify for Medicaid.

Both the Internal Revenue Service and California Franchise Tax Board offer some tax relief for long-term care expenses.  Both allow long-term care expenses to be treated as medical expenses in tax reporting.  Both also allow individual taxpayers to treat premiums paid for tax-qualified long-term care insurance as a personal medical expense as well.  The maximum deduction allowed, adjusted for age, goes up to $4,240 for policy holders over 70.  California also allows a $500 tax credit to be taken on a sliding scale when long-term care exceeds 180 days and the person’s adjusted gross income does not exceed $100,000.

These are some of the strategies that, while they don’t solve the problem of long-term care finances, can help soften the blow.  But the best solution would be for more middle-class individuals to purchase long-term care insurance when they are young and healthy, making insurance premiums affordable and long-term care support available when they need it.   Certainly, offering tax incentives for this type of insurance would be a substantial cost saving for the government as well as for the families involved.  In the meantime, no one should forget the free health insurance policy: maintaining a healthy active life style to ward off the chronic health problems that so often necessitate long-term care in the first place.

Long-term care is defined as helping aged or disabled people with personal tasks like cooking, bathing, cleaning, feeding, shopping, toileting, and dressing.  The costs for long-term care vary depending on the service required but they add up fast; and if a full-time nursing facility is called for, the cost can be catastrophic.  Sad stories abound.  A recent New York Times article tells the story of a 61 year old Ohio resident whose wife was diagnosed with early-Alzheimer’s.  When she could no longer be cared for at home, she was moved into a nursing facility – the same one housing  her own aged parents.  The cost of her care, $7000 a month, is certain to rise as her disability worsens; and her husband fears there will be nothing left of their assets when he will need them.

Years ago the task of caring for the chronically ill fell to their families.  My mother had tuberculosis and died when she was only 30 leaving 3 children 10, 8, and 2 years old.  It was my grandmother who came to live with us and cared for us all, allowing my dad to continue working at his odd-hours job.   The idea then of someone being sent to “a home” was something dreadful.  It was a mark of either uncaring families or truly devastating circumstances.   But today’s far-flung families, broken marriages, working women, and the sheer number of people who need some degree of daily help make long-term care the new reality.

Unfortunately, it’s a reality remarkably few people are ready to face.  I was at a party last weekend when the subject came up.  The hostess, an active 70 year old,  related that after she had nursed her late husband through a long debilitating illness, she looked into long-term care insurance for her self.  “It’s too expensive!” she exclaimed and then joked, “I guess if my kids can’t take care of me, they’ll have to take me out and shoot me.”  All kidding aside, she’s decided to take her chances that she won’t end up like her husband.

10 years ago, when she was 73, my friend Dorothy had a similar experience.  She also looked into long-term care insurance after caring for her late husband during his long battle with lung cancer.  Of the two insurance companies she talked to, one declined her application because of a bout she had with cancer 10 years before; but the other offered her a policy for $4300 a year.  With it, she would be covered for daily expenses at a nursing facility or home care for a life-time limit of $131,400.  To cover the cost for the first couple of years, she asked her family to help pay for it in lieu of birthday and holiday gifts.  (“At my age, I don’t need anything else, she explained”)  After she moved into a smaller home, she was able to budget the amount into her own modest retirement income.  This inspired her daughter, Anne, to apply for her own long-term care insurance.  Because Anne is younger and healthy, she can expect to spend much less for her policy.

Long-term care insurance premiums depend on age, health, benefits, and length of time the policy-holder will wait before benefits can begin.  The deductible period (initial period of long-term care that is covered solely by the policy holder) and the presence of inflation-protection are other features that affect the premium price.

Most long-term care policies pay a fixed benefit amount on a daily, weekly, or monthly basis.  The benefit is a reimbursement of actual expenses and can be applied toward  in-home services, special enabling-devices or equipment, and assisted-living or nursing home facilities.  Insurance shoppers should look for policies that are “tax-qualified.”  Benefits from these plans are not taxable as income.  Once purchased, a policy can be returned in 30 days with any money spent refunded.

The Department of Health and Human Services predicts that 40% of the 65 year olds living today will require a nursing facility sometime during their lifetime.  10% of these will stay 5 years or more.  Most of us don’t think twice about purchasing house or car insurance to cover the risk of severe financial loss.  How is long-term care insurance any different?   It’s the one major health expense for which nearly all Americans are uninsured.  Less than 3% of Americans carry long-term care insurance despite the increasing odds of living longer and eventually requiring help with daily living tasks.

A tax incentive might help encourage more people to purchase this insurance; but expecting another government CLASS act is not in the cards given the enormous debt obligation we’re already facing.   This is one problem we as individuals and families need to be responsible for solving ourselves.

Long-term care (LTC) is defined by insurers as assisting individuals who are unable to perform “Activities of Daily Living” (ADLs) such as bathing, dressing, moving about, eating, toileting, continence, procuring necessary items, and cleaning.  It might involve visiting nurses, health aids, transportation, home delivered meals, chore services, and adult day care.  Such services take place as needed in a person’s home or in an assisted-living arrangement or nursing facility.  Strictly speaking, medical treatment expenses are not covered under LTC policies.

Long-term care is becoming an urgent issue.  Right now, people over age 85 are part of the largest growing population segment.  It is estimated that 55% of them will require some degree of long-term care services in their lifetime.  The Center for Retirement Research at Boston College says 1/3 of people turning 65 this year will need at least 3 months of nursing home care sometime during their lives.  10% will stay there 5 years or longer!  Expenses for long-term care services varies. One year in a nursing home averages $50,000.  Assisted living arrangements are averaging $2000 a month and in-home assistants coming 3 times a week for a couple of hours can cost $1000 a month. And these costs can total much more in some areas.  How many of us can bear this expense?

The Community Living Assistance Services and Support (CLASS) program was to be a government insurance program for working people that would provide a daily cash benefit of $50 to cover long-term care needs in the event beneficiaries became incapable of caring for themselves for more than 90 days.  Participants would become vested after 5 years of making payments.  Premium costs would be determined solely on the worker’s age at time of sign-up.  Pre-existing conditions, poor health or unhealthy habits or living conditions would have no bearing.  No one would be turned away.

In the real world, the cost of insurance premiums is based on the probability of how much will be paid out in benefits given the pool of people participating in the insurance plan.  Premiums paid for by healthy people cover the cost of care required by those less fortunate, making the cost of insurance affordable for everyone.  Unfortunately, private actuaries as well as the Health and Human Services (HHS) own staff deemed CLASS financially unsustainable because it would draw a preponderance of people with pre-existing conditions and general poor health.  This would drive the premium cost up, making the plan overly expensive.  Healthy people would turn away or buy cheaper private insurance. As written, the law required the program to be self-sustainable; and so, when HHS couldn’t find a way to implement it that would guarantee its financial stability, it was cancelled.  Families facing a possible future of caring for disabled and elderly members will have to look elsewhere for help.

How are people with long-term care needs cared for now?  Medicare only covers medical costs for the elderly and limits long-term care to a short after-hospitalization period.  However, Medicaid, the state/national program providing medical care for the poor and disabled, does cover long-term care services.  In fact, today, Medicaid pays more than 40% of all nursing home costs.  Long-term care on all levels has become the single largest component of Medicaid, making up 1/3 of its reimbursements.

In the past, adult children, faced with their parents’ declining capacities, have sheltered their parents’ assets making them compliant with Medicaid’s  poverty standard.  However, states struggling with exploding Medicaid costs are making such moves more difficult.  Additionally, the current recession has forced states to cut back services and reduce already low reimbursements to long-term care facilities.  As a result, fewer and more spare facilities are available to all people under Medicaid.

Right now, only 2.8% of Americans have long-term care insurance coverage. The government’s already whopping outlay for entitlements and the coming deluge of aging baby boomers needing assistance make for a perfect storm unless we start thinking more seriously about how we’re going to cover the expense of long-term care.  Our next blog will look at possible options.

The scariest one is the Independent Payment Advisory Board (IPAB) found in section 3403 of the PPACA.  It’s a 15 member panel appointed by the president and commissioned to work full time to keep Medicare spending under a certain level.  However, its approach is largely limited to reducing reimbursements to medical service providers starting with physicians and later extending the reductions to hospitals and other facilities.

Every year, if Medicare costs are too high, the panel will submit a reduction plan.  Congress has to agree or pass by a  challenging 3/4 majority a plan of their own that accomplishes the same objective.  If this can’t be done within a certain period,  the reductions proposed by IPAB automatically take place without the chance of even a President’s veto. These conditions make it nearly impossible to challenge any IPAB proposal, effectively making IPAB an autonomous un-elected legislative body and stripping Congress of its authority over Medicare expenses

Richard Foster, Medicare’s respected actuary, has testified that reducing physician payments to the extent proposed would force doctors to do more with less money or quit Medicare practice altogether thereby substantially reducing seniors’ access to care.  He estimates that hospitals would also become unprofitable further endangering the health-care-scene for seniors.

IPAB is a cowardly way to cut the Medicare budget.  A group of largely anonymous bureaucrats unaccountable to no one will do the dirty work allowing legislators to escape blame for reducing seniors’ health benefits.

It doesn’t stop there.  Another way the PPACA plans to save Medicare dollars and reduce benefits is by having members obtain health care through Accountable Care Organizations (ACOs) instead of independent doctors of their own choosing.

ACOs are groups of medical personnel working together with various medical facilities.  (hospitals, clinics, labs)  that, under rules developed by Medicare, will provide integrated care for patients.  Because all the medical services provided in the ACO share the same patient information, fewer mistakes and better diagnosis are made.  Physicians working for the ACO are salaried and their time is managed by the ACO so there is no incentive to add extra visits, tests, or procedures as there is in the usual, fee-for-service system.  To control costs, Medicare will collect patient data to evaluate patient treatment and reward what they see as good, cost effective results.

The program will begin in 2012.  As ACOs become Medicare-certified, seniors will be assigned to one in their area.  Incentives will be offered to encourage seniors to join but, initially, it won’t be mandatory.

It sounds like a good idea.  Shared patient information, integrated care, lower cost, an end to unnecessary services.  What’s not to like??  Well, for starters your ACO primary doctor will recommend the ACO heart doctor when one is needed, not the acclaimed but more expensive independent heart specialist.  Expensive treatments will count against the total amount spend on a patient.  As a result, your ACO doctor will think twice before ordering one for you.  In fact, the latest technologies and procedures, in general, will not be considered unless they’re on a government approved list.  (This is also covered in another PPACA provision, the Patient-Centered Outcomes Research Institute (PCORI) which will control what treatments all doctors can use.)

Another benefit-limiting provision of the PPACA is called value based purchasing which will effect all physicians, ACO-based or not.  Medicare will evaluate physicians’ costs in treating patients compared to their peers.  To keep from being penalized, doctors will soon avoid treating patients requiring more expensive treatments or avoid more costly but effective treatments in general.

In an another example of government micromanaging medical treatment, the PPACA is paying particular attention to what they see as the overuse of imaging.  All doctors will be allowed only a limited number of advanced diagnostic imaging,  CT/MRI scans , on an individual regardless of the severity of injuries or disease or face more penalties.

These and other PPACA changes to Medicare are being readied for roll-out.  People’s fears about any future legislation that will reduce their Medicare benefits are misplaced.  It’s what’s in a law that has already passed that should be looked into.  Perhaps as people become more aware of what’s in store for them under the PPACA, they may be more open to consider more seriously the Medicare reform options being discussed today.