How to choose & use health insurance, to avoid large medical bills?
July 17, 2023 11:59 AM   Subscribe

I live in the United States (Colorado). I personally know multiple people who have health insurance but ended up with medical bills of $100k to $500k+. What are steps that my family can take to avoid this, when choosing health insurance and dealing with medical issues? We have an ACA for now, and some of my loved ones have Medicare.

One story that scared me is my friend "Beth", who is on Medicare and has a serious chronic condition. Her condition lands her in the hospital for months at a time. Medicare pays for 60 days of hospital expenses during each stint and then charges a co-pay of $400/day for days 61-90. Beth has paid this co-pay ($12,000 as of 2023) on a number of occasions.

My acquaintance "John" is in his 50s. He managed to build up a retirement nest egg of over $1M. He fell suddenly ill and was hospitalized for an extended period. His insurance didn't cover most of it (due to pre-existing conditions? he didn't explain fully) and the medical bill wiped out most of his retirement savings. It un-did his past 15 years of savings.

When searching for tips on how to avoid these situations, I found this article: "100 million Americans touched by medical debt". Some of the people in this story had health insurance but still wound up with bills of $250,000 or $850,000. 

As an example of a concrete step, I learned from the above article that some insurance plans have a lifetime cap. That's how the Foy family wound up with a $850,000 bill. The lifetime cap is prohibited by ACA but some legacy health plans still have it. After learning this, I read through the fine print of all of my family members' insurance plans. In one of their insurance plans, I found a lifetime cap buried on page 49 out of 80. Two long ICU/hospital stays would be enough to exceed that lifetime cap. I recommended to my family member that they switch plans.

As another example, Medicare part B has a co-pay of 20%, and there's no maximum out-of-pocket. If my relative on Medicare gets hit by a car and ends up in the hospital, it seems like they could be billed a co-pay of $50k or $100k. From my online research, it sounds like buying Medigap insurance could be one way to reduce this risk.

I've personally encountered a few of my medical claims getting unexpectedly denied by my health insurance. I appealed and that was denied too. The claims cost between $200 to $5,000 each, and I ended up paying out of pocket. It makes me worry that someday I'll have much larger medical expenses that will also get unexpectedly denied. I want to avoid the situations faced by my friends Beth and John, where years of savings got wiped out by a medical problem.

With respect to health insurance (choosing it & using it), what can I do to reduce the risk of these large medical bills? Thanks!
posted by roastbeef to Health & Fitness (13 answers total) 19 users marked this as a favorite
In commercial insurance, you can purchase plans with lower deductible and maximum-out-of-pocket limits. These plans will be more expensive per month as you are trading the possibility of a high single expense for the certainty of a premium.

With Medicare, you can enroll in a Medicare Advantage plan, which has annual out of pocket limits, or you can purchase Medigap policies which cover your un-capped out of pocket costs in traditional Medicare.

You can think of premiums and out of pocket costs as two ends of a see-saw; when one goes down the other must go up. The balance point of the see-saw is the underlying prices charged by ever-consolidating hospitals and health systems, which rise well in excess of inflation every year. The individual consumer can choose between high premiums and high deductibles, but has little power to control how high the underlying costs are, which means that both premiums and deductibles must continue to rise no matter what we do.
posted by gauche at 12:21 PM on July 17, 2023 [1 favorite]

One thing to consider is long-term care insurance. This is in addition to health insurance, life insurance or other kinds of insurance.

Do you know if "John" was in a hospital for the whole time or was he possibly in a nursing home or assisted living facility? If he was in a nursing home or rehabilitation center, long-term care insurance would likely have paid for the cost. I'm less sure about if it would have paid for his care in a hospital. I am a single person in their 50s, and decided to get long-term care insurance so that I would not lose my retirement savings (or impose on family members) if I need that kind of care.
posted by OrangeDisk at 12:25 PM on July 17, 2023 [2 favorites]

Do you know if "John" was in a hospital for the whole time or was he possibly in a nursing home or assisted living facility? If he was in a nursing home or rehabilitation center, long-term care insurance would likely have paid for the cost.

This is a good point, but it's more accurate to say that Medicare would likely NOT have paid for the cost. Many people think that, because Medicare pays for their care when they get old, it pays for long-term care such as you might receive in a nursing home or from a home health aide. This is generally not the case; Medicare pays for a limited amount of long-term care under limited circumstances.

Medicaid pays for the majority of long-term care in the US, but it has income and asset limits which generally require people to impoverish themselves in order to receive those benefits.
posted by gauche at 12:30 PM on July 17, 2023 [2 favorites]

I mean, the single best thing you can do is to not get sick. Easier said than done.

I'm not a health insurance expert, but I think the best thing you could do is to get a plan that covers preventative maintenance at 100%, and then take advantage of that by going to your checkups on schedule. That's not going to actually prevent the big-ticket bills - I have a friend who got diagnosed with leukemia at 29, and no amount of preventative care could've stopped that from happening - but it will at least make you aware of many potential issues while they're small before they balloon into $850,000.

But to a great extent, health insurance is gambling. If you spend $100,000 a year on the most inclusive plan you can find - $0 deductible, every procedure covered 100%, no questions asked - but then don't use it for anything other than preventative care visits, that's wasting your money the same as if you had uncovered bills. You have to balance the coverage you're getting with the probability of actually needing that coverage. One of the reasons your friend John is in the situation he's in is because it's comparatively rare for otherwise healthy men with no risk factors in their early 50s to be hospitalized for long periods of time. Early 50s men have a lot of health problems, but most of them can be treated via outpatient clinics. When he was making his insurance elections, he probably rightly thought that it would be more likely that he'd get an appendectomy or have prostate cancer or need some prescription medication than that he'd be in a coma for six months. That said, if he did, in fact, have a pre-existing condition, maybe he should have weighted the probability of an adverse event more heavily. That's one of the biggest advantages of preventative care: giving you a more accurate picture of what's likely to happen to you.
posted by kevinbelt at 12:37 PM on July 17, 2023

Best answer: Be very careful about long term care policies. Read the fine print. They do not automatically pay out. You need to qualify for reimbursement (which can take months) and they can have relatively low lifetime payout caps.
My mom paid thousands of dollars on long term care premiums over 20 years. It then took over a year to get the company to agree she qualified (assisted living w/Alzheimer's) and her benefits will run out after 3 years. Medicare covers none of her assisted living care
Long term care insurance is not necessarily an automatic solution.
posted by bookmammal at 12:43 PM on July 17, 2023 [4 favorites]

Essentially in the US long term care is only paid for by insurance in two scenarios 1) you have long term care insurance which is very rare at this point and 2) you spend all your assets until you are poor and then it will pay for it. Assets are legally defined and vary between states. This is why you hear things about hiring an elder care attorney. There are ways to protect assets but they need to be done early, and carefully within complicated laws.

Medicare in general has copays unless you also buy a supplemental or have medicaid as well which is something called dual eligible usually. You'll also see these plans referred to as MMAI ( Medicare medicaid alignment initiative iirc)

It's really hard to avoid uncovered charges in any planned way. A payable out of pocket maximum can assist with covered charges, so say 5,000 a year. But uncovered medications or services won't count towards your benefits at all.
posted by AlexiaSky at 12:43 PM on July 17, 2023

Best answer: I'm on a medication that is hundreds of thousands of dollars a year, and what saves me is that my insurance has an out-of-pocket maximum. So that is the first thing I would look for.

Assessing Medicare is very complicated, and supplemental Medicare plans vary by state. I believe most states have offices that assist people with understanding Medicare choices, so I would start there. BTW, people I know with my rare cancer think Medicare Advantage is terrible because of limitations on coverage.

I also know a lot of people with my cancer who rely on charities to help with $3000/mo copays. And sometimes pharmaceutical companies offer copay assistance. I only know about this because of my online support group. So if you develop a serious illness, I'd suggest finding a support group because people figure out ways to manage.

I've read so many horror stories about how long-term care policies actually play out that I wouldn't bother with it without doing a huge amount of research.
posted by FencingGal at 12:56 PM on July 17, 2023 [4 favorites]

Yeah, OOP caps are pretty good.

Was hospitalized last fall. Spent three days in the ICU, three weeks after that in the hospital. Total chaege was $488,000. Luckily, capped that shit. So only had to pay a few thousand.
posted by Windopaene at 1:14 PM on July 17, 2023

Best answer: Some areas where people get tripped up:
- having insurance that covers a lot, but has a very narrow network. This is often OK for primary care and preventive needs, but if you need specialty or sub-specialty care, or want to be seen at the nearest comprehensive cancer center, or even need to go to the ER, sometimes this is out of network and costs can accumulate rapidly. Often, but not always, broad network is inversely correlated with out of pocket expenses.

- Medicare Part B, as you know, puts 20% coinsurance on the patient. There are Medigap policies that will reduce this. Medicare Advantage plans can also reduce out of pocket expenses but often at the price of a narrow network.

- high costs for uncovered care, like physical therapy is often limited to 20 visits a year), speech therapy, etc.

- medications that are brutally expensive and require a complicated prior authorization process every time. This is like sand in the gears and can result in delays in treatment

- needing long term care, as in a subacute rehab or nursing home. Medicare pays for very limited rehab care and home health services, and doesn't pay for long term care or long term aides at all.

The only way I can think of to really mitigate this is to make sure you have a good understanding of your insurance policy, including which hospitals are in network, and as you get older, to try to save a fairly large amount of money earmarked for medical expenses.
posted by The Elusive Architeuthis at 1:17 PM on July 17, 2023 [4 favorites]

Best answer: I highly recommend An American Sickness by Elisabeth Rosenthal. This is part polemic and part user guide to the US system. You can see some of the "user guide" bits on the website (which are themselves good answers to aspects of your original question), but there's lots more in the book.
posted by caek at 2:13 PM on July 17, 2023 [5 favorites]

Best answer: As another example, Medicare part B has a co-pay of 20%, and there's no maximum out-of-pocket. If my relative on Medicare gets hit by a car and ends up in the hospital, it seems like they could be billed a co-pay of $50k or $100k.

They needed to get a Medicare supplement plan*. I suppose those are what used to be called medigap plans. I have a Part G supplement through AARP. It covers all the coverage shortfalls of basic Medicare A&B coverage.

* note: this is not the same as a Medicare Advantage plan. Those are more akin to private insurance and can be very problematic for many of the same reasons as private insurance. I suspect your relative opted for an Advantage plan.
posted by Thorzdad at 3:27 PM on July 17, 2023 [1 favorite]

Best answer: Call your insurance before you see a new doctor, get a new procedure, get on a new medication, etc, and ask if a prior authorization is required. Every time. And if it is required, have your doctor submit the needed paperwork. If they deny it, have your doctor appeal on your behalf that it's needed for whatever's going on. Check if your doctor is in-network for your plan. Don't take "no" as a definite answer.

Check your explanations of benefits and ask for line-by-line billing along with the associated codes and check for errors, and appeal if you find any. There's a lot that can be done with the right phone calls and your time.
posted by Theiform at 9:09 PM on July 17, 2023 [2 favorites]

Best answer: You've already taken the most important first step, which is to read the fine print on everything. Some health insurance companies in the US seem to basically depend on people misunderstanding their plan benefits, and in these situations you end up having basically zero recourse unless you manage to catch them lying in writing (which is rare).

So, read everything, trust nothing unless it's in writing, and basically deal with your insurance company like you would an extremely shifty counterparty in any major financial deal. (Think selling a car to the sketchiest person you know, or buying property from same.) Keep good records, save all correspondence, take notes, keep the fucking receipts. Every time.

(I keep all my records electronically but TBH I can't recommend this for anyone who isn't very IT-competent, since the risk of catastrophic loss due to a computer mishap is quite a bit higher than your house burning down, at least it seems to be in my world.)

Lifetime coverage caps are, as you have discovered, a huge issue in many plans. You want to avoid them like the plague they are, because they essentially put the risk of catastrophic loss back on you, the insured, rather than on the insurance company, who you are probably hoping to pay to take on that risk.

"Out of pocket maximum" is the other key number to look at, but be careful as the 'maximum' may only count the cost of covered services, leaving you exposed to unlimited risk if you require some sort of uncovered service to stay alive. So in addition to comparing the number, also compare what that number actually contains and ensure you're comparing apples to apples between plans.

For an individual not eligible for insurance through their employer, I've yet to see many plans that are better than the ACA ones which still offer decent coverage. There are non-ACA plans that are cheaper, but every time I've had a friend tell me about the "great deal" they got on a non-ACA plan, they seemed fishy. However, this might vary by state, which is one of the reasons it's hard to give someone solid advice that applies across the US. It's a state-by-state market, and what's allowed to be sold in one state might be illegal only a few miles away. (Generally, the redder the state you live in, the more caution I'd advise. But just living in a blue state doesn't necessarily mean you're safe.)

If you have the time to do so, what I'd recommend doing is coming up with a couple of reasonably-plausible scenarios that would be catastrophic for you, and then see what the plan would do about them. E.g. if you get hit by a car and transported by air ambulance (probably not covered) to the nearest ICU (out of network) and treated by a bunch of out-of-network doctors who all 'surprise bill' separately, and you get given a bunch of expensive brand-name drugs... what's the impact going to be in the worst case? If the insurance doesn't save your ass in a situation like that, IMO it's not really insurance, it's just bad prepaid healthcare.
posted by Kadin2048 at 5:55 PM on July 18, 2023

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