Is Health Insurance Really The Biggest Health Care Crisis In America?


DisagreeDuring the presidential election campaign of 2008, then senator Barack Obama, was successfully able to change the aggravation of increasing Major Medical insurance premiums to a national “Health Care Crisis.”

I do not disagree that something had to be done about the high cost of health care in doctor’s offices and hospitals.  It was getting to the point where not only was it a hardship for those in poverty to pay for health care, but it was a major expense for middle-class, working Americans.

The way things were heading, only those with Medicare or who worked for huge companies could afford to pay for health care when they got sick.  Health insurance premiums for small groups and individuals was approaching the point where owners of small businesses and their employees could not afford to pay the premiums.  They were dropping their coverage and taking their chances.

Although I disagree with the way Obama handled things, I must grudgingly admit that Obamacare may work, in the short-term.  Unfortunately, I do not anticipate it to be successful in the long-term unless it is drastically changed by the next president.

I’m hoping that when another president is elected it will not be too late to address the issue with an eye on what is good for all Americans and not just the constituency that is needed for political reasons.

There is no question that something had to be done about the “Health Care Crisis.”  However, I am not convinced that Obamacare corrects the biggest “Health Care Crisis” that America faces.

In this post I want to answer the question, “Is health insurance really the biggest health care crisis in America?”

THE REAL “HEALTH CARE CRISIS”

It is true that when Barack Obama declared the “Health Care Crisis” about 25% of Americans had no Major Medical health insurance.  For the wealthiest nation on the planet, that is terrible.  Those of us who paid for health insurance also had to pay for the health care bills these uninsured Americans ran up when they went to the Emergency Room.

The hospitals were required by law to treat many of them for “free.”  However, they practiced “cost shifting.”  They billed our health insurance companies for both our treatment and that of the uninsured when we used the Emergency Room.

Mr. Obama’s solution was to require that all Americans purchase private insurance with their own money.  Those who the federal government says can not afford to pay the premium will qualify for “subsidies.”

Unfortunately, Mr. Obama was so focused on the problem his mother had when she tried to make her insurance pay for advanced cancer treatment when she did not pay the appropriate premium, he failed to see an even bigger “Health Care Crisis” approaching Americans.

Yes, when Mr. Obama was campaigning for president 25% of Americans had no Major Medical insurance.  However, at the same time 90% of Americans had no Long Term Care insurance.

In my opinion, the fact that more than 70% of retired Americans will need Long Term Care at sometime during their senior years.  In comparison fewer than 5% of Americans with health insurance even meet their deductibles each year.  The latest statistics I have seen show that 95% of medical costs are spent by 5% of the population each year.  The problem is that while The Law of Large Numbers allow actuaries to predict that phenomenon with accuracy, it is impossible to predict who will be part of the 5% who need significant health care each year.

Unfortunately, while the costs for Long Term Care are significantly more expensive than the average American’s health care expenses people in nursing homes and “shut-ins” tend not to go to the polls to vote.

” According to the American Association for Long-Term Care Insurance, 7.6 million individuals currently receive care at home because of long-term health conditions, permanent disability or terminal illness, but there are just 1.8 million individuals in nursing homes. Many buy long-term care insurance just so they can receive care in their own home.”

OBAMACARE’S SWING AND MISS

In fairness to Obamacare, it did originally attempt to address the looming crisis of Long Term Care while the Affordable Care Act was being debated in congress.

However, after Obamacare was passed by congress and became law, President Obama decided that Title VIII of the Patients Protection and Affordable Care Act was unworkable.  Without the consent of our elected officials in congress, he suspended work to make it feasible.

Right now Medicare and Medicaid are the only government programs that offer any sort of help for the Long Term Care expenses of the elderly.

Medicare is limited to just a few days in a nursing home or medically necessary “home health visits” by a licensed medical professional.

Medicaid is a state-run program that is only available for those who are able to financially qualify.  The qualifications differ from state-to-state but the one thing that all states have in common is that before you can get help from Medicaid with your Long Term Care expenses you must “spend down” most of your life’s savings.

While a “spend down” program may be acceptable if you are single, it can have serious consequences for a healthy spouse and children’s inheritances if proper planning is not done ahead of time.

Since the politicians in D.C. have decided that the “Health Care Crisis” does not include those who are too old to vote, the private insurance industry has developed an option for middle-class Americans who cannot qualify for Medicaid without a “spend-down” plan.

Traditional Long Term Care insurance is still available for those who want the most comprehensive plan available.  It has been around since the late 1970s but has evolved significantly in the past 10 years.

(If you have a Long Term Care insurance plan from before 2005, I highly urge you to dust off the policy and review it.  It may be obsolete when it is compared to current policies.)

Yes, traditional Long Term Care insurance can be very expensive if you accept all the bells and whistles that insurance companies offer.  However, basic plans, without all of the optional riders, often cost no more than the average permanent Life insurance policy would cost for someone at the same age.

OPTIONS

Since Obamacare became law in 2010, I have seen where the insurance industry has developed some more affordable options for those who do not want all the benefits of a traditional Long Term Care insurance policy.

  1. Life Insurance – Several Life insurance plans offer Long Term Care or Critical Illness riders.  Those plans are often sufficient to pay for a home care aide.  Just be aware that many of them require the policy to have been in force for at least 2 years before they will pay any benefit.  If you elect to use this strategy, make certain that you read your policy when you get it and understand any, and all, limitations.
  2. Annuities – Like Life insurance, many annuities will increase your annuity’s balance to pay for Long Term Care expenses.  Just be aware that most annuities have similar limitations as Life insurance riders.  If you elect to use this strategy, make certain that you read your policy when you get it to understand any limitations and responsibilities you have in order to qualify for benefits.
  3. Critical Illness Insurance – By far the cause for the majority of Long Term Care expenses for people who can stay at home is cancer.  After that is Heart Disease and Stroke.  If all you are wanting to do is make certain that you have the money for the Long Term Care expenses that come with cancer, heart attack and stroke, I urge you to consider a Critical Illness insurance policy.  All plans will pay if you are diagnosed with cancer, heart attack or stroke.  Many plans will also cover you if you are diagnosed with another critical illness.

There are a couple of problems with all of these options that require you to plan ahead.

  1. Obamacare’s mandated Essential Benefit Plans do not cover Long Term Care expenses unless they are “medically necessary.”  In other words, unless it is treatment designed to cure an ailment, you will not be covered.  For example, if you need a nurse to periodically come by to help you with an injection or to change a bandage, that cost will be covered.  However, if you suffer a paralyzing injury and need help going from you bed to a chair or the bathroom, the Essential Benefit Plan will not pay for you to hire an aide.
  2. Obamacare does not eliminate medical underwriting for this type of insurance.  Once you suffer an accident or illness that limits your abilities, you will probably not be able to get the insurance.
  3. Before you can qualify for Medicaid, you must “spend down” your life’s savings to poverty levels.  If you are single, with no children, that may not be a problem.  However, if you are married or have children who you want to leave an inheritance to, a “spend down” program could be problematic.

FINAL THOUGHT

Whether you are for the A.C.A. or think that Obamacare is the worst legislation since Prohibition is immaterial.  The fact is that America faces a bigger “Health Care Crisis” than what was addressed in the A.C.A.

Every day, more than 10,000 Baby Boomers turn 65.  That means that 90% of 7000 people, everyday, will need to “spend down” to qualify for Medicaid to help with their Long Term Care bills in the future.

I am not foolish enough to think that everybody will elect to use The Insurance Barn to help them make plans.  However, I urge you, if you have read this far, to contact an insurance agent you trust and make arrangements so that you do not have to rely exclusively on Medicaid to help you through the coming crisis.

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