What does it mean to be adequately insured? A growing body of research is showing that today's health-related problems increasingly become financial problems when health insurance doesn’t cover enough. The research is showing that rates of medical debt are growing, chiefly among the insured. One in five privately insured Americans with chronic conditions live in families with medical bill problems—an increase from 16 percent in 2003. When out-of-pocket spending for medical care exceeds just 2.5 percent of income—less for low-income persons and retirees—financial burdens on our nations families and retirees become substantial. Learn how to protect yourself.

How do you know if your health care coverage is sufficient when you need it most?

Is your insurer adequately covering your needs? Please share a few comments about your own experiences and use our Health Care Coverage Facts Calculator to identify the true cost of coverage under your plan. The staff at Medicare Sherpa has attached the complete report in our on-line forum, “Coverage When It Counts” from the Center for American Progress Action Fund.

Know Your Options under Medicare

Knowing whether insurance provides adequate coverage when you retire can be a challenge. Health insurance policies and even Original Medicare are complex products, highly variable in their design, and key information about how coverage works is not always disclosed during marketing. Further, health insurance and Original Medicare promises protection against future, unknown events. Consumers who are healthy today can find it difficult to anticipate future medical problems and costs and harder still to evaluate how insurance or Medicare might cover those needs.

The protection health insurance offers today is highly dependent on the policy purchased. An insured person who becomes seriously ill might have to pay thousands, or tens of thousands, of dollars out-of-pocket for needed care. For many consumers that range represents the difference between health security and financial catastrophe. Consumers compare the prices of health insurance policies, but cannot always reliably tell if they are comparing like products. The affordability of health insurance premiums cannot be considered independently of the adequacy of coverage health insurance provides. At a minimum, the difference in protection health insurance offers should be readily available for all to see.

Know Your Out-of-Pocket charges

Health insurance should be transparent, so that consumers know what they are getting in a market filled with options that are not always equal. Many urge that consumers value this plan choice and that choice is vital to efficient competition in health insurance markets. Yet, economists teach that well functioning markets require transparent information so that both buyers and sellers can understand and evaluate options. That’s why health insurance transparency and coverage adequacy go hand in hand.

In the United States, health care spending per person exceeded $7,400 in 2007, although few Americans needed an “average” amount of health care. Instead, just 10 percent of the population accounts for two-thirds of all health care spending. Most people are healthy most of the time, but over the course of a lifetime, most people will also have at least a year or two when medical needs are very high. One out of every three women and one of every two men will be diagnosed with cancer in their lifetimes. The lifetime risk of cardiovascular disease is 50 percent for men and 40 percent for women. In addition, chronic conditions account for approximately three-quarters of medical care spending in the United States. Therefore, medical expenses for a condition may not be confined to one calendar year, even though we buy health insurance coverage in one year increments.

Know All Other Cost Sharing Differences

The research described in this paper estimated cost scenarios for patients with serious medical conditions: breast cancer, heart attack, and diabetes. Under each scenario, care received is based on published treatment guidelines, and no added complications arise. It is also based on health insurance offered to individuals under the age of 65 in California and Massachusetts.

Over the next few weeks, Medicare Sherpa is going to reach out to Center for American Progress Action Fund to develop a Health Care Coverage Facts Calculator for retirees over the age of 65 and specifically build coverage calculators for Original Medicare, Medicare Supplement and Medicare Advantage plans. Each example below illustrates health care costs associated with medical conditions and treatment plans that cover a three (3) year period. Since most health insurers reset the clock each year on January 1^st you can expect your out-of-pocket costs to be reset as well. Three year's worth of premiums, deductibles, co-insurances & copayments are illustrated in each example:

• The breast cancer patient is diagnosed with an early stage tumor in May, and care continues for 87 weeks. She needs 52 diagnostic tests and imaging procedures; one surgery; 118 visits associated with chemotherapy, Herceptin, and radiation therapy; 36 mental health visits; and 36 prescription drugs and refills. What providers charge and insurers pay for health care varies geographically. Total allowed charges for this care are estimated to be $97,298 in California and $143,180 in Massachusetts.

• Care for the heart attack patient also begins in May, with treatment extending 56 weeks.  He needs one ambulance ride, two hospitalizations for surgery, six cardiology visits, nine diagnostic tests and imaging procedures, 36 cardiac rehab sessions, 50 mental health visits, and 64 prescriptions and refills. Total allowed charges are estimated to be $81,993 in California and $89,644 in Massachusetts.

• The third scenario examines the cost of managing well-controlled diabetes. The patient tests her blood sugar at least four times a day and administers insulin, sees her physician quarterly for checkups and lab tests, and has her feet and eyes examined annually. In one year, she would have seven office visits and 10 lab tests. She also would use approximately 1,400 each of test strips, lancets and alcohol swabs, as well as 430 syringes. She would also need to fill or refill 38 prescriptions. Total allowed charges for a year of diabetes management are estimated at $7,309 in California and $7,850 in Massachusetts.

Making Health Plans more Transparent

If you have never been very sick you may not appreciate the extent and type of medical care that could be required in the event of a serious illness. Nor would you likely anticipate what such care might cost, in terms of either billed provider charges or

insurer allowed charges. If you are retired and on Original Medicare alone, the costs could be substantially higher than the examples provided.

Use our “Health Care Coverage Facts Calculator”

To improve transparency and standardize information, the Center suggests the development of a new information tool for health insurance consumers: a “Health Care Coverage Facts” label for health insurance policies, modeled on the Nutrition Facts label required for packaged foods. A Coverage Facts label would summarize key features in a health insurance policy and illustrate how it might cover care for a given treatment scenario. The label would highlight important estimates, such as total treatment costs and the amount the patient might be expected to pay. The label could break down patient cost liability by type of service (highlighting the impact of excluded or limited benefits, for example) and by type of cost sharing (illustrating how co-pays might add up during treatment of a chronic condition).

Medicare Sherpa has attached a mock-up of such a label for Medicare Advantage Plan in Massachusetts and you can find a copy in our forum. If you are retired and covered by a Medicare Advantage plan the results may surprise you.

Understand the Implications of Health Care Reform on Coverage

As policymakers contemplate national health care reform, a key question will be the level of protection health insurance should provide. The answer involves tough trade-offs. More protection costs more, while less protection leaves patients exposed to higher costs they may not be able to afford. The financial burden of high cost sharing and excluded benefits falls on people only when they are sick, and will be ongoing for those with chronic conditions and particularly those who are retired.

The process of reform has already started and the fate of health care reform for most retirees will be felt on October 1^st of this year. The federal Centers for Medicare and Medicaid Services, or CMS, on February 20^th announced a negative .5% payment decrease to Medicare Advantage insurers in 2010—instead of about 4% in the past few years. This alone will result “...in fewer managed-care plans and the generous benefit packages that they have right now will be less generous,” according to Mark Miller, executive director of the Medicare Payment Advisory Commission, which advises Congress on Medicare payments, said recently.

Its critically important that all retirees participate in the national debate on Health Care Reform. You will find a copy of U.S. Senator Max Baucus (D-Mont.) report on “Reforming America's Health Care System: A Call To Action” in our Discussion Forum.

About the Author:

My name is Dana Cutter and I am Founder and Editor of Medicare Sherpa. Our staff spends their days searching the Internet for the best content and advice on retirement.  On our site you will find articles on Social Security, Medicare Benefits, Prescription Drug Benefits and more. Please feel fee to send me an email with ideas for content, site improvements or general help launching your online persona. I hope you will consider joining and I am looking forward to reading more about you online.

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