Legal Issues when someone has Dementia – Think about Medical Insurance

This week’s blog continues the discussion of Legal Issues when someone has Dementia.  The introductory installment (April 30, 2015) put forth the issue of “Who can speak for someone with dementia?”  The May 14, 2015 installment discussed the situation where the person with dementia has Advance Directives in place.  The May 21, 2015 installment discussed the legal issues in determining whether a dementia sufferer can choose to have new Advance Directives prepared.  The May 30, 2015 installment discussed options in preparing a Health Care Power of Attorney.  The June 4, 2015 installment discussed how to decide whether to prepare a Living Will.  The June 11, 2015 installment discussed some of the basic issues in preparing a General Power of Attorney.  The June 18, 2015 installment discussed the importance of making the General Power of Attorney “durable.”  The June 25, 2015 installment discussed the importance of NOT making the General Power of Attorney “springing.”  The July 2, 2015 installment discussed revoking prior Powers of Attorney.  The July 9, 2015 installment discussed Do Not Resuscitate orders.  The July 16, 2015 installment discussed the Right of Disposition designation.  The July 23, 2015 installment discussed the Will (or Last Will and Testament.)  The July 31, 2015 installment discussed beneficiary designations on life insurance policies, IRAs, annuities, etc.  The August 6, 2015 installment discussed whether to pre-plan a funeral.  The August 14, 2015 installment discussed choosing a final resting place.  The August 28, 2015 installment discussed pre-planning the funeral ceremony.  The September 3, 2015 installment discussed when and how to pay for the pre-planned funeral.  Today’s installment will discuss medical insurance choices.

Today’s installment continues the discussion of issues to manage when someone finds out that he or she has a disease that causes dementia.  These issues should be managed before the dementia gets worse, before the disease takes away the person’s ability to make decisions.  Along with the issues previously discussed, someone who has dementia (or his or her family) should look at the different options to pay for his or her upcoming medical costs.

Because the vast majority of people who have dementia related disease are seniors, this installment will focus on Medicare options.  The people who have dementia related disease that are not yet old enough to qualify for Medicare have health insurance options very similar to those available to people with special needs discussed in the March 5, 2015 installment of this blog.  (Someone who becomes disabled (from the dementia related disease or from some other cause) can get Medicare 25 months after the disability is recognized by the Social Security Administration.  These people have the same Medicare options as seniors.)

People who have Medicare available to them have three basic options for medical insurance.  So called “straight Medicare” provides the insured person with Medicare coverage for 80% of medical costs.  The insured person is responsible for the other 20% as a co-pay.

People who do not wish to pay the 20% co-pay can purchase either Advantage Plans or Medicare Supplements.

An Advantage Plan is an insurance policy that pays most or all of the 20% of medical costs that Medicare does not cover.  The amount of the insured’s new co-pay depends on the Advantage Plan that the insured chooses.  Generally, the higher the premium, the lower the co-pay.  There are plenty of other options that change the price and co-pay as well.  (An Advantage Plan actually steps into the shoes of Medicare and pays the 80% in addition to whatever costs exceed the insured’s co-pay.  The Advantage Plan insurance company receives both the premium of the individual insured person and a payment from the Medicare program in lieu of Medicare’s usual 80% payment towards the insured’s costs.  The Advantage Program’s coverage of Medicare’s portion of costs is generally not noticed by the insured.)  Because an Advantage Plan is a “replacement” for Medicare, it can have some limitations in covered services or in approved service providers as compared to “straight Medicare.”  In addition, there are many different advantage plans, each offering slightly different coverage, from which to choose.

When an insured person has a Medicare Supplement, the Medicare program pays its usual 80% pays the insured’s medical costs, and the Supplement pays the 20% not covered by the Medicare office.  Medicare Supplements, because they supplement Medicare rather than replace Medicare, do not generally have any differences from Medicare in covered services or approved service providers.  There are many different Supplements.  The differences among Supplements generally is small, but worth examining.

Advantage Plan premiums usually cost about one-third of Medicare Supplements.  (Some Advantage Plans have a $0 premium, in fact.)  An Advantage Plan’s limitations on services and providers is the trade-off for a lower premium.  The most glaring difference between Advantage Plans on the one hand and both straight Medicare and Medicare Supplements on the other hand is the coverage of post-hospitalization rehabilitation services.

With straight Medicare and Medicare Supplements, an insured person who has been admitted to the hospital for three days and then needs post-hospitalization rehab can have 100 days of rehab coverage.  Someone on an Advantage Plan may have rehab coverage end before 100 days have elapsed.  An Advantage Plan (because it has rules slightly different than straight Medicare) can determine that rehab is not helping the insured person and can end coverage.  Sometimes the rehab coverage is stopped as early as day 20.  Rehab can be very expensive, so Advantage Plans have a strong incentive to end rehab coverage as early as possible.

(“Admission” to the hospital rather than “under observation” in the hospital is a very important distinction in the availability of insurance coverage for rehab.  That issue is not handled differently by Medicare, Advantage Plans, or Medicare Supplements, though.  Consequently, the “admission” versus “observation status” issue is not important to today’s discussion.  I mention it here as a side note because it is an important issue for all people insured through Medicare.)

Someone who has a dementia causing disease is likely to need much greater medical attention than before the dementia started.  Accordingly, someone suffering from dementia (or his or her family) may want to change to an insurance plan with greater coverage than he or she had previously.  (Open enrollment for such a switch falls between October 15 and December 7 each year, with the new policy taking effect on January 1 of the next year.)

Unfortunately, someone covered by any form of Medicare cannot switch plans on demand.  (Medicare, unlike the Affordable Care Act, allows the insurance company to make underwriting decisions on individual plans.)  Trying to move to a plan that provides more coverage may require a medical examination and will certainly require answering medical questions.  If the dementia related disease has been identified by a doctor or is noticeable to an insurance company underwriter, a more generous plan may not be available.  Accordingly, I urge anyone who believes that he or she is in the early stages of a dementia related disease to move to a plan with better coverage (if necessary) at the next open enrollment period.  Generally, I urge people to move to a Medicare Supplement, if they can.

If a Medicare Supplement is not available, an alternative is an Advantage Plan or even straight Medicare with a separate Hospital Indemnity policy.  (The cost of an Advantage Plan plus Hospital Indemnity policy is usually less than a Medicare Supplement.)  A Hospital Indemnity policy is subject to underwriting, though.  If someone with a dementia related disease waits too long, the Hospital Indemnity policy may not be available either.

Without considering the cost of premiums, my preferences for medical insurance for someone who has a dementia related illness is a Medicare Supplement.  My second choice is an Advantage Plan with a Hospital Indemnity policy.  My third choice is straight Medicare.  Finally, my fourth choice is an Advantage Plan.  I realize that my preference is for the most expensive insurance.  When someone learns that he or she has dementia, I suggest that he or she abandon price sensitivity and try for the best coverage.  (The insurance may not be available because of the dementia or some other pre-existing condition, but, with the disease likely only to get worse, trying to get the best insurance as soon as possible is a good idea.)

Most people on Medicare keep their existing insurance plans from year to year.  Someone who believes that he or she has the early stage of a disease that causes dementia should take a hard look at his or her insurance choices at the next open enrollment period.

Acknowledgement:  Thanks to Michael Whitaker of Premier Solutions Group in Brookpark, Ohio for helping me understand Hospital Indemnity insurance.

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