Sam was a retired Raytheon engineer. When I first met him he was just 65, was an insulin dependent diabetic and had already had one heart attack. He had evolving diabetic cardiomyopathy which eventually results in terminal congestive heart failure if something else does not happen first. Over the next 10 years I managed to keep him going by simply adjusting his medications. He had a chest x-ray here and there, was never hospitalized and never had to see a specialist. The final two years of his life he was hospitalized 5 times for a multitude of reasons, usually his heart. On one of his last visits with me I informed him that the end was near and that he should make sure he had all his affairs in order including discussing the situation with his family. Towards the end of our conversation he mentioned how lucky he was to have had his insurance. I just half heartedly smiled and said “yes.” He died just over one month later peacefully at home.

Sam had both Medicare A and B and was paying $321 monthly for an AARP supplemental plan over the twelve years of his Medicare life. That totals $46,224.00.

What was Sam’s actual financial liability under Medicare? Well, Part A is hospital insurance and if you paid your Medicare taxes is free. Every time you are admitted there will be a deductible which then was $880.00. Now it is $1024.00. That is an admission lasting from 15 seconds to 60 days. After 60 days there are additional charges but frankly, in 26 years of practicing medicine I have never had a senior in the hospital for 60 days. They have either been discharge or dead long before the 60 days is up. So, for Part A Sam would have spent a rounded off $5000.00.

Part B is for outpatient medical care. You can elect to sign on or not. Most sign on. At this point in time there is a progressive monthly premium which starts at $96.00 for those earning less than $80,000 yearly and goes up to $231.00 for those earning over $205,000.00 yearly. At the beginning of each year there is a $131.00 deductible. After this most services will have a 20% co-pay. Blood work is totally free.  In Sam’s day there was only a single premium for all of $76.00. Very conservatively we can say that Sam saw me every three months or 48 visits for a total co-pay liability of $720.00. Part B does NOT cover yearly physicals and any associated work. The supplemental insurance plans will cover Part A deductibles, Part B deductibles and Part B co-pays. They do NOT cover the monthly premiums or physicals and any associated work.

Sam paid $46,224.00 for $5720.00 of healthcare liability and he was a sick guy!

What I tell my seniors to do at the age of 60 is to open a long term CD and start paying themselves a monthly premium. When they hit $5000.00 they are self insured and can start sending their money on fun and their grandchildren. If they have an expense they just start paying themselves the premium again until they get back to the $5000.00. Many do not even spend the interest the account earns.

We younger folks are in much more trouble. The cost of Medicare is going to be slowly shifted over to the elderly over the next several decades. Why do you think Part B premiums have become progressive? Part A deductibles are also creeping upwards. The politicians sneak up behind you like thieves in the dark instead of staring you right in the face and letting you know how it’s going to be. But, they did give us a way out. They are just not explaining it correctly. The answer is the Health Savings Account (HSA). This is a type of high deductible health insurance were you get to open another IRA which is all an HSA is EXCEPT all healthcare expenses can be paid in tax free dollars including dental and eye work. If a young person starts making yearly contributions by the time they get to 65 they could have upwards of $250,000.00 in the account. They will then be insulated from whatever happens to Medicare.

In Short, supplemental insurance for the elderly is a RIP OFF. Both politicians and insurers should be ashamed of themselves. It is so sick one has to wonder how much money is changing hands here.

One more thing, those Medicare HMO plans are nothing but exercises in how to keep the elderly from getting the care they need so an insurance company can MAKE MONEY. It has as to be payola again. Of course politicians could really just be stupid. But the honest ones might also just be misinformed. They need to get down there with someone in the trenches…like me.

3/17/08

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