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December 17, 2017
By Susan Callahan, Associate Editor and Featured Columnist  

[Health and fitness articles are reviewed by our team of
Doctors and
Registered Nurses, Certified fitness trainers and other members of our
Editorial Board.]







As Benjamin Franklin once famously said, nothing in life is
certain but death and taxes. To this list we now can add a
third --- health insurance problems.  And we are not talking
here about the people who
don't have health insurance.  
That number, much labored over by politicians, actually is a
head-fake, a side show over there, a distraction from the
iceberg fast approaching over here.

No, the iceberg coming over
here is that even those of us
who already have health insurance face a high risk of
financial ruin, especially as we age.  

Over 66% of Americans over the age of 65 who file
bankruptcy cite medical expenses as the primary reason for
their downfall, according to a 2010 study from Professor
John Pottow of Michigan University.  Mind you, only 7% of
people who file for bankruptcy are over age 65 but of
those who do file, medical expenses lead them down that
sad path.

The reason our well-laid retirement plans come tumbling
down are medical expenses not covered by Medicare.   The
stories are now legion.

The interesting thing is, the overwhelming number of
Americans actually have health insurance.  In fact, 92% of
us do.

According to the Census Bureau's Population Survey, the
United States has 325 million people as of 2016. Of this
total, 155 million people receive health insurance through
an employer, making up about 48% of the total. Another
53 million people (16% of the total) receive health care
coverage from Medicare, the government program for
those over 65. Another 9à million are covered by a
combination of programs including Medicaid and the
Medicaid expansion called the Affordable Care Act. The final
27 million --- 8% --- are uninsured.


The Retirements of the Middle Class Are Being Derailed

The rise of medical bankruptcies over the period of 2005 to
2007 documented in a 2007 Harvard study introduced the
topic into the national political conversation and laid the
groundwork for the election of Elizabeth Warren to the US
Senator.

According to that study, 62.1% of all bankruptcies in 2007
were medical, and 92% of these medical debtors had
medical debts over $5000, which represented 10% of
pretax family income of $50,000. This means that these
people were solidly middle class.

The rest met criteria for medical bankruptcy because they
had lost significant income due to illness or mortgaged a
home to pay medical bills That study has been both widely
heralded and  soundly criticized.  

Of the most credible criticisms is
Meghan Mcardle's analysis
in The Atlantic, called appropriately enough, "Why
Warren's New Bankruptcy Study Is So Bad". McCardle
argues that "The post 2005 increase in bankruptcies isn't
being driven by medical bankruptcies.  It's simply
rebounding from what every single analyst at the time,
including Elizabeth Warren, agreed was an unsustainable
drop."

Whether you believe the problem is large or that it is over-
exaggerated, the truth of real life stories cannot be
minimized.

Medical Expenses Burn Through Life Savings

One such story was told by Mary Koch of Omak,
Washington. Mary and her husband John ran a successful
local newspaper in Omak before he suffered a devastating
stroke.  The stroke forced them to sell their newspaper a
little over a million dollars.

The money didn't last long. As Mary details, she had to
spend all of it on home care attendants to give her even a
brief respite from her 80 to 90 hour per week care-giving
duties. The list of expenses also included wheelchairs,
computers that John used to speak, other devices, and on
physical and speech therapists. When the money was gone,
they turned to Medicaid.

How Many People Have to Spend their Life Savings Before
Getting on Medicaid?
































I too have a friend whose story is a riches to rags tale.
Diane was an executive in the pharmaceutical industry who
married a seemingly well-to-do man in his early 60's. It
wasn't until after the wedding that he let her know that he
had not worked long enough to qualify for Social Security
and Medicare, and that, at his age,  he had not been able to
find another good job.


He also revealed that most of the money he earns goes to
pay the living and medical expenses of his mentally ill
daughter. He forked over about $3000 per month in co-
pays, rent and food for his daughter.

As my friend learned these facts, she saw her own carefully
planned retirement vanish before her eyes. She loved this
man so leaving him was not an option she felt she could
take.


That meant that she faced the difficult problem of finding a
way to fund the health care of an aging man who could not
on his own qualify for Medicare. That left Obamacare, for
him an expensive option, and Medicaid. They chose
Medicaid. Over the past 15 years, I have seen the
deepening furrows of worry cross my friend's forehead.  
The 401k she had built since her thirties  was spent down,
then the IRA, then the savings put aside for emergency
bills. All gone.


How many other once middle class or upper middle class
Americans have impoverished themselves just to qualify for
Medicaid?

Though statistics on this question are hard to come by, you
get some sense of the scale of the problem by looking at
The Affordable Care Act.

The Affordable Care Act, known as Obamacare, is an
expansion of Medicaid, according to Medicaid's own
website: "The Affordable Care Act of 2010 created the
opportunity for states to expand Medicaid to cover nearly
all low-income Americans under age 65."


A little-noticed provision of ACA is that it changed the way
that income is calculated for determining Medicaid eligibility.
Now, only modified adjustable income is used. There is no
resources or assets test.  Really?




Medicaid Spend Down Provisions Let You Keep Your House


When you apply for Medicaid, as opposed to Obamacare,
states still do look at your assets. Assets above $2,000
generally disqualify you for Medicaid, depending on the
state.

Many people with assets such as bank accounts, choose to
spend down these assets to qualify for Medicaid.

Medicaid allows you to spend down money to

  • pay off the mortgage on your house

  • repair your home

  • buy a new home

  • prepay funeral expenses

  • replace your old car

  • pay for home health care



Before you apply for Medicaid, you can also transfer assets.
My friend's husband, for example, transferred title to his
home to son.


But you have to make these transfers within a certain
amount of time.  Starting from the moment you qualify for
Medicaid, the law looks back 5 years (60 months) at your
assets. If you transferred assets before 1986 (specifically,
January 1, 1986), then the law looks back only 3 years.

As for Medicare, the program for those over 65, it has large
coverage gaps. First, Medicare does not cover long term
care. It also does not cover co-pays, co-insurance or
deductibles. Nor does it even cover the cost of all
hospitalization.

Here is an example. In 2011, a man named
Gary Lucido of
Chicago wrote about the hospital experience of his mother.

His mother was hospitalized for a terrible case of MRSA
infection. She stayed in the hospital for 48 days. The bill
totaled $110,000.

His mother was covered by Medicare. But here's the
shocker. When the hospital billing department submitted its
bill to Medicare, it only agreed to cover $2300.

The remaining $107,700 was paid by private insurance
($22,000), Medicare forcing the hospital to write off
$75,000 and, guess who, the patient and their family.

That story is repeated hundreds of thousands of times each
year in hospitals across America.

You see, you go into a hospital with some peace of mind,
waving your Medicare card. The problem is this --- that
Medicard card is simply not a powerful card. It doesn't
cover the total bill. So-called Medigap private insurance, as
we have seen, only covers a part of the bill, in many cases.
That leaves you and your shrinking net worth to cover the
rest.

The fall from millionaire to Medicaid, despite the passage of
the Affordable Care Act, still most often is triggered by
unexpected medical expenses.   Few if any of us can see a
stroke coming.  When that unthinkable event happens,
when you need it the most, Medicare is often a porous net.

So, your net worth gets hit. Your retirement savings get
hit. One study estimates in fact, that a married couple can
expect to pay $260,000 in out-of-pocket costs during their
retirement. These costs include co-pays, drugs, long-term
care, coverage gaps and on and on.

Medicaid, again, despite the passage of the ACA, still a
program for the poor. And Medicare still has giant sized
coverage gaps that middle class and upper middle class
people simply can't affordably cover.

















































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