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Taming my healthcare cost monster
Old 05-05-2013, 01:26 PM   #1
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Taming my healthcare cost monster

How I Tamed My Health Care Cost Monster

As I was coming close to turning 65, I knew I had to make some important decisions regarding my health care coverage. For the previous 20 years, I had been riding the coattails of my wife’s employment, and paying sometimes nothing and sometimes a token amount for soup-to-nuts health insurance coverage. But no more. The minute I turned 65, I would be dropped like a hot potato from my wife’s employer-provided health insurance policy. Goodbye, free ride. Hello, Medicare.

There are plenty of health care cost horror stories on the blogosphere and, like most of you, I had read my share. Health care costs: the bottomless pit … the destroyer of retirement stashes… the car crash waiting to ruin my carefully laid plans for financial independence. What to do?

While all these happy thoughts were progressively rising to my mind’s surface more and more often, my mailbox started spewing forth more and more direct (junk) mail packets from insurance companies eager to take my money in exchange for… what? I figured I had better start digging in and find out.

Yes, Medicare would cover a very large part of the front end, but not everything and not without limit. And it would actually cost me?! (Surprise, surprise, I thought all that money deducted from my paychecks for over 40 years would take care of that.) And so, to cover what Medicare would not, I would need a Medicare supplement policy. Or not (!) since I could also opt for a “Medicare Advantage” policy to combine the core Medicare coverage and the supplemental coverage under one insurance roof. Boy, oh boy.

I started making lists and evaluating policies, tabulating who gave what for how much and up to what limit, and yaddy yaddy – and then it came to me. Too many possible answers. But… what was my question? What problem was I trying to solve? Without nailing that down, no way would I recognize the right answer when I saw it.

The first thing I realized, before even formulating that all-important question, was that I had begun my policy search implicitly trying to replace what I was losing: soup-to-nuts coverage. But did I really need that? Sure, it had been great “fun” to go to doctors and be able to walk out having to co-pay a whole ten bucks (!) for a consultation or an annual physical or anything. Blood tests? Sure! An x-ray? Bring it on! A colonoscopy? Well, if I really had to. What did I care; I wasn’t paying for any of it.

But did that mean I could NOT pay for it? Did I really need health insurance to cover that? What did I REALLY need the health insurance to do? And so I had my question. And I also had my answer. I needed a Medicare supplement policy that would keep me from suffering a catastrophic loss of retirement assets as the result of treating an illness or accident.

So, what would a “catastrophic loss of retirement assets” look like? How much loss would be catastrophic? That number is (of course) different for everybody. But since this is my story, this is my catastrophic loss number: anything above $25,000. What I needed was a policy that would LIMIT MY RISK to that $25,000. And I should search for and select a policy based on how well it would limit my risk, and not on what I could get for my premiums along the way.

By now, you are probably starting to see where I ended up going. To arrive at what I would consider the best overall deal for me, I looked at 2 factors: annual premium and annual out-of-pocket risk. And lo and behold, a High Deductible Plan F Medicare Supplement policy was right up my alley. My premium is $636 a year. My deductible (and therefore my out-of-pocket risk) is $2110 a year. Add to that $1260 in annual Medicare premiums, $180 a year for my prescription plan, and $325 for my annual prescriptions deductible and it all adds up to $4511 a year.

Throw in another $489 in theoretical prescription co-pays a year and we get a worst case scenario of $5000 a year – which is one hell of a lot less than my $25,000 tolerance limit.

Every year, I’ll pay the premiums (which, I realize, will creep up every year). Then I’ll be on the hook for the first $2110 of medical expenses -- over and above what Medicare will pay -- plus the first $325 of prescriptions. And after that… ZERO cost for up to 15 months of hospitalization… ZERO cost for 100 days at a nursing facility… ZERO cost for all physicians services… ZERO cost for all laboratory diagnostic services… plus a bunch of prescription medicines thrown in. (Hey! If I’m still racking up medical costs after 15 straight months of this stuff, it’s going to be time to pull the plug anyway.)

So I put those policies in place. Then the last piece of the puzzle for me was to set aside $5000 in a savings account specifically intended to cover two years’ worth of the $2435 in annual worst-case medical and prescription out-of-pocket annual medical expenses. Case closed! I could stop worrying about my health care coverage, and get on with my financial independence living.

The big epiphany here? I focused on overall worst case scenario risk to come up with a maximum expense number ($5000 a year) I could most certainly live with. And the best news of all? Even if you’re under 65 and without Medicare, you could make this work too. (Our New $237/month Health Insurance Plan | Mr. Money Mustache)

What about you? How have you approached health care cost coverage and its costs so that it won’t swallow up your stash?

Alex in Virginia
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Old 05-05-2013, 01:51 PM   #2
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Originally Posted by Alex in Virginia View Post
The big epiphany here? I focused on overall worst case scenario risk to come up with a maximum expense number ($5000 a year) I could most certainly live with. And the best news of all? Even if you’re under 65 and without Medicare, you could make this work too.

What about you? How have you approached health care cost coverage and its costs so that it won’t swallow up your stash?

Alex in Virginia
Well, not all of us can make this work, because we can't get health care insurance. Many of us may be in good health but, with preexisting conditions or because of medical history, can't get a policy at any price. Unless the state has a high risk pool (mine doesn't) one is SOL. Even those with high risk policies are paying substantially more. This is one of the critical issues facing most forum members. Congratulations on getting inexpensive coverage.
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Old 05-05-2013, 01:58 PM   #3
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Nice, thanks for sharing your view. The one big hole in your plan, as is with most of us with a plan of coverage is the 100 days maximum at a nursing facility. Some risks you either have to accept or you pay those really high premiums. In no way am I saying your plan is wrong or flawed, but that for you (as is for many others) a catastrophic risk that one chooses to either ignore/accept.
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Old 05-05-2013, 02:55 PM   #4
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It looks like you had next-to-nothing insurance costs while on your working spouse's health insurance to aging into medicare? Can you be denied coverage under any of the medicare supplements?

Many younger people might like to follow your suggestions from the blog you reference but would be excluded for preexisting conditions. But I am happy you have found something that works for you.
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Old 05-05-2013, 07:06 PM   #5
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Alex- Glad you've found a workable solution for your situation, but agree with Michael that it's a WHOLE different situation for many folks under-65 with pre-existing conditions. At least until next year when guaranteed issue HI should become available under the ACA Exchanges. As we get closer to Oct sign-up period others should be able to run their own 'Alex-style' analysis for their HC expenses.
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Old 05-06-2013, 06:31 AM   #6
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Dear MichaelB, ERhoosier, Bestwifeever and heeyy_joe,

Thanks so much for your replies to my post. I am SO sorry to have neglected to say something about people with pre-existing conditions. Being superfortunate not to have to worry about that, it went right by me in the heat of writing up my post. Mea culpa.

ERhoosier, you introduced what may be the solution for people under 65 with pre-existing conditions. As you point out, next year may (will?) put a fix in place for pre-existing conditions when guaranteed issue HI should become available under the ACA Exchanges. I guess we will have to wait and see.

Best of luck to all,

Alex in Virginia
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Old 05-06-2013, 06:53 AM   #7
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Alex in Virginia, in the words of that most distinguished American statesman

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Old 05-06-2013, 05:41 PM   #8
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Quote:
Originally Posted by Alex in Virginia
How I Tamed My Health Care Cost Monster

As I was coming close to turning 65, I knew I had to make some important decisions regarding my health care coverage. For the previous 20 years, I had been riding the coattails of my wife’s employment, and paying sometimes nothing and sometimes a token amount for soup-to-nuts health insurance coverage. But no more. The minute I turned 65, I would be dropped like a hot potato from my wife’s employer-provided health insurance policy. Goodbye, free ride. Hello, Medicare.

There are plenty of health care cost horror stories on the blogosphere and, like most of you, I had read my share. Health care costs: the bottomless pit … the destroyer of retirement stashes… the car crash waiting to ruin my carefully laid plans for financial independence. What to do?

While all these happy thoughts were progressively rising to my mind’s surface more and more often, my mailbox started spewing forth more and more direct (junk) mail packets from insurance companies eager to take my money in exchange for… what? I figured I had better start digging in and find out.

Yes, Medicare would cover a very large part of the front end, but not everything and not without limit. And it would actually cost me?! (Surprise, surprise, I thought all that money deducted from my paychecks for over 40 years would take care of that.) And so, to cover what Medicare would not, I would need a Medicare supplement policy. Or not (!) since I could also opt for a “Medicare Advantage” policy to combine the core Medicare coverage and the supplemental coverage under one insurance roof. Boy, oh boy.

I started making lists and evaluating policies, tabulating who gave what for how much and up to what limit, and yaddy yaddy – and then it came to me. Too many possible answers. But… what was my question? What problem was I trying to solve? Without nailing that down, no way would I recognize the right answer when I saw it.

The first thing I realized, before even formulating that all-important question, was that I had begun my policy search implicitly trying to replace what I was losing: soup-to-nuts coverage. But did I really need that? Sure, it had been great “fun” to go to doctors and be able to walk out having to co-pay a whole ten bucks (!) for a consultation or an annual physical or anything. Blood tests? Sure! An x-ray? Bring it on! A colonoscopy? Well, if I really had to. What did I care; I wasn’t paying for any of it.

But did that mean I could NOT pay for it? Did I really need health insurance to cover that? What did I REALLY need the health insurance to do? And so I had my question. And I also had my answer. I needed a Medicare supplement policy that would keep me from suffering a catastrophic loss of retirement assets as the result of treating an illness or accident.

So, what would a “catastrophic loss of retirement assets” look like? How much loss would be catastrophic? That number is (of course) different for everybody. But since this is my story, this is my catastrophic loss number: anything above $25,000. What I needed was a policy that would LIMIT MY RISK to that $25,000. And I should search for and select a policy based on how well it would limit my risk, and not on what I could get for my premiums along the way.

By now, you are probably starting to see where I ended up going. To arrive at what I would consider the best overall deal for me, I looked at 2 factors: annual premium and annual out-of-pocket risk. And lo and behold, a High Deductible Plan F Medicare Supplement policy was right up my alley. My premium is $636 a year. My deductible (and therefore my out-of-pocket risk) is $2110 a year. Add to that $1260 in annual Medicare premiums, $180 a year for my prescription plan, and $325 for my annual prescriptions deductible and it all adds up to $4511 a year.

Throw in another $489 in theoretical prescription co-pays a year and we get a worst case scenario of $5000 a year – which is one hell of a lot less than my $25,000 tolerance limit.

Every year, I’ll pay the premiums (which, I realize, will creep up every year). Then I’ll be on the hook for the first $2110 of medical expenses -- over and above what Medicare will pay -- plus the first $325 of prescriptions. And after that… ZERO cost for up to 15 months of hospitalization… ZERO cost for 100 days at a nursing facility… ZERO cost for all physicians services… ZERO cost for all laboratory diagnostic services… plus a bunch of prescription medicines thrown in. (Hey! If I’m still racking up medical costs after 15 straight months of this stuff, it’s going to be time to pull the plug anyway.)

So I put those policies in place. Then the last piece of the puzzle for me was to set aside $5000 in a savings account specifically intended to cover two years’ worth of the $2435 in annual worst-case medical and prescription out-of-pocket annual medical expenses. Case closed! I could stop worrying about my health care coverage, and get on with my financial independence living.

The big epiphany here? I focused on overall worst case scenario risk to come up with a maximum expense number ($5000 a year) I could most certainly live with. And the best news of all? Even if you’re under 65 and without Medicare, you could make this work too. (Our New $237/month Health Insurance Plan | Mr. Money Mustache)

What about you? How have you approached health care cost coverage and its costs so that it won’t swallow up your stash?

Alex in Virginia
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Old 05-07-2013, 06:39 AM   #9
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Originally Posted by heeyy_joe View Post
Nice, thanks for sharing your view. The one big hole in your plan, as is with most of us with a plan of coverage is the 100 days maximum at a nursing facility. Some risks you either have to accept or you pay those really high premiums. In no way am I saying your plan is wrong or flawed, but that for you (as is for many others) a catastrophic risk that one chooses to either ignore/accept.

Hi, heeyy_joe...

Thanks for replying to my post.

As serendipity would have it, I actually have that nursing facility hole you speak of covered up to a point.

Separate (in my mind, anyway) from the health insurance, I also have a longterm care insurance policy. That LTC coverage will pay for $180 per day of the cost of any nursing facility stay -- beyond the stay's first 90 days. So the nursing facility coverage from the health insurance policy (first 100 days) and the nursing facility coverage from the LTC policy (after the first 90 days) dovetail quite nicely.

Luck of the Irish, I guess (even if I'm not)!

Cheers...

Alex in Virginia
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Old 05-07-2013, 10:45 PM   #10
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Originally Posted by Alex in Virginia View Post
Hi, heeyy_joe...

Thanks for replying to my post.

As serendipity would have it, I actually have that nursing facility hole you speak of covered up to a point.

Separate (in my mind, anyway) from the health insurance, I also have a longterm care insurance policy. That LTC coverage will pay for $180 per day of the cost of any nursing facility stay -- beyond the stay's first 90 days. So the nursing facility coverage from the health insurance policy (first 100 days) and the nursing facility coverage from the LTC policy (after the first 90 days) dovetail quite nicely.

Luck of the Irish, I guess (even if I'm not)!

Cheers...

Alex in Virginia
It should be noted that the 90 days applies if and only if you are progressing to getting better according to the medical practicioneers. If you are steady in a nursing home, then Medicare will decide that its now long term, and not a recovery stay. The Medicare benefit is a benefit as a place to recover. (This did happen to my mother in 2003-4)
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Old 05-08-2013, 06:57 AM   #11
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It should be noted that the 90 days applies if and only if you are progressing to getting better according to the medical practicioneers. If you are steady in a nursing home, then Medicare will decide that its now long term, and not a recovery stay. The Medicare benefit is a benefit as a place to recover. (This did happen to my mother in 2003-4)

Hello, Meierlde...

Thank you for replying to my post. Your point is a good one to keep in mind.

Call me an eternal optimist, but I like to think that even if I should need to enter a nursing home, etc, that I would eventually recover. (Better to hope than the alternative.)

However, if I end up in the dead-end scenario you've presented, at least I'll have my LTC coverage to fall back on financially.

Cheers...

Alex in Virginia
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Old 05-08-2013, 04:23 PM   #12
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Any idea of who has to keep track of out of pocket cost until you hit the deductible.
While I am at it you might want to read this insurance agent forum,read the whole thead,I am still not quite sure exactly what they are talking about with the F hi ded plan. Also interesting to see their side comments.
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Old 05-08-2013, 05:15 PM   #13
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Any idea of who has to keep track of out of pocket cost until you hit the deductible.
While I am at it you might want to read this insurance agent forum,read the whole thead,I am still not quite sure exactly what they are talking about with the F hi ded plan. Also interesting to see their side comments.
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What happens with my megacorp policy, is that besides the physician copay, you don't pay anything at the point of service, but get a notice in the mail sometime later that tells what the company may have paid and what you will get a bill for, including the amount of the unused deductable.
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Old 05-08-2013, 05:59 PM   #14
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This is how I believe the plan F hi ded is really working,the deductable only applies to when the plan starts to pay. Until the deductable is met,it is just like being on orgianl medicare without a supplement policy.

So: If you go into the hospital you would pay the Part A deductable of 1184 for one benefit period.
Then if you went to the doc you would pay your 147 deductable.
Then if you went to the doc again you would pay 20% co insurance,not sure if you pay both at the same time,this would go on until you hit the total out of pocket.
Or another way is this years total oop is 2110,if you only went to the doctor.
2110-147=1963/.2=9815.
So you would have to rack up 9815 in doc bills before the medigap would actually start to kick in. Original medicare is paying the 80% you are paying 20%
until you hit the 2110 dollars.
This chart explains it well.
Link

Whether this makes economic sense still have to figure this out.
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Old 05-08-2013, 06:14 PM   #15
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Mike, as I understand it the $2,110 2013 Plan F High Deductible amount is met once your total out of pocket amount from Medicare hits that amount, whether from Part A (Hospital) or Part B (Doctor, Lab, etc.) or a combination of the two.
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Old 05-08-2013, 06:24 PM   #16
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Rewahoo: Yes that is correct.
I was trying to explain how many doctor bills you need to have before you could possibly hit the 2110 total oop. Original medicare is paying 80%.
Regardless of which supplement you get. Say if you just went to the doc 10 times at 100 a visit,
1000 total billed cost,you would pay the 147 part B deductable plus 20% or 200, I think.
Not sure though if you pay on retail cost or negotiated cost.
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Old 05-08-2013, 08:02 PM   #17
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Rewahoo: Yes that is correct.
I was trying to explain how many doctor bills you need to have before you could possibly hit the 2110 total oop. Original medicare is paying 80%.
Regardless of which supplement you get. Say if you just went to the doc 10 times at 100 a visit,
1000 total billed cost,you would pay the 147 part B deductable plus 20% or 200, I think.
Not sure though if you pay on retail cost or negotiated cost.
Old Mike
You pay the 20% of the medicare rate + perhaps 15%. This is why the whole doc fix thing keeps coming up, physicians must take the medicare rates if they take medicare patients + perhaps 15% see Payment of Doctor Bills By Medicare for details 2/3 of the way down the page. So the issue of in network or out of network is not as important, A physician either accepts medicare patients or they do not. They may bill no more that 115% of the medicare charge under the limiting charge law.
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Old 05-09-2013, 12:04 PM   #18
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Mike, as I understand it the $2,110 2013 Plan F High Deductible amount is met once your total out of pocket amount from Medicare hits that amount, whether from Part A (Hospital) or Part B (Doctor, Lab, etc.) or a combination of the two.

Hi, REWahoo...

Thanks for participating in the discussion arising from my original post.

The way I read my policy language, the $2110 annual deductible can include medical expenses not covered by Medicare at all. For example, I recently had a minor procedure done at my dermatologist, which both the doc and I knew Medicare would blow off. But we still went ahead and submitted the claim because by doing so the medicare supplement insurance company got brought into the billing loop and noted that expense against my deductible.

Correct me if I'm wrong...

Alex in Virginia
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Old 05-11-2013, 06:39 AM   #19
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... Can you be denied coverage under any of the medicare supplements?

Hi, Bestwifeever...

Thanks for participating in the discussion arising from my post.

The answer to your question is "no." When I enrolled in my medicare supplement plan, I did it over the internet, no questionaire, "liketysplit."

The insurance company wants to know your gender and your age (so it can creep up your premium on your birthday each year). That's it.

Cheers...

Alex in Virginia
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