Chapter 23: Money and Health

Woody Grant: “I won a million dollars.”

ER Doctor: “Congratulations. That'll just about pay for a day in the hospital.”

– Nebraska (2013)

It’s advisable, though not always affordable, to have health insurance. Most Americans get theirs in one of four ways:

Through an employer
On their own in the “individual” market
Through Medicaid if they are disabled or have low incomes
Through Medicare if they are sixty-five or older or disabled

Also, close to nine million people get insurance from the Department of Veterans Affairs (VA).

The cost of insurance, what is covered, and which insurance can be used to pay for which treatments vary widely. It’s also really hard to find out in advance what medical care will cost and how much will be covered by insurance. Prepare to be surprised. Unpleasantly.

Health insurance (except Medicaid in many states) generally does not pay for contact lenses and glasses, dental care, and hearing aids. The same goes for long-term care, such as extended nursing home stays. These all require separate insurance.

Health Insurance Lingo

Let’s get some terminology out of the way.

Deductible: a dollar amount that you have to pay before the insurance company pays anything. For health insurance, deductibles are yearly amounts.

Co-payment: a fixed dollar amount you’re expected to pay (for example, $20 per doctor visit).

Co-insurance: a percentage of the cost of a procedure or drug that you are expected to pay after you’ve reached the deductible.

Out-of-pocket maximum: the most you have to pay in a year for procedures that are covered by the insurance plan. Co-insurance stops at this amount; the insurance company pays 100 percent of additional charges.

Network: a group of hospitals, doctors, pharmacies, and other providers with which the insurance company has negotiated rates for different procedures. Insurance companies will cover more costs when you use “in-network” providers than “out-of-network” providers.

Health Maintenance Organizations (HMOs): insurance organizations that require you to use “in-network” providers. Out-of-network providers are on your own dime.

Preferred Provider Organizations (PPOs): plans where your cost is lower if you use an in-network provider but there is some coverage for out-of-network costs.

High-deductible health plan (HDHP): A policy which meets various requirements that will allow you invest in a Health Savings Account (HSA). As the name suggests, the main feature is that the deductible is high: in 2020 at least $1,400 for an individual or $2,800 for a family.

Coverage at Work

Many employees receive health insurance at work. Unfortunately, there is no “one size,” so it’s important to review the plans that are available to you. Key questions to ask are:

Is coverage also available for my spouse/partner and children? Compare costs if your spouse/partner also has insurance at work.
Are there exclusions that affect me (e.g., pre-existing conditions, mental health services, etc.)?
What are the deductibles, co-pays, maximums, etc., compared with my expected expenses?
Do I have doctors or hospitals that I prefer to visit and, if so, are they in the plan network?
What does the insurance cost? Recognize that what is taken out of your paycheck is often only a fraction of the cost. Your employer picks up the rest (though you can be sure that your salary is lower as a result). A total yearly cost of $20,000 for a family plan is not unusual. Your employer’s share of the premium is shown on your year-end W-2.
Do I need a referral from a primary care doctor to see specialists?
Do I need pre-approval from the insurance company for elective procedures?
If I choose an HDHP does my employer contribute to an HSA for me?

Remember, you can usually change plans once a year. If you are healthy and don’t anticipate any significant expense, a high-deductible plan and HSA may make sense; if you expect higher expenses, a more expensive plan with more generous benefits might be better.

If you leave your job, you can choose to continue your employer health coverage for up to eighteen months under what is known as COBRA coverage. [56] The catch: You pay the full cost of coverage.

Individual Coverage

If you don’t have insurance at work or through a parent or partner’s plan you need to look to the individual insurance market. “Individual” just means you’re not part of a larger group; you can still get a policy to cover your entire household.

Brace yourself for sticker shock and a cumbersome sign-up process. Start by looking at the “Marketplace” created by Affordable Care Act (“ACA”, also known as “Obamacare”) to see how to enroll in your state. There is an annual enrollment period that runs for a few weeks starting in November of each year, though you can also sign up if you have a life change such as losing other insurance, getting married, or having a child.

If your income isn’t too high, the government pays part or even all of your premium for policies bought through the Marketplace. How much depends on your income relative to the national poverty level. You get this subsidy by telling the government how much you expect to make in the coming year. Later, when you file taxes on your actual income, you settle up by paying more or less in income taxes for the year.

National Poverty Level (Annual Income) in 2020 [58]

Size of Household

Lower 48

Alaska

Hawaii

$12,760

$15,950

$14,680

$17,240

$21,550

$19,830

$21,720

$27,150

$24,980

$26,200

$32,750

$30,130

$30,680

$38,350

$35,280

$35,160

$43,950

$40,430

You can also buy an individual policy that is not sold through the Marketplace. This may give you more choices but be aware that these policies don’t always cover everything Marketplace policies must cover.

Medicaid

Medicaid and the related Children’s Health Insurance Program (CHIP) provide basic health coverage for about 72.5 million Americans—more than one out of five. Eligibility varies by state; thirty-seven have “expanded” Medicaid to cover households earning up to about a third more than the national poverty level. The rules are complex; to find out more start by getting info on your home state’s program.

Medicare

When you turn sixty-five you should enroll in Medicare. One misconception is that Medicare is free. It's not. You pay premiums and if you don’t enroll on time, you’ll face life-long higher costs. [59]

Medicare comes in several "parts:"

Part A covers hospital stays. It’s free if you’ve paid FICA taxes for at least ten years. Otherwise, your pay a premium (in 2020, up to $458 a month).

Part B covers doctor visits and other “outpatient” services. You pay a premium for Part B coverage which is often taken out of your Social Security check. The basic premium in 2020 was $145 a month for Part B, more if you made more than $87,000 ($174,000 as a couple). There is also an annual deductible for Part B, $198 in 2020.

Part C and Part D are extra policies that you can buy from insurance companies. Part C (known as Medicare Advantage) plans roll all your Medicare (Parts A, B, and usually D) into one package. The policies provide more coverage but are HMOs or PPOs that either don’t cover out-of-network costs at all or only at a lower rate.

Part D policies are specifically for prescription drugs. Most Medicare Advantage policies include prescription drugs, so you wouldn’t get a Part D policy if you opt for a Medicare Advantage policy.

Finally, Medigap (or Medicare Supplement) policies are policies you can buy to “fill the gaps” in Medicare coverage. They cover deductibles and coinsurance among other things. You wouldn’t get a Medigap policy if you opt for a Medicare Advantage plan.

It’s all a lot more complicated than it needs to be, but that’s what it is. If you’re nearing sixty-five take some time to figure it out.

When Insurance Doesn’t Pay

Stuck with a massive medical bill? Welcome to America’s healthcare system, which serves up a steady diet of denied claims, unaffordable insurance, outrageous charges, “surprise” bills, and hospitals suing patients for non-payment. There’s no single or easy way to navigate this mess, but here are some tips from insiders: [60]

Before Getting Care

Figure out whether it’s medically necessary. Don’t just go with the first recommendation. Sometimes procedures are recommended “just in case” or because doctors want to avoid being sued. Or they become an accepted practice even though there is little evidence of any benefit; an example is the overuse of arterial stents. [61]

Comparison shop. If it’s not an emergency, call around to different hospitals and providers and try to find out what a procedure will cost you out-of-pocket. Prices vary dramatically, often with little difference in quality. Be persistent because getting the information can be tough. You can also research prices on-line for different procedures in your area.

Once you have a sense for what a procedure should cost, negotiate. Offer to pay cash in advance as opposed to going through insurance (especially if you want to use an out-of-network provider or won’t reach your deductible). Some providers will give you a deal to avoid the hassle of dealing with insurance companies. Taking this concept to the next level, you can even go outside the country and get common procedures for much less (known as “medical tourism”).

Learn about the active ingredients in medications and look for generic substitutes. Many brand-name drugs are nearly identical to medicines that are older and available in generic form.

During Care

When you are at the doctor, let alone in the ER, you feel lousy and vulnerable. You're in no mood to haggle. But ideally you should ask questions to understand which tests and procedures are going to be run and why you need them. “Oh, it’s standard practice” is not a good answer.

IIf you’re told you will be kept in the hospital make sure you’re admitted (covered by insurance), not just kept for observation (not covered by insurance). Ask for a semi-private room rather than a private room (more expensive). Insist on in-network providers only (write it on hospital admission papers).

Afterwards

If you receive a medical bill, do not just pay it. Request itemization of charges and get explanations for anything you don’t understand. Bills are rife with errors. Try to inform yourself about typical costs and immediately challenge and negotiate outsized charges. Check if your employer has a patient advocate; consider hiring one for especially large bills. If your insurance claim is denied, understand why and your right to appeal.