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CHAPTER 9

Health and Disability Insurance

Pssst. Here are a few words to the wise: Don’t Get Sick.

More Americans Wanted the Health Care Bill to Do More

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Health Care Costs

  • The United States has the highest per capita medical expenditures of any industrialized country in the world
    • Predicted amount over $13,493 per person in 2022
    • This amount is over twice as much as the average for the 24 industrialized countries in Europe and North America
    • 6% of the GDP in 1965, but expenditures rose to over 17.3% of our GDP in 2022 – $4.007 trillion!
      • And it is still growing − 20% by 2032?
        • One-fifth of our economy will be health care

More Than 70% of Americans Feel Failed by the Health Care System

Time Magazine

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Why Does Healthcare Cost So Much?

  • Use of sophisticated, expensive technologies
  • Duplication of tests and technologies
  • Increases in the variety and frequency of treatments
  • High administrative costs – Insurance companies!
    • 26% of health care dollar vs. 1% in Canada
  • Increasing number and longevity of elderly people
    • From ages 60 to 70, the average person uses more healthcare resources than they did from ages 0 to 59

These are the most significant reasons, especially the last two reasons. Malpractice insurance is often used as a scapegoat for spiraling costs but it is a very small amount except in some areas of healthcare such as obstetrics and gynecology.

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What is Being Done About the High Costs of Health Care?

  • Careful review of fees and charges
  • Establish incentives for...
    • Preventive care
    • Services provided out of the hospital where medically acceptable
  • Community health education programs to get people to take better care of themselves
    • Preventive care is almost always cheaper than allopathic care once the patient is sick
  • Medical “vacations”
    • 750,000 in 2007; 1.8 million in 2023 from the U.S.

The real answer to this question is, “Not much.”

Are you willing to forego your medical care?

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Which Would You Choose?

You are 34 years old and have been smoking cigarettes for 20 years. Recently, you have been experiencing severe abdominal pain and a nagging cough. You go to your family doctor who sends you immediately to the hospital. After a few tests, the specialist asks you to sit down with her and tells you that you have stage 4 lung cancer that has spread to your liver and spine. She tells you that you probably have three to six months to live. She gives you two choices:

Choice 1: You decide to forego radical treatment. Instead, you are given pain medication and placed in hospice care after two months. Your chances of living 5 years are 1 in 1,000.

You die in four months.

Choice 2: You decide to undergo radical treatment. You have surgery, radiation treatment, and several rounds of chemotherapy. Your chances of living 5 years are 1 in 85. You die in nine months.

Total cost: $95,000

Total cost: $1,450,000

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And That’s Not All…

  • The average cost per diabetes patient is $12,022 for the diabetes, $19,736 for all health costs
  • Post-traumatic stress syndrome? $18,640 per year
  • Cystic fibrosis? $15,571 per year
  • Liver transplant? $878,400

1% of patients use 22% of the medical resources. 5% use 50%. 1/3 of all Medicare dollars are spent in the last year of life. What can we do about these costs?

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  • In 2008, while then-Senator Obama was campaigning for the Presidency and making health care his primary focus, his grandmother was dying
    • He saw the heroic and costly efforts that were being used to keep her alive for an extra few months
  • Along with his campaign promises to rein in health care costs, he floated the idea of giving Medicare patients in the last few months of life information about options such as hospice care
    • His political opponents quickly accused him of wanting to create death panels

To this day, a large number of people still believe that the Affordable Health Act contains death panels

http://www.theguardian.com/commentisfree/2013/oct/01/healthcare-obamacare-affordable-care-act

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The Affordable Care Act

  • aka Obamacare, Romneycare
    • Originally proposed by the Heritage Foundation
      • A conservative think tank group
      • Implemented by Mitt Romney in Massachusetts in 2006
    • Create large health insurance “exchanges”
    • Create a health insurance mandate
      • Encouraging the young and healthy to have insurance to help pay for the older and sicker members of society
    • People can not be denied insurance because of pre-existing conditions

Romneycare worked well in Massachusetts as 98% of people are now insured. Is Obamacare, the Affordable Care Act, working on a national level? For many years, the news was filled with the cries of the Republicans in Congress who would do anything, including shutting down the government and defaulting on the debt, to overturn it.

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How Can You Reduce Your �Personal Health Care Costs?

“Yeah, sure, Mom. Right.”

Do financial health and medical health have any correlation? Yes!

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Health Insurance and �Financial Planning

  • Health insurance alleviates the financial burdens people suffer due to illness or injury
    • Part of your overall risk management plan to safeguard your family’s economic security
    • A week in the hospital can literally kill you (financially, that is)
  • 26 million Americans have no health insurance
    • Two-thirds are full-time workers and their families
    • Older college students can now be covered by their parent’s policy until age 26 under the Affordable Care Act

This number is a new low and was made possible by the two major bills of the last few years hammered out by the Democrats and President Biden. Why don’t we hear more about this? I guess outrage over Critical Race Theory is more important to the news outlets.

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Types of Health Care Coverages

  • Comprehensive major medical insurance
    • Low or high deductible offered without a separate, basic plan
  • Hospital indemnity
    • Pays a fixed amount for each day you are in a hospital
      • Cheap but not very useful
  • Dread disease and cancer insurance policies
    • Focus on unrealistic fears, and only pay out for very specific conditions
    • Often sold by people working on commission
      • Expensive and not very useful

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Types of Health Care Coverages

  • Dental expense insurance
    • Group coverage for exams, cleaning, �x-rays, fillings, oral surgery
  • Vision care
    • Some group plans include exams and glasses
  • Long-term care insurance
    • Virtually unknown 20 years ago, but now is growing faster than any other form of insurance
    • Oversold, especially to younger adults who could easily start an investment plan to self-insure their long-term care

(continued)

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A Good Health Insurance Plan Should…

  • Offer basic coverage for hospital and doctor bills
  • Pay at least 80% of out-of-hospital expenses after the yearly deductible is met
  • Limit your out-of-pocket expenses to no more than $5,000 to $8,000 in a year, excluding dental, optical and prescription costs – aka “stop-loss”

The Affordable Care Act removed the typical $1 million restriction and the typical one-year pre-existing exclusion for health insurance. When Americans are asked if they like the provisions of the Affordable Care Act (without naming the law or referring to Obama), they overwhelmingly say, “Yes.” When they are asked if they like Obamacare, they overwhelmingly say, “No!”

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Sources of Health Insurance and Health Care

  • Group plans comprise close to 90% of all health insurance issued – “An ‘accident’ of history…”
    • Most group plans are employer sponsored, and the employer pays part or most of the cost
    • The Health Insurance Portability and Accountability Act (HIPAA) provides some protection
      • If you changes jobs you need not lose your health insurance
  • Individual health insurance policy
    • Typically (but not always) cost more than group policies
  • Affordable Care Act Health Insurance Exchanges
  • Mangled care, uh… Managed care
    • Two of the prime examples are HMOs & PPOs …

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Sources of Health Insurance and Health Care

  • Health Maintenance Organizations (HMOs)
    • Contract with care providers
    • Fixed monthly premium
    • Focus on prevention and wellness
  • Preferred Provider Organizations (PPOs)
    • Several providers to choose from
    • Costs more than a HMO, but you have more choice and fewer restrictions
    • If you go to another provider it costs more

(continued)

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“Catastrophic” Health Insurance

  • Low-cost / High-deductible insurance
    • It is really a comprehensive major medical plan
    • Choose your own health care providers
    • Pay out of pocket
    • Can usually negotiate lower fees
      • Just mention this magic little four-letter word, “Cash”
  • Protected against large losses
  • Great for small businesses and the self-employed
    • Eligible for Health Savings Accounts
      • You can contribute pre-tax money to a Health Savings Account and then use it to pay for health care costs
    • Not to be confused with Flexible Spending Accounts

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Medical Information Bureau (MIB)

  • The MIB operates much in the same manner as the credit reporting agencies
    • Used by life insurance companies in much the same manner as the credit reports and the C.L.U.E. reports
    • Protected by the same laws as the credit agencies
      • Fair Credit Reporting Act
  • MIB must correct any inaccurate information or allow you to report your side of the story
    • Allowed one free report each year (like credit reports)
    • 866-692-6901
    • www.mib.com

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Government Healthcare Programs

  • Medicare – Federal program for those age 65 and older, and certain disabled persons
    • Part A – compulsory
      • Covers hospital costs including doctor
    • Part B – voluntary
      • Doctor’s office visits & some prescriptions
      • Now being “means tested”
        • More about this later when we get to retirement…
    • Part C – Medicare Advantage or
    • Medigap – Will pay what Medicare does not
    • Part D – prescription costs
  • Medicaid (MediCal in California)
    • Low income people of all ages
    • State administered with Federal guidelines

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Disability Income Insurance�and Financial Planning

  • Disability income insurance protects your most valuable asset – your ability to earn an income
    • One of the most neglected forms of insurance
    • Aim for a benefit that when added to your other income will equal 60-70% of your take home pay
      • (You won’t find any that exceed 70%)
    • May (will!) only pay if you can not work at any job
      • Look for a policy that pays if you are unable to work at your regular job (Again, you won’t find any!)
    • How long do benefits last? To age 65? For life?
      • Typically only 2 to 5 years now
    • How long is the waiting period? 90, 180 days?
      • The longer the waiting period, the lower the premium
        • Similar to the deductible in an auto or home policy – Only start paying for your disability after the waiting period is over

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Four Sources of Disability Income

  • Employer-sponsored disability insurance
    • Group disability policy may be short or long term but usually not enough by itself
  • Individual disability insurance
    • Good Luck! It is very hard to find and, if found, it is expensive and restrictive
      • What a deal, huh?
      • Try Mutual of Omaha (They might still offer it)
  • Social Security
    • Covers total disability that lasts more than one year
  • Workman’s Compensation
    • If you are injured at work

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Bottom Line on Health Insurance

  • BOHICA
    • That’s right – it is pretty much the bottom line on all insurance…

Oh, Yeah. Don’t Forget. Don’t Get Sick.

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