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Planning Today for Tomorrow's Health Care Costs

Vol. 3, No. 2, Summer 1998

Janice Holm Lloyd

What you don't know can hurt you -- the cost of believing in myths.
"We grow too soon old and too late smart" (Pennsylvania Dutch saying).

Bob and his wife Shirley own a large farm where they once raised tobacco, corn, and soybeans. In the mid-late 1980s they had some tough years, decided to go into a contract poultry operation, and built several poultry houses. There was so much depreciation that they did not have to pay self-employment tax when they filed Schedule F. Bob is turning age 65 and has only 24 Social Security credits, so he will not be eligible for premium-free Medicare Part A. Shirley did some part-time off-farm work in the past, but recently launched her own crafts business. She too has only a few Social Security credits.

Question: Can Bob and Shirley get health insurance during the years when health care is most expensive? Answer: It depends on the current policy and how much money will be available.

Unfortunately, many families believe things about Medicare and other health insurance for older folks that can best be called "myths." Following are some of these myths and their realities.

The Myth The Reality
Everyone gets Medicare - and at no cost. This is not true. If you have fewer than 40 Social Security credits, you will not be eligible for premium-free Medicare Part A (Hospital Insurance). Premiums in 1998 are $170/month for persons with 30-39 credits, and $309/month for persons with fewer than 30 credits. Nearly everyone pays Part B (Medical Insurance) premiums ($43.80/month in 1998).
I'm going to work til I die and won't need Social Security or Medicare, so I'll just keep my current health insurance. You may not be allowed to keep your current insurance. Most health insurance policies for persons younger than 65 end when they reach age 65. When a person reaches age 65, almost all private health insurance is a secondary payer and will not pay for what Medicare covers, regardless of whether the person has Medicare A and B coverage.
If I decide I need Medicare later, I'll get it then. You may not be eligible later. Many older families do not have sufficient savings and income to cover health insurance premiums and other out-of-pocket health care expenses.

Action Steps to Locate Reliable Information

Key Facts about Social Security and Medicare

About Social Security

About Medicare

Checklist For Analyzing a Situation and Determining Available Options

Choosing the Best Options for Your Family

Option 1. If you now have fewer than 40 Social Security credits on record, you should estimate how many you (and your spouse, if you are married) will have at age 65. If that number will be fewer than 40, consider working longer under Social Security coverage. If it is not possible to earn enough credits, see if you can purchase a group policy that can be continued after age 65 and try to budget and save in order to pay the premiums for whatever coverage is available and affordable. If you find that you will have 40 or more credits, you will be eligible for premium-free Part A and should follow the enrollment procedure described in Cooperative Extension Service publication 'Getting Off to a Good Start with Medicare.'

Option 2. If your current health insurance will not continue after you turn 65, study the Medigap plans and locally available Medicare HMO plans, and begin budgeting and saving for policy premiums.

Option 3. If you have an employer group health plan that will continue past age 65, compare its cost and coverage with Medigap policies or locally available Medicare HMO plans (plus Part B premium), and begin budgeting and saving for the premiums you expect to owe for whichever coverage you select.

Option 4. Estimate other out-of-pocket health care expenses and begin budgeting and saving for future health expenses that will be your responsibility.

Sources of Further Information or Assistance

Author

Janice Holm Lloyd, Family Resource Management Specialist, North Carolina State University.

Cite this article:

Lloyd, Janice Holm. "Planning Today for Tomorrow's Health Care Costs." The Forum for Family and Consumer Issues 3:2 (1998): 25 pars. 9 July 1998

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