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Article Excerpt
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Mary and Bob Smith's Story
Mary, age 62, and Bob, age 65, have worked hard helping their only child through college and are now looking forward to living the life of empty nesters. They have tried to do everything fight in funding their child's education, setting aside a $10,000 emergency fund, prepaying funeral expenses, paying off both vehicles, accumulating $200,000 in CDs from the sale of Bob's business, and purchasing a home that now has $200,000 in equity and a small mortgage. Bob just retired and has an income of $1,200 per month from his company retirement plan and receives Social Security retirement benefits of $953 per month. At age 65, Bob became eligible for Medicare and also purchased a Medicare Supplement (Medigap) Policy. Mary is employed and earns $1,500 per month and is covered by a group health insurance policy provided by her employer. The Smiths want to leave their home to their only child, Bob Jr., who plans someday to live in his childhood home and raise his own family. A month after retirement, Bob suffered a massive stroke, was hospitalized for a week, and then was moved to a skilled nursing facility for rehabilitation. After 60 days in the nursing facility, Bob's condition stabilized. Given the severity of his condition, he will need to remain in a nursing home for the remainder of his life. How will the Smiths survive this personal and financial crisis? What resources and insurance coverages do the Smiths have that cover these costs? How do the Smiths provide for themselves and still leave a legacy to their child?
What Kind of Care Does Bob Need and Does Medicare Cover It?
Unfortunately, most Americans believe that they are adequately covered for the type of care that Bob needs. They believe that Medicare (the federal government health care program for individuals 65 or older), a Medicare Supplement (Medigap) Policy (a policy purchased from an insurer to supplement coverage under Medicare), and/or private individual or group medical expense insurance covers situations such as Bob's required long-term care. However, Bob needs substantial assistance with "activities of daily living (ADLs)," and most Americans (including Bob) are not adequately insured for those needs. ADLs include bathing, dressing, transferring (moving to and from a bed to a chair), toileting, remaining continent, and feeding oneself. This type of care (sometimes referred to as personal or custodial care) is not covered by Medicare, Bob's Medigap policy, or Bob's private health insurance.
Only A Small Portion of the Cost of Bob's Care Is Covered. Even though Bob's primary need is for long-term assistance with ADLs, Medicare does provide coverage for his initial six-day hospital stay, subject to a $1,068 deductible and a $135 deductible and 20 percent co-pay for physician's services. Since Bob's hospital stay was at least three days in length, and he was admitted into a skilled nursing facility within 30 days of his discharge, Medicare will pay for up to 100 days of his care as long as he needs some element of skilled care. Medicare pays for the first 20 days of care without a...
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