Total up your fixed expenses and your flexible expenses. Subtract thistotal from your total income. If there is something left over,congratulations! You are living within your means. This would be a goodtime to decide where you can accelerate payment on your fixed expenses. Ifthere is nothing left, or if your expenses exceed your income, it is timeto sit down and seriously consider where you can cut back in order to startliving a financially responsible life. It is in the context of a working budget that the measures mentioned before- couponing, brown bagging it, conserving energy, and others – truly work!If you’re budgeted for $125 a week for groceries, but with coupons youbring your total down to $115, you’ve generated $10 that can be applied topaying off debt or to one of your special accounts such as the vacationfund.
What? You don’t have a vacation fund? Well, you should! This is wheresaving comes in. Make saving a priority. To do this, pay yourself first. Twenty dollars one way or the other will not break most of us. When yourpaycheck gets deposited, take twenty dollars (or more if you can) and putit in a savings account. Your immediate goal is to have three months ofliving expenses (total of your fixed and flexible expenses) stashed away asa cushion against loss of income. Once you have done this you can startsaving for special expenses such as family vacations, new cars and otherextravagances. Finally, and most importantly, you need to remember that your budget is aliving document. Don’t tack it to the fridge and forget about it.
Reevaluate your expenses from time to time. Certainly, changes in lifestylerequire a reworking of your budget. However, in reality, no budget willstand the test of time. The smallest raise or the slightest increase inexpenses need to be integrated into your budget and considered in the grandscheme. Now… Choosing Which Health Insurance?Health insurance allows you to budget for and prepay certain medicalexpenses. There are many factors to consider in determining what type ofhealth insurance, if any, best meet your needs and those of your family. With any health plan, there is a basic premium, which is how much you oryour employer pay, usually monthly, to buy health insurance coverage. Inaddition, there are often other payments you must make, which will vary byplan. In considering any plan, you should try to figure out its total costto you and your family, especially if someone in the family has a chronicor serious health condition.
There are two basic categories of health insurance plans: indemnity andmanaged care. These categories differ in their basic approach, both in howmuch you have to pay and how easy it is to get the services you need. Although no plan will pay for all the costs associated with your medicalcare, some plans will cover more than others. The major differences between indemnity and managed care plans concern:1. Insured’s choice of providers2. Insured’s out-of-pocket costs for covered services3. Plan’s method of paying bills for services. Indemnity Plans:Indemnity plans, also known as fee-for-service plans, are the “traditional”type of insurance plans. These plans generally offer more choice ofclinicians and facilities than managed care plans.
With an indemnity, you can use any medical provider (such as a physician,therapist or hospital). Indemnity plans pay their share of the costs of aservice only after they receive a bill. You or the provider sends the billto the insurance company, which pays part of it. In most policies, you, as the insured, will have a deductible-such as $200-to pay each year before the insurer starts paying for services. Once youmeet the deductible, the plan pays a percentage of what it considers the”Usual and Customary” charge for covered services. Typically, the insurerwill pay 80 percent of the Usual and Customary costs, and you pay the other20 percent, which is known as coinsurance. If the provider charges more than the Usual and Customary rates, you willhave to pay both the coinsurance and the difference. The plan will pay forcharges for medical tests and prescriptions as well as from clinicians andhospitals. Indemnity plans often do not pay for some preventive care, likecheckups.
Managed Care:Managed care plans have agreements with certain physicians and other healthcare providers to give a range of services to plan members at reduced cost. Managed care plans include preferred provider organizations (PPOs), healthmaintenance organizations (HMOs), and point-of-service (POS) plans. Preferred Provider Organization (PPO):A PPO is a form of managed care most like an indemnity plan. A PPO is anetwork of doctors, hospitals, and other providers of care who have agreedto accept lower fees from the insurer for their services. As a result, yourcost sharing should be lower than if you go outside the network. Inaddition to the PPO doctors making referrals, plan members can referthemselves to other clinicians, including those outside the plan.
If you go to a doctor within the PPO network, you will pay a co-payment (aset amount you pay for certain services, for example, $10 for a doctor’svisit or $5 for a prescription). If you choose to go outside the network, you will have to meet a deductibleand pay coinsurance based on higher charges. In addition, you may have topay the difference between what the provider charges and what the plan willpay. Health Maintenance Organization (HMO):HMOs are the oldest form of managed care plan. HMOs offer members a rangeof health benefits, including preventive care, for a set monthly fee. Thereare many kinds of HMOs. If clinicians are employees of the health plan andyou visit them at central medical offices or clinics, it is a staff orgroup model HMO.
Other HMOs contract with physician groups or individual practitioners whohave private offices. These are called individual practice associations(IPAs) or networks. HMOs will give you a list of clinicians from which to choose a primary careprovider. This provider — generally a physician, nurse practitioner, orphysician’s assistant — coordinates nearly all of your medical care. Thismeans that if you wish to see a specialist for diagnosis or care, yougenerally you must be referred by your primary care provider in order tohave the service covered by the HMO. With some HMOs, you will pay nothing for diagnostic tests or treatment. With other HMOs, there may be a co-payment, like $5 or $10, for variousservices. An HMO covers only the cost of charges for clinicians and services thatbelong to the plan. If you go outside the HMO, you will pay the bill.
Point-of-Service (POS) Plans:Many HMOs offer an indemnity-type option known as a POS plan. The primarycare doctors in a POS plan usually make referrals to other providers in theplan. But in a POS plan, members can refer themselves outside the plan andstill get some coverage. If the clinician makes a referral out of the network, the plan pays all ormost of the bill. If you refer yourself to a provider outside the networkand the service is covered by the plan, you will have to pay coinsurance. The Bottom LineOver time, the distinctions between indemnity and managed care plans havebegun to blur as health plans compete for your business. Some indemnityplans offer managed care-type options, and some managed care plans offermembers the opportunity to use providers who are “outside” the plan. Thismakes it even more important for you to understand how your health planworks.
In general, you will have less paperwork and lower out-of-pocket costs ifyou select a managed care type plan and a broader choice of health careproviders if you select an indemnity-type plan. Do You Really Need Health Insurance?If your typical medical expenses are small and your reserve funds are big,you may want to skip the monthly payments to an insurance company and bankthe cash instead. Or at least, consider reduced coverage. HMOs, PPOs and other types of Insurance allow you to budget for and prepayyour anticipated medical expenses. When you evaluate whether or not you need insurance, you need to decide howmuch catastrophe you and your pocketbook can bear. It is similar to car insurance. The higher your deductible, the less youpay up front!Make sure you have a plan (whether it involves insurance or not) thatcovers you in case of emergency or chronic conditions…hospital expensescan quickly add up. Major Medical or Short Term Major Medical coverage canbe a good solution when you only want or need protection from big medicalbills.
To make an informed decision, you may want to talk to an insurance brokeror a financial advisor. Understanding Disability Insurance: Employer-sponsored disability insurance policies are designed to provide individuals with all or a percentage of their salary, in the event thatthey are unable to work due to a non-work-related injury or illness. Employer-sponsored disability insurance is not the same as workers compensation, nor is it the same as Social Security. Basically, there are two types of employer-sponsored disability insurance:Short-term disability plans and long-term disability plans. Short-term disability plans, often offered by employers, are designed toprovide financial protection to individuals who, because of non-work-related illnesses or injuries, are unable to temporarily perform theirnormal job duties. The time period covered by short-term disability plansvaries significantly. Often, however, the maximum period is six months.
Many companies specify a waiting period that must be recognized beforeshort-term benefits take effect. Most employers specify that “sick days”must first be used, and that the employer and/or the employers’ insurancecompany and/or a case manager be notified before short-term disabilitybenefits will be honored. The amount of benefits that an individual receives while on short-termdisability depends on many factors, including his or her salary prior toinjury or illness and the policy itself. Benefit amounts can range from 50percent to 100 percent of an individual’s salary. Long-term disability plans are designed to provide financial protection toindividuals who, because of non-work-related illnesses or injuries, areunable to temporarily perform their normal job duties for time periodsextending beyond those specified by short-term disability plans.
Long-term disability policies do not take effect until short-termdisability policies “run out.” Employers sometimes offer long-termdisability policies to employees as an optional benefits purchase. Employers rarely pay all of the premiums to cover employees’ long-termdisability policies. Long-term disability benefits vary significantly. Monthly benefits”payouts” are rarely 100 percent of an individual’s salary. Moretypically, the benefit is 50 percent or 80 percent of an individual’ssalary. As with short-term disability policies, long-term disability policiesspecify maximum time limits for “pay out”, such as five years, 10 years, ora specific age. Often, individuals must stay in contact with a casemanager and/or the insurance company or employer.
Understanding Workers Compensation:Worker’s compensation encompasses many different state and federal lawsdesigned to provide benefits to employees (or their families) for work-related illnesses, injuries and deaths. The laws vary widely, and somestates exempt certain classes of workers, such as farm employees. Employers pay workers’ compensation premiums. Individual employees do notpay them, nor are the premiums deducted from an employee’s wages. The coststo the employer for coverage of employees vary widely and are determined bystate workers’ compensation authorities. Workers’ compensation premiums can represent a significant cost to bothsmall businesses and large corporations. Though individual employees donot pay for coverage, ultimately, all the costs are absorbed through lowersalaries and through increased product and service pricing.
Workers’ compensation (and fraud) is big business (to attorneys, toinvestigators, and to firms whose role is to monitor workers’ compensationclaims). The state agencies that manage workers’ compensation also varies. Todetermine what agency manages workers’ compensation in your state, contactyour state’s department of labor or its equivalent. Workers’ compensation covers only those injuries, illnesses or deaths thatoccur while an individual is on the job. It entitles individuals toreceive benefits for all job-related injuries, regardless of who is atfault (the employee or the employer). It does not, however, cover injuries,illnesses or deaths that occur while an employee is at home or on vacation. Benefits are calculated on pre-injury, pre-illness or pre-death wages. Theamount of benefits, or fixed weekly dollar amount, that an individual mightreceive from a claim also varies according to a number of factors includingthe degree of impairment resulting from the injury.
Claims for workers’ compensation must be filed within a certain timeperiod, defined by the individual states. Injured employees should reportthe incident to his or her employer immediately, and request or obtainappropriate diagnosis and treatment, if necessary. Employers have the right to contest workers’ claims, in which case ahearing will be held. Both workers and employers can appeal decisions. Filing a workers’ compensation claim for injuries or illnesses that are notsustained on the job is fraudulent and illegal. An exception to this rule,in some states, is the assumption that certain medical conditions forcertain types of workers are caused by the work. In these cases, it may beassumed true, regardless of any direct cause and effect being proven. It is also illegal and fraudulent to claim that an impairment resultingfrom a job-related illness or injury is greater than it really is.
Long Term Care Insurance:The phrase “long-term care” refers to the kind of assistance that you or aloved one might need if you or the individual ever develop a chronicillness or disability that makes it impossible for you to care foryourself. Long-term care can be provided at home or in a nursing home. Currently, neither Medicare nor Medicare supplement policies are designedto cover expenses arising from long-term illnesses or chronic conditionsrequiring custodial care. Only Medicaid provides unlimited coverage for custodial care in a nursinghome, but only to low-income persons or those who have exhausted their ownresources.
Experts estimate two out of three persons who enter nursing homes, as”private pay” residents become Medicaid eligible within a year. Nursinghome costs range anywhere from $20,000 to $40,000 per year. The cost couldbe as high as $75,000 for the most expensive nursing homes. Most people, ortheir families, pay for these costs themselves. Several insurance companies sell a variety of “long-term care” insurancepolicies. Some long-term care policies pay for skilled, intermediate orcustodial care in a nursing home. Others also cover home health orhomemaker services as well.
Most policies require the individual to be hospitalized first beforenursing home care will be covered. Some require that the individual receiveskilled or intermediate care before the insurance company will pay forcustodial care expenses. Policies generally pay only for expenses in nursing homes that:1. Are licensed by the state and participate in Medicaid and/or Medicare,and2. Meet the policy’s definition of skilled, intermediate or custodial care. Similar requirements are specified for how much a policy will pay for homehealth services. Check the nursing homes in your area to make sure thehomes fit policy definitions. If they don’t, you or your loved one may notbe eligible for benefits in the nursing home of your choice.
Also inquire about the waiting lists at various nursing homes. While thenursing home of your choice may fit your insurance company’sspecifications, the waiting list may be long. Yearly premiums for long-term care insurance vary greatly — from under$100 to as high as $2,500. Factors that influence the price include:1. Your age at the time of purchase2. Benefits offered3. The insurance company’s pricesGenerally, the younger you are when you buy a policy, the lower yourpremium will be. Most companies will not sell policies to those over theage of 79. What is Medicare?Medicare is a health insurance program for people age 65 or older, certainyounger people with disabilities, and people with End-Stage Renal Disease(ESRD). According to the federal Health Care Financing Administration(HCFA), Medicare serves about 39 million beneficiaries.
The large majority of Medicare beneficiaries have original Medicare. Thisis the traditional fee-for-service arrangement, which means you can go toany health care provider who accepts Medicare. You must pay a deductible,and then Medicare pays its share of the costs and you pay your share. How does Medicare work?Original Medicare, also called traditional Medicare, is the most widelyused and best understood choice through which Medicare beneficiariesreceive their health care. Health care providers are paid based on theservices they provide. In general, your choices are less restricted with Original Medicare thanwith other Medicare choices. For example, you can go to any doctor,hospital, or other health care provider who accepts Medicare. But yourcosts are likely to be higher than with other choices, in part because youalso need Medicare supplement (Medigap) insurance. You also are likely toface more paperwork than with some of your other Medicare choices.
Who pays for Medicare?Medicare is financed by Americans’ payroll taxes and administered by theHCFA. Beneficiaries also have “out-of-pocket” costs: They must pay Medicarepremiums, deductibles, and coinsurance (or co-payments). In addition,beneficiaries must pay for their own Medicare supplement insurance(commonly known as Medigap) if they want it, prescription drugs, routinephysicals, custodial care, most dental care, dentures, routine foot care,hearing aids, and other costs. Low-income beneficiaries who cannot affordthese can get further financial help. Who is eligible for Medicare?To be eligible, you or your spouse must have worked for at least 10 yearsin Medicare-covered employment, be age 65 or older, and be a citizen orpermanent resident of the United States. A younger person with a disabilityor with chronic kidney disease also might qualify for Medicare.
Are there income limits or medical requirements?There are no income limits for Medicare. There are medical requirements forthe delivery of services, because an individual must have a medical needfor those services. Can you explain the two parts of Medicare, Part A and Part B?Medicare Part A is “hospital insurance.” It helps pay for inpatienthospital care, inpatient care in a skilled nursing facility, home healthcare, and hospice. In limited circumstances it will pay for skilled nursing-facility care. Most Medicare beneficiaries qualify for premium-free Part A. In 1999, the deductible was $768 and covers the first 60 days of a hospitalstay. Beneficiaries pay coinsurance for longer stays and for some care in anursing home.
Medicare Part B is “medical insurance.” It helps pay for medical services -physician, ambulance, outpatient therapy, and a wide range of otherservices, equipment and supplies, including: x-rays, emergency care,limited chiropractic services, artificial limbs and eyes, medical supplies,neck and other braces, kidney dialysis and kidney transplants, breastprostheses following a mastectomy, preventive services, and various otheritems. Part B is optional, and 2000 premiums are $45.50 per month. Thesepremiums are deducted from Social Security, Railroad Retirement, and CivilService Retirement checks. Medicare also covers certain preventiveservices. The annual Part B deductible is $100 for 2000.
What is Medigap?Because not all needed services are covered by Medicare and Medicarerequires deductibles and coinsurance, many people purchase Medigapinsurance to help them cover some of those extra services and costs. Someservices are not covered at all. Medicare supplements – also known asMedigap policies – plug the gaps left by Original Medicare. While Medicareis a government program, Medigap policies are offered by private insurancecompanies.
To help beneficiaries compare these policies, the government has mandatedthat only 10 standard Medigap policies may be sold (except in Minnesota,Massachusetts, and Wisconsin). These policies are referred to by theletters A through J. In some states, beneficiaries can purchase MedicareSELECT, which is a Medigap policy that requires you to use hospitals andphysicians in its network in order to receive full benefits.
How do I enroll in Medicare?Some people are enrolled in Medicare automatically. Enrollment is automaticif you are not yet age 65 and you already are receiving Social Security orRailroad Retirement benefits. If you are disabled, you will beautomatically enrolled in both Part A and Part B of Medicare beginning withyour 25th month of disability. Most people have to enroll in Medicare. The enrollment period begins threemonths before you turn age 65 (or right away if you require regulardialysis or a kidney transplant) and continues for seven months. Applyingearly can help you avoid a possible delay in the start of your Part Bcoverage. To apply for Medicare, contact any Social Security Administration office.
If you don’t enroll during these 10 months, you’ll haveto wait until the three months beginning on Jan. 1, and your Part Bcoverage won’t start until July. What happens if I wait to enroll?Don’t put off signing up for Medicare. If you wait 12 or more months toenroll, your premiums are likely to be higher. However, you have someoptions if you have group health insurance based on your own or yourspouse’s (or a family member’s) current employment. Even if you continue to work after your 65th birthday, you should sign upfor Part A of Medicare. Part A will probably help pay some of the healthcare costs not covered by your employer plan. Part B is a different story,however. It might not be a good idea to sign up for Medicare Part B if youhave health insurance through your employer. You would be required to paythe monthly Part B premium, and your Part B benefits could be of limitedvalue when the employer plan is the primary payer of your medical bills.
What is a Medicare HMO?In 1999, new choices for receiving Medicare services – known asMedicare+Choice – became available in some parts of the country. However,several of these new choices are not widely available. Today, beneficiariesmost often can choose between Original Medicare and certain Medicaremanaged care plans. Beneficiaries who are happy with Original Medicare donot have to change. Beneficiaries who want information about theiravailable choices can call (800) MEDICAR. Medicare health maintenance organizations (HMOs) provide all Medicare-covered services under Parts A and B and may provide additional benefitsnot available with Original Medicare. Many Medicare HMOs charge premiums inaddition to your Part B premium. For your health care to be covered by yourHMO that care must be provided either by the HMO or by a provider you havebeen referred to by your HMO. The only exceptions are emergency or urgentlyneeded care.
Neither Medicare nor the HMO will pay for non-emergencyservices delivered by providers outside the HMO. Every January a Medicare HMO can change the premiums charged and thebenefits offered. (The list of health care providers can change any time.)Therefore, making your Medicare HMO choice is an annual decision. Medicare HMOs can offer a Point of Service (POS) option. Under the POSoption, beneficiaries can receive services from providers who are outsideof the HMO network. However, beneficiaries must pay higher out-of-pocketcosts. Medicare Cost HMOs have “cost” contracts with Medicare. Unlike the other(risk) HMOs, if you are in a “cost” plan, you can receive covered servicesfrom either within the HMO or outside of it. If you obtain Medicare-coveredservices outside the HMO’s network, you pay the same coinsurance anddeductibles as in Original Medicare. If you stay within the HMO network,you pay only the applicable co-payments. By 2002, HMOs with “cost”contracts will either become Medicare+Choice plans or be phased outaltogether.
In addition to Original Medicare, the choices now available in somelocalities include Medicare managed care plans, which are usually HMOs. Tobe eligible for these new health plans, a beneficiary must have both Part Aand Part B and must not have ESRD. He or she also must live in thegeographic area served by the plan, and some Medicare managed care plans(often called Medicare HMOs) charge a premium in addition to the Medicarepremium.
Two other managed care options have been slow to catch on. There are nopreferred provider organizations (PPOs) as yet, and only one providersponsored organization (PSO), St. Joseph’s Health Care in Albuquerque, NewMexico. Other options in the future include private fee-for-service (PFFS) plans. There is a large (as many as 22 states) application pending, and it maybecome available in early 2000. As far as medical savings accounts (MSAs),health insurance policies with high deductibles, and religious andfraternal benefit society plans (RFBs) are concerned, none are yetavailable.
Should MSAs become available, up to 390,000 Medicare beneficiaries maypurchase them. Medicare would pay the premium for the MSA and deposit itinto the account established by the beneficiary. The beneficiary would usethe MSA funds to pay for services provided before the deductible is met andfor other services not covered by the MSA. RFBs can be sponsored by churches, conventions, and affiliated groups asmanaged care plans for their members. At present, only the Mennonitesqualify to offer this type of plan, and they have not applied. Medicare managed care plans provide all Medicare services and may provideadditional services such as prescription drugs. Members do not need Medigapinsurance, but they must keep paying their Part B premium.
Sometimes HMOsprovide services at a lower cost to beneficiaries than Original Medicareplus Medigap coverage. HMOs can change their additional services andpremiums on Jan. 1 of each year. Last year, as competition and costsincreased, some Medicare beneficiaries found that their HMOs reduced theavailable additional services, increased premiums, pulled out of someareas, or even closed. Medicare beneficiaries must take care when you change how you receiveMedicare services. This is particularly true when you leave a managed careplan, whether voluntarily or involuntarily. Because Medigap insurance isnot needed when you’re in a managed care plan, beneficiaries returning toOriginal Medicare have certain rights to buy Medigap insurance. Thoserights vary from state to state, so people in these circumstances shouldcontact their State Health Insurance Assistance Program for help.
Insure.com has a list of these phone numbers in Answers to seniors’ healthquestions. When making Medicare and health insurance decisions, you need to be wellinformed. If you have questions about Medicare, or if you are interested inchanging the way you receive Medicare-funded health care services, contactyour State Health Insurance Assistance Program. Special rules and consumerprotections sometimes apply when you change health plans. If you or yourspouses have health insurance through a former employer or union, contactyour benefits representative before you make any new plan choices. Otherwise, you could loose future options or benefits.
