Medical insurance was originally designed to cover an individual or a group from the potentially catastrophic costs of a serious illness or injury. More recently, benefits have expanded and, along with escalating medical costs, this has produced a complex and expensive array of options for individuals and companies.

Managing medical insurance cost, then, is more important than ever. It involves balancing the desire for comprehensive coverage with the need to keep the cost of insurance reasonable and minimize exposure to the risk of catastrophic loss. Some of the variables that are important in selecting the right coverage are:

What is the monthly premium you can afford?
What health care services do you require or desire to have?
Is it important to see any doctor you choose or are you willing to limit your choices?
How much of an annual deductible are you comfortable with?
What is the Out of Pocket maximum amount you are willing to accept before the plan pays $100% of the costs?

For example, medical insurance costs can be dramatically reduced by the insured choosing a higher deductible and Out-of-Pocket maximum and then assuming more of the risk below that threshold. This can be in the way of settling for less benefits or willingness to pay a higher co-payment amount. By adopting this strategy, costs can sometimes be reduced by 70% compared to a more generous plan.

Regardless of the plan chosen, it is important to know what is not covered. For example, most plans exclude custodial care…the daily activities type of care one requires Long Term Care insurance for. Also excluded are conditions covered by worker’s compensation, conditions resulting from acts of war, armed aggression or release of nuclear energy, services provided by relatives and any services for which you are eligible to receive Medicare (whether or not Medicare benefits are paid). The list of exclusions is long and detailed so, again, it is wise to check with a knowledgeable medical insurance agent.

Medicaid and Medi-Cal

Medi-Cal is California's version of Medicaid. It is medical coverage for only the basic medical and assisted-living costs of the poor. Medi-Cal, like Medicaid, requires that people have very few assets to qualify. In California, the limit for a single person is usually $2,000 in assets and $35 per month of income. At a typical Retirement facility, more than 90% of the patients are on Medi-CAL. When people are forced to go on Medi-CAL, it is quite frequently a major shock for them. Many are emotionally devastated.

Medicare

Medicare is a national health insurance program for people 65 or older, younger people with certain disabilities, and people with permanent kidney failure who need dialysis (called End-Stage Renal Disease, or ESRD), or a transplant.

Medicare is run by the Health Care Financing Administration (HCFA). The Social Security Administration helps HCFA by enrolling people in Medicare and by collecting Medicare premiums.

Medicare was designed as only the most basic coverage for medical and hospital expenses. Medicare, much to the surprise of many seniors, pays very little for one of the most likely medical requirements; long term care. For example, here is an example of how the standard Medicare Plan works:

Number of Days in Nursing Home Covered by Medicare
Days	Medicare pays	You Pay
1 - 20*	100% of approved amount	$0
21 - 100	All approved, less $96 deductible	$96 per day
101+	$0	100%

*Medicare will pay 100% for ONLY the first 20 days

For this reason, individuals with sufficient means need to purchase Medicare supplement insurance to ensure they are adequately covered. Medicare supplement insurance, or Medigap as it’s also known, is offered by private insurance companies and regulated by Federal and State law.

Medicare has these parts:

Part A - Hospital Insurance, which helps pay for medically necessary inpatient care in a hospital, skilled nursing facility or psychiatric hospital, and for hospice and home health care.

Part B - Medical Insurance, helps pay for medically necessary physician services, outpatient hospital care, and other medical services and supplies not covered by Part A. Both Parts A and B have deductibles and co-payments, and Part A has benefit limitations, as well.

Part C – Medicare Advantage (formerly known as Medicare+Choice) is available if you are entitled to Medicare Part A, enrolled in Part B, and provided you reside in the plan’s service area. There are two options under Part C. With the Coordinated Care Plans, you can be enrolled in a Health Maintenance Organization (HMO), Point of Service (POS), Regionally Expanded Preferred Provider Organization (PPO), or a Provider-Sponsored Organization (PSO)

The second option is to set up a Health Savings Account (see Chapter 7) in conjunction with private fee-for-service plans offering at least the same benefit coverage levels as Medicare Parts A and B, or high deductible coverage. Call 1-800-MEDICARE or visit www.medicare.gov to determine what plan choices are available in your area.2

Part D – Prescription Drug, becomes available in January 2006. Beneficiaries have several choices for getting their drug coverage, including:

People who are in, or want to be in the original, fee-for-service Medicare program can enroll in a Part D prescription drug plan (PDP) that contracts with Medicare;

l People who are in, or want to enroll in a Medicare Advantage managed care plan (HMO, e.g.) can enroll in that plan’s Part D Medicare Advantage-Prescription Drug plan (MA-PD); or

People who are in, or want to join a Medicare Advantage Private Fee For Service (PFFS) plan, can get their Part D prescription drug coverage through the PFFS plan if it is offered, or through a PDP if it isn’t included as a benefit of the PFFS.

Although enrollment into Part D is voluntary, people with Medicare who choose not to enroll when they are first eligible may have to pay a higher premium if they later decide to enroll in a Part D plan. They will also need to wait until the annual enrollment period at the end of each year to sign up. Benefits will begin on the first day of the following year. If someone already has drug coverage that is at least as good as the Part D, they can keep their existing drug coverage without facing a premium penalty later. The premiums, deductibles and coverage limit amounts will increase annually. Coverage limits include a gap in coverage (“doughnut hole”) during which a beneficiary must pay all his or her drug costs before the Part D plan begins paying again.

See more about Medicare Prescription Drug Plan and Cards,

Medigap Insurance
Medigap insurance is designed to supplement Medicare’s benefits. These policies are sold by private insurance companies and are regulated by Federal and state law. The medical plan must be clearly identified as Medicare supplemental insurance and it must provide specific benefits that help fill the gaps in your Medicare coverage. Other kinds of insurance may help you with out-of-pocket health care costs, but they do not qualify as Medigap plans.

Standard Medigap Plans
A Medigap policy is a health insurance policy sold by private insurance companies to fill the “gaps” in Original Medicare Plan coverage. There are 12 standardized Medigap plans called “A” through “L.” The front of a Medigap policy must clearly identify it as “Medicare Supplement Insurance.” Each plan A through L has a different set of benefits. Plan A covers only the basic (core) benefits. These basic benefits are included in all the Plans, but Plans K and L also include hospice care.

When you buy a Medigap policy you pay a premium to the insurance company. As long as you pay your premium a policy bought after 1990 is automatically renewed each year. This means that your coverage continues year after year as long as you pay your premium. This premium is different than the Medicare Part B premium. You must also pay your monthly Medicare Part B premium.

However, in some states, insurance companies may refuse to renew Medigap policies that you bought before 1990. The law in these states did not say these policies had to be automatically renewed each year (guaranteed renewable) at the time these policies were sold.

Medigap policies only help pay health care costs if you have the Original Medicare Plan. You don't need to buy a Medigap policy if you are in a Medicare Advantage plan. In fact, it is illegal for anyone to sell you a Medigap policy if they know you are in one of these plans.

If you have Medicaid, it is illegal for an insurance company to sell you a Medigap policy, except in certain situations.

Overview of Medigap Plans K and L

In 2005, you might be able to buy Medigap Plans K and L (also can be sold as Medicare SELECT) from a Medigap insurance company. These new Medigap policies can be sold only as standardized plans.

Medigap Benefits and Medicare Part D

Beneficiaries who already have prescription drug benefits at least as good as Medicare’s may be able to keep it without the risk of paying a higher Part D premium if they later decide to enroll in Part D. People with a Medigap plan with prescription drug benefits were allowed a choice between their Medigap benefits and the new Medicare Part D benefit. Beneficiaries who decided to sign up for Part D can keep their Medigap policy without the prescription benefit or they can switch to another Medigap plan. They can’t, however, have both a Medigap benefit for prescription drugs and the Medicare Part D benefit at the same time.

Most Medigap prescription drug benefits won’t be considered at least as good as Medicare’s. However, some people may want to keep their Medigap benefit because any legally prescribed drug from any pharmacy is covered. Those beneficiaries will need to decide if they want to keep their existing benefits and pay a higher premium if they later enroll in Part D.

Your current policy will no longer offer drug benefits after January 1, 2006. You need to apply for Medicare Part D to help with prescription drug costs starting on November 15, 2005.

If you currently take medications, you can enter your medications on www.pparx.org and this website will tell you which of the 70+ Medicare-approved cards will provide you with the most savings. On an average income, you will pay $37 per month and a $250 deductible on your medications. Once you have spent $3600 out of pocket, the prescription program will pay 95% of your costs.

If you would like more information, or you would like to review your Medigap coverage (there are 2 new plans being offered in 2006), please call us at 1-800-765-0561 or visit www.Medicare.gov.

What is the monthly premium you can afford?

What health care services do you require or desire to have?

Is it important to see any doctor you choose or are you willing to limit your choices?

How much of an annual deductible are you comfortable with?

Medicaid and Medi-Cal

Medicare

Medicare was designed as only the most basic coverage for medical and hospital expenses. Medicare, much to the surprise of many seniors, pays very little for one of the most likely medical requirements; long term care. For example, here is an example of how the standard Medicare Plan works:

Medicare has these parts: