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Health Care and Disability Insurance

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Title: Health Care and Disability Insurance


1
CHAPTER 9
Health and Disability Income Insurance
Pssst. Here are a few words to the wise Dont
Get Sick. More Americans Wanted the Health Care
Bill to Do More
2
Health Care Costs
  • The United States has the highest per capita
    medical expenditures of any industrialized
    country in the world
  • Predicted approximately 9,000 per person in 2013
  • This amount is over twice as much as the average
    for the 24 industrialized countries in Europe and
    North America
  • 6 of the GDP in 1965, but expenditures rose to
    over 17.6 of our GDP in 2010 2.5 trillion!
  • And it is growing fast - 21½ by 2018?
  • http//www.chcf.org//media/MEDIA20LIBRARY20File
    s/PDF/H/PDF20HealthCareCosts13.pdf
  • http//www.huffingtonpost.com/2013/10/03/health-ca
    re-costs-_n_3998425.html

Americans want too much of a very good
thing. Health insurance rose dramatically in 2011
3
Why Does Health Care Cost So Much?
  • High administrative costs Insurance companies!
  • 26 of health care dollar vs. 1 in Canada
  • Use of sophisticated, expensive technologies
  • Duplication of tests and technologies
  • Increases in the variety and frequency of
    treatments
  • Increasing number and longevity of elderly people
  • From ages 60 to 70, the average person uses more
    health-care resources than they did from ages 0
    to 59

These are the most significant reasons,
especially the first and the last reasons.
Malpractice insurance is often used as a
scapegoat for spiraling costs but it is a very
small amount.
4
What is Being Done About the High Costs of Health
Care?
  • Careful review of fees and charges
  • Establish incentives for...
  • Preventive care
  • Services provided out of the hospital where
    medically acceptable
  • Community health education programs to get people
    to take better care of themselves
  • Preventive care is almost always cheaper than
    allopathic care once the patient is sick
  • Medical vacations
  • 750,000 in 2007 1.6 million in 2012 (?)

The real answer to this question is, Not much.
Are you willing to forego your medical care?
5
Which Would You Choose?
You are 34 years old. Recently, you have been
experiencing severe abdominal pain and a nagging
cough. You go to your family doctor who sends
you immediately to the hospital. After a few
tests, the specialist asks you to sit down with
her and tells you that you have stage 4 liver
cancer that has spread to your lungs and spine.
She tells you that you probably have three to six
months to live. She gives you two choices
Choice 1 You decide to forego radical
treatment. Instead, you are given pain
medication and placed in hospice care after two
months. Your chances of living 5 years are 1 in
1,000. You die in four months.
Choice 2 You decide to undergo radical
treatment. You have surgery, radiation
treatment, and several rounds of chemotherapy.
Your chances of living 5 years are 1 in 85. You
die in nine months.
Total cost 1,250,000
Total cost 45,000
6
And Thats Not All
  • The average cost per diabetes patient is 7,900
    for the diabetes, 13,700 for all health costs
  • http//www.diabetes.org/advocate/resources/cost-of
    -diabetes.html
  • Post-traumatic stress syndrome? 8,300 per year
  • http//www.cbo.gov/sites/default/files/cbofiles/at
    tachments/02-09-PTSD.pdf
  • Cystic fibrosis? 49,000 per year
  • http//www.lung.org/assets/documents/publications/
    lung-disease-data/ldd08-chapters/LDD-08-CF.pdf
  • Liver transplant? 500,000
  • Lung transplant? 1,000,000
  • http//www.transplantliving.org/before-the-transpl
    ant/financing-a-transplant/the-costs/
  • And the anti-rejection medication costs 21,000
    per year for the rest of your life!
    http//answers.google.com/answers/threadview/id/27
    1467.html

1 of patients use 22 of the medical resources.
5 use 50. 1/3 of all Medicare dollars are
spent in the last year of life. What can we do
about these costs?
7
  • In 2008, while then-Senator Obama was campaigning
    for the Presidency and making health care his
    primary focus, his grandmother was dying
  • He saw the heroic and costly efforts that were
    being used to keep her alive for an extra few
    months
  • Along with his campaign promises to rein in
    health care costs, he floated the idea of giving
    Medicare patients in the last few months of life
    information about options such as hospice care
  • His political opponents quickly accused him of
    wanting to create death panels

To this day, a plurality of people still believe
that the Affordable Health Act contains death
panels http//www.theguardian.com/commentisfree/20
13/oct/01/healthcare-obamacare-affordable-care-act
8
The Affordable Care Act
  • a.k.a. Obamacare, Romneycare
  • Originally proposed by the Heritage Foundation
  • A conservative think tank group
  • Implemented by Mitt Romney in Massachusetts in
    2006
  • Create large health insurance exchanges
  • Create an health insurance mandate
  • Encouraging the young and healthy to have
    insurance to help pay for the sick
  • People can not be denied insurance because of
    pre-existing conditions

Romneycare has worked well in Massachusetts as
98 of people are now insured. Will Obamacare
work on a national level? As we are painfully
aware, the news is filled with the cries of the
Tea Party Republicans in Congress who will do
anything, including shutting down the government
and defaulting on the debt, to overturn it.
9
How Can You Reduce Your Personal Health Care
Costs?
  • Stay well focus on prevention
  • Eat a balanced diet and keep your weight under
    control
  • Reduce total meat, dairy, and sweets consumption
  • How much sugar is in soda?
  • Learn to deal effectively with
  • Dont smoke Dont drink to excess
  • Get enough rest, relaxation, and exercise

Yeah, sure, Mom. Right.
Do financial health and medical health have any
correlation?
10
Disability Income Insuranceand Financial Planning
  • Disability income insurance protects your most
    valuable asset your ability to earn an income
  • One of the most neglected forms of insurance
  • No matter what your age during your working
    years, you are more likely to become disabled
    than to die
  • Young, healthy people dont think about the risks
    related to all their future earning potential
  • Provides regular cash income lost by employees as
    the result of an accident, illness or pregnancy
  • If you become disabled your income drops but your
    expenses usually go up

11
Disability Income Insuranceand Financial Planning
(continued)
  • Carefully read a policys definition of
    disability
  • May (will!) only pay if you can not work at any
    job
  • Look for a policy that pays if you are unable to
    work at your regular job (You will not be able to
    find any!)
  • Aim for a benefit that when added to your other
    income will equal 60-70 of your gross pay
  • You will not see more than 70
  • How long do benefits last? To age 65? For life?
  • How long is the waiting period? 90, 180 days?
  • The longer the waiting period, the lower the
    premium
  • Similar to the deductible in an auto or home
    policy

12
Four Sources of Disability Income
  • Employer-sponsored disability insurance
  • Group disability policy may be short or long term
    but usually not enough by itself
  • Individual disability insurance
  • Good Luck! It is very hard to find and, if
    found, is expensive and restrictive
    (www.unum.com)
  • What a deal, huh?
  • Social Security
  • Covers total disability that lasts more than one
    year
  • Workmans Compensation
  • If you are injured at work

13
Health Insurance and Financial Planning
  • Health insurance alleviates the financial burdens
    people suffer due to illness or injury
  • Part of your overall risk management plan to
    safeguard your familys economic security
  • A week in the hospital can literally kill you
    (financially, that is)
  • 47 million Americans have no health insurance
  • Two-thirds are full-time workers and their
    families
  • Older college students can now be covered by
    their parents policy until age 26 under the
    Affordable Care Act

This number has been climbing as more and more
smaller businesses claim they can no longer
afford the cost of health insurance for their
employees. The Affordable Care Act is supposed
to reduce this number to just below 20 million.
14
Types of Health Care Coverages
  • Comprehensive major medical insurance
  • Low or high deductible offered without a
    separate, basic plan
  • Hospital indemnity
  • Pays a fixed amount for each day you are in a
    hospital
  • Cheap and not very useful
  • Dread disease and cancer insurance policies
  • Focus on unrealistic fears, and only pay out for
    very specific conditions
  • Often sold by people working on commission
  • Expensive and not very useful

15
Types of Health Care Coverages
(continued)
  • Dental expense insurance
  • Group coverage for exams, cleaning, x-rays,
    fillings, oral surgery
  • Vision care
  • Some group plans include exams and glasses
  • Long-term care insurance
  • Virtually unknown 20 years ago, but now is
    growing faster than any other form of insurance
  • Oversold, especially to younger adults who could
    easily start an investment plan to self-insure
    their long-term care

16
A Good Health Insurance Plan Should
  • Offer basic coverage for hospital and doctor
    bills
  • Pay at least 80 of out-of-hospital expenses
    after the yearly deductible is met
  • Limit your out-of-pocket expenses to no more than
    4,000 to 5,000 in a year, excluding dental,
    optical and prescription costs a.k.a.
    stop-loss

The Affordable Care Act removed the typical 1
million restriction and the typical one-year
pre-existing exclusion for health insurance.
When Americans are asked if they like the
provisions of the Affordable Care Act (without
naming the law or referring to Obama), they
overwhelmingly say, Yes. When they are asked
if they like Obamacare, they overwhelmingly say,
No!
17
Sources of Health Insurance and Health Care
  • Group plans comprise close to 90 of all health
    insurance issued An accident of history
  • Most group plans are employer sponsored, and the
    employer pays part or most of the cost
  • The Health Insurance Portability and
    Accountability Act (HIPAA) provides some
    protection
  • If you changes jobs you need not lose your health
    insurance
  • Individual health insurance policy
  • Typically (but not always) cost more than group
    policies
  • Affordable Care Act Health Insurance Exchanges
  • Mangled care, uh Managed care
  • Two of the prime examples are HMOs PPOs

18
Sources of Health Insurance and Health Care
(continued)
  • Health Maintenance Organizations (HMOs)
  • Contract with care providers
  • Fixed monthly premium
  • Focus on prevention and wellness
  • Preferred Provider Organizations (PPOs)
  • Several providers to choose from
  • Costs more than a HMO, but you have more choice
    and fewer restrictions
  • If you go to another provider it costs more

19
Catastrophic Health Insurance
  • Low-cost / High-deductible insurance
  • It is really a comprehensive major medical plan
  • Choose your own health care providers
  • Pay out of pocket
  • Can usually negotiate lower fees
  • Just mention this magic little four-letter word,
    Cash
  • Protected against large losses
  • Great for small businesses and the self-employed
  • Eligible for Health Savings Accounts
  • You can contribute pre-tax money to a Health
    Savings Account and then use it to pay for health
    care costs
  • Not to be confused with Flexible Spending Accounts

20
Medical Information Bureau (MIB)
  • The MIB operates much in the same manner as the
    credit reporting agencies
  • Used by the life insurance in much the same
    manner as the credit reports and the C.L.U.E.
    reports
  • Protected by the same laws as the credit agencies
  • Fair Credit Reporting Act
  • MIB must correct any inaccurate information or
    allow you to report your side of the story
  • Allowed one free report each year (like credit
    reports)
  • 866-692-6901
  • www.mib.com

21
Government Health Care Programs
  • Medicare Federal program for those age 65 and
    older, and certain disabled persons
  • Part A compulsory
  • Covers hospital costs including doctor
  • Part B voluntary
  • Doctors office visits some prescriptions
  • Now being means tested
  • More about this later when we get to retirement
  • Part C Medicare Advantage or
  • Medigap Will pay what Medicare does not
  • Part D prescription costs
  • Medicaid (MediCal in California)
  • Low income people of all ages
  • State administered with Federal guidelines

22
Bottom Line on Health Insurance
  • BOHICA
  • Thats right it is pretty much the bottom line
    on all insurance

Oh, Yeah. Dont Forget. Dont Get Sick.
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