Old Parents Planning - Part II

Last week I wrote about a couple estate planning issues related to my aged parents. This week it has to do with health care and the experience of my wife's mother. Not to be too specific but my mother-in-law had major surgery about a month ago. She spent about a week in the hospital and now she is in a rehab facility working to get her back on her feet so she can go home.

This is not a commentary about the health care providers (doctors, nurses, hospitals, rehab facility) but about how these providers get paid and the impact on the patient and family. By the way the care has been excellent but the agony to my mother-in-law and her three daughters with the payment scares has been very difficult and continues to raise its ugly head.

My mother-in-law happens to be covered by a health maintenance organization that takes the place of Medicare. This HMO also has its own medical staff so it is both a health insurance company and provider at the same time. This create an inherent conflict because the HMO provides the insurance but also their staff (doctors and nurses) recommends when a patient will no longer be covered by their insurance.

Within the first week at the rehab facility (not part of the HMO) we were told by the social worker that my mother-in-law's case would be reviewed every few days to determine if the HMO would continue to provide insurance coverage for her. My mother-in-law just had major surgery and there is talk that the HMO is considering discharging her from their responsibility as no longer medically necessary! This puts severe pressure on the family because currently my mother-in-law requires around the clock care. Without insurance coverage her wealth would be depleted quickly.

Due to a medical complication she is still covered by the HMO but we are still on pins and needles knowing that a letter will come soon that says her HMO insurance coverage is over. Fortunately the rehab center also has an assisted living facility that would provide housing and meals at a fixed rate but any additional services (bathing, helping with medication, bath rooming, transferring) would cost extra. Given her slow recovery the additional services would add up quickly without the insurance coverage.

This is one tiny example where our health insurance delivery system is failing. This HMO has to follow the rules set forth by Medicare but the Center for Medicare/Medicaid Services is under severe financial pressure. Just recently an the annual report from the Social Security Board of Trustees to Congress said that Medicare/Medicaid trust fund will be insolvent by 2017. This is two years earlier than projected last year. It is being compounded by the weak economy through less collection of taxes and interest earned. CMS lower their standard of care, discharing patients earlier, which then dictates what the HMO can do.

What can be done? This is one the key agendas of President Obama this year. I heard on the radio this morning that Jim McDermott, my Representative from the State of Washington, is proposing a single payer system similar to Medicare. I don't think this will happen. The health insurance lobbyist hold too much weight with Congress. I will be very interested in the health care reform debate that will be occurring soon in the halls of congress.

What can be taken away from this experience from a financial planning standpoint;

• Even with health insurance coverage there is no assurance that it will cover what you think it will cover as being medically necessary. Without this coverage, even though it can be a frustrating experience, one's assets would be depleted quickly. Having secondary insurance to Medicare is paramount.
• Every year Fidelity comes out with a study estimating the cost for health coverage in retirement. In this year's report the health costs are estimated to be near $250,000 over an average lifetime. You better incorporate this into your retirement projections. The cost in retirement probably won't be less given the potential cost of health care.
• Family members need to make sure their aged parents have adequate health insurance coverage beyond what is provided tbyMedicare (part "A", "B" and "D").
• It is also a time to discuss long term care insurance coverage that would come into play if patient is required to have custodial care (not able to take care of themselves) for an extended period of time. Most people don't think they would need such insurance but with the advancement in medical technology (mother-in-law is a good example) making it possible to live longer more people will live beyond their ability to take care of themselves. Who is going to pay for it?

I think this is enough for this week. There is much food for thought here.