MONEY retirement income

Immediate Annuities: When Guaranteed Income Is a Bad Bet

An immediate annuity, offering guaranteed income for life, sounds great -- until life throws you curve balls. Photo: Shutterstock

Guaranteed income for life sounds great—until life throws you a curve ball.

It’s long been a mystery to economists: As MONEY has often noted, an immediate annuity is a great way to ensure you never run out of money in retirement; for a fixed sum upfront, you collect a monthly check for as long as you live.

So why do few people buy one? This disconnect, dubbed the annuity puzzle, has led regulators to try to add annuities to 401(k)s to encourage savers to buy them.

Turns out, savers had it right all along, even if they didn’t know why (a fear of dying young is what deters most). Almost half of retirees are better off keeping their portfolios liquid, not locked up in annuities, according to new research by Felix Reichling of the Congressional Budget Office and Kent Smetters of the Wharton School of Business.

The chief reason: the potentially high cost of health care. “One of the largest risks facing most retirees is running up hefty medical or long-term-care expenses that aren’t covered by insurance,” says Smetters.

Tying up too much cash in an annuity can produce a double whammy. A health crisis may cut your lifespan, which reduces the future value of your remaining annuity payments. Meanwhile, you need cash to pay for your care.

“The risks of health care costs are something most planners and investors knew intuitively,” says Michael Kitces, director of research at Pinnacle Advisory Group.

Still, adds Kitces, as long as you have a savings cushion for health care, the guaranteed income from an annuity can pay off if you end up living beyond your life expectancy. But take these steps first:

Build a health care nest egg. With Medicare covering only about half of medical costs, Fidelity estimates that a 65-year-old couple will spend $220,000 on health care expenses during retirement. And that doesn’t include long-term care, which some 70% of Americans will eventually need in some form, according to U.S. Department of Health and Human Services data.

That could be family help — what’s most common — or nursing care, at an average tab of $91,000 a year, reports MetLife. The average stay is three years.

Create a care plan. Thinking ahead can help reduce your long term-care expenses, says MIT AgeLab director Joseph Coughlin. For example, few baby boomers have made the kind of modifications to their homes — widening doorways or lowering countertops — that would allow them to stay put if they become disabled.

Preview your income. With enough set aside for health care, deploy the rest of your assets. Find out how much income your savings will produce with T. Rowe Price’s retirement income calculator. To see the benefits of putting a portion in an immediate annuity — perhaps enough to cover much of your fixed expenses — get quotes at immediateannuities.com, then head back to T. Rowe’s tool, entering the annuity as a pension.

“With a steady income, you’ll be better able to hang on to stocks, which can give you higher returns,” says Kitces. Given the spiraling cost of health care, every little bit helps.

MONEY Health Care

5 Things to Know About Finding a Doctor Online

Online reviews are a great place to start looking for a new doctor or specialist. But you should dig deeper.

1. More patients are web surfing for docs.

Nearly a third of consumers have read doctor reviews, PricewaterhouseCoopers reports, while Google searches for crowdsourced MD data have doubled since 2007.

The info is now found on dozens of sites, from medically focused Healthgrades and Vitals.com to general review sites like Angie’s List and Yelp.

What you’ll find: an overall rating based on patient reviews, info about training, plus metrics such as time spent per patient, office wait, and customer service.

2. The sites are great for bedside manner…

Look for patterns in the reviews to get a sense of a doctor’s patient style. That’s especially useful when choosing a family practitioner, less so for a specialist.

“The narrower the doctor’s expertise, the more you need their knowledge, not their personality,” says Pamela Gallin, author of How to Survive Your Doctor’s Care. Some site extras: ZocDoc lets you book appointments via its portal; Angie’s List offers a service to help detect billing errors.

3 …But less useful for assessing quality of care

Studies have found weak correlation between health ratings and other measures of how successfully a provider treats patients. And the sites offer little data on the outcomes of procedures by specific docs. That may change because of Obamacare, which ties Medicare financial incentives to performance; that should make more data available.

4. Choosing a hospital? Get a full lowdown

“There’s much more quality and safety information available for hospitals than for physicians,” says Matt Austin, a patient-safety expert at Johns Hopkins Medicine.

Use the Hospital Compare tool at Medicare.gov to see how readmission, complication, and death rates compare with the national averages, plus patient satisfaction data. Check LeapfrogGroup.org for safety ratings by hospital and procedure and InformedPatientInstitute.org for state-specific data.

5. For cost info, head to your insurer’s site

As part of their doctor search tools, most health plan websites will help estimate your out-of-pocket for a particular doctor or hospital.

For in-network care, large insurers such as Cigna and Aetna will factor in your plan design, deductible, and their pricing agreements with specific practices. Such tools have become more popular as patients shoulder more of their medical bills.

Says UnitedHealthcare’s Victoria Bogatyrenko: “Consumers are more price-sensitive.”

MONEY Health Care

Help Your Parents Get the Right Home Care

The right home care can make it possible for many seniors to age in place. Photo: Jason Hindley

Your parents probably want to age in place. The right home care is the key to making it happen.

The vast majority of Americans want to live at home for as long as possible: Nearly 90% of people over the age of 65 said so in a 2010 AARP survey.

And with assisted living costing more than $40,000 a year on average, staying put can also save money. But the physical and medical problems that go hand in hand with aging can make home life difficult.

That’s why seniors — and their adult children — are increasingly hiring help to extend their time at home. Demand for these services is so strong that the Labor Department expects the number of aides to rise by 70% through 2020, making it the fastest-growing job in America.

The cost of help, though, can add up fast, averaging $21,000 a year for a typical part-time schedule, says MetLife. And more often than not, the government or insurance won’t foot the bill. Take these steps to find the right care:

Identify the need

After a hospital stay or health crisis, it’s often obvious that a parent should have help. In those cases a doctor may prescribe short-term skilled nursing care or physical therapy visits, which should be covered by Medicare.

Other times, the need is tougher to spot: dirty dishes in the usually tidy kitchen, stubble on Dad’s typically clean-shaven face.

“When you see longtime habits changing, that could be a sign,” says Kathleen Gilmartin, chief executive officer of home health franchiser Interim Healthcare.

Your own heavy caregiving load could also be the trigger: “Home health aides give family caregivers a break from the stress and let them manage their own life,” says Denise Brown, founder of online support site Caregiving.com.

The type of care varies, from health aides and nursing assistants who can help with bathing, dressing, and medication reminders to workers who’ll do light housework and fix meals. In both cases you’ll pay about $20 an hour through a home health agency, says MetLife (for live-in care, the average tab is $250 a day). By hiring directly you can pay about a third less, says Steve Horen, CEO of the home agency Koved Care.

A geriatric-care manager ($150 to $200 an hour) can do an assessment of your parents’ needs. Locate one at caremanager.org.

Hire carefully

A geriatric-care manager or home health agency will screen candidates and conduct background checks. You can find an agency at homecareaoa.org. Advertise directly, and you’ll need to do the due diligence, including checking references and credentials. Health aides and nursing assistants are generally certified by the state.

No matter where you get the names, interview at least three potential hires. Look for a pro who has experience taking care of someone with your parents’ particular needs. “If your father is grumpy and doesn’t like to eat in the morning, ask the caregiver how she would handle that,” says Jody Gastfriend, vice president of senior-care services at Care.com.

When you hire through an agency, the company acts as the employer, withholding taxes and paying unemployment and workers’ comp insurance. While many people who hire direct pay cash, by law you must contribute to Social Security and Medicare on the caregiver’s behalf. A service like Breedlove.com or HomeWorkSolutions.net will handle taxes and insurance for $700 to $800 a year.

Once you’ve found someone you like, make him or her feel valued and comfortable. These jobs don’t pay great, so try to be flexible about scheduling. And, adds Gastfriend, “express thanks for the often challenging work they do.”

Investigate aid

Some 70% of home health bills are paid out of pocket, according to the market research firm Home Care Pulse. Still, don’t overlook any aid options.

Most long-term care insurance policies cover visits when a person cannot perform two to three “activities of daily living,” such as meal prep or bathing. Medicare pays only for doctor-ordered, skilled nursing care. If your parents have very little in assets, Medicaid usually covers part-time help. Check benefitscheckup.gov for eligibility and find local services at eldercarelocator.gov.

MONEY Health Care

Coping with the Financial Toll of Terminal Illness

Steve West spends mornings with his granddaughter, Gracie, 2, who has learned to hug him even though he can't hug back. ©Annabel Clark

Since he was diagnosed with a terminal illness almost four years ago, Steve West and his wife, Pam, have tried to live life to the fullest while coping with the physical, emotional, and financial drain of his condition. Their big money worry now: How will she manage once he is gone?

Steve West cheated death once. In the summer of 1969, when he was 17, Steve and a friend were camping in Tennessee when they wandered down a nearby path. The trail hugged the side of a cliff on one side, with a 100-foot drop on the other.

Steve lost his footing. The fall would have killed him if some branches hadn’t broken his descent. As it was, it took 10 hours for rescue workers to reach him. He fractured his arm and leg and suffered numerous internal injuries, resulting in a four-week hospital stay that ruined his plans to attend the Woodstock music festival.

Steve’s remarkable survival made the front pages of the Chattanooga newspapers, and soon became a footnote to a busy and productive life.

Death, however, was preparing to get even. It cast an unseen shadow as Steve earned a doctorate in sociology, taught at a small Virginia college, and switched careers to become a successful pharmaceutical market researcher in Philadelphia; it lay in wait as he married, had a child, divorced, and married again.

Then, in 2008, Steve began to feel that his left leg wasn’t quite right — he had “tingling sensations,” he recalls. In September of that year, he and his wife, Pamela Learned, were on a trip to Scotland when he noticed a weakness in his left leg. After a day of sightseeing in Edinburgh, he was walking with a limp.

Back home in the upscale Philadelphia neighborhood where they lived, Steve and Pam theorized that the problem was nerve damage from a fall he had sustained during a trip to Yellowstone National Park the year before. But not only was his leg getting worse, it was beginning to twitch. Steve had been a runner who could easily put in three to five miles several days a week. No longer.

“The distances kept getting shorter and shorter,” he says. Pam recalls, “It was so mild I said to him, ‘You’re just getting old. Start walking.'”

Related: Cutting the High Cost of End-of-Life Care

Steve’s work made him knowledgeable about medical subjects, so he did some research. Sitting in bed one morning with his wife, drinking coffee, Steve told her he thought he might have ALS, a progressive neuromuscular disorder also known as Lou Gehrig’s disease, after the baseball great who was stricken with it in the 1930s. A visit to a neurologist at Pennsylvania Hospital in March 2009 confirmed Steve’s self-diagnosis — and the devastating prognosis: ALS is always fatal, usually within five years.

Today, nearly four years later, Steve’s disease has progressed to the point where he has lost the use of his arms and legs, has trouble breathing, and can no longer feed or care for himself. Just when his death will come is unknown. It depends on when he will, literally, run out of breath — when his respiration will become too weak to sustain life.

Compared with the typical end-stage hospice patient, Steve, 60, is doing well. “I can whip their asses,” he says. He and Pam, 53, go out daily for walks, visit with friends, stop in for lunch at a local pub. Still, they are realists. Based on his condition now and the doctor’s most recent assessment, Pam’s response is swift and unequivocal when they are asked for their thoughts about how much longer Steve has to live: six to nine months.

Any patient and family facing terminal illness knows that the physical and emotional toll will be immense, of course. What’s often underestimated at first: the financial toll, as ongoing health care bills drain savings, even for couples like Steve and Pam, who earned a six-figure income and had built what they thought was an ample cushion.

When it’s the main breadwinner who is ill, the anxiety about money is heightened — especially if that spouse was also primarily responsible for handling the household’s finances. That’s the case for Steve and Pam.

Weighed down by uncertainty about what the future holds, Pam finds herself embracing worst-case scenarios that may never materialize and worrying about how she will support herself later at a time when every minute the couple have now is more precious than ever.

Steve West and Pam Learned found each other on Match.com in 2003 and were married four years later. Theirs was a very modern romance, a joining of two mature adults with three grown children from previous marriages between them.

He has a daughter, 31, who works in the financial industry in New York City; Pam has a son, 27, in Los Angeles and a daughter, 30, who lives nearby with her husband and daughter.

The couple’s combined income — Steve made over $200,000 a year; Pam, $60,000 to $70,000 — meant that they were able to enjoy a comfortable lifestyle. They set aside about $10,000 a year for twice-yearly vacations, mostly to national parks, where Steve would fly-fish.

Both owned businesses that allowed for frequent travel. Pam, a former journalist, owned a firm that provided marketing services to nonprofits and municipalities; Steve was a founding partner of a pharmaceutical market research firm.

They had taxable savings and investments of $500,000, retirement accounts totaling about $700,000, and no debt except for a mortgage on their $550,000 house (a far from onerous $2,100 a month). They felt as if they were set financially, or at least well on their way.

And they were — right up to the day Steve learned he had ALS, a disease so rare that only 5,600 people a year are diagnosed with it.

Amyotrophic lateral sclerosis, he discovered, is an equal-opportunity affliction, making no distinction for race, ethnicity, or gender. The disease slowly shuts down nerve cells throughout the body, leaving patients unable to walk, use their hands, eat, or speak, though their brains remain vibrant.

While it’s been more than 70 years since Lou Gehrig’s emotional “Luckiest Man” farewell speech at Yankee Stadium raised the profile of ALS, there is still no known cause or cure, only treatments to forestall the steady decay.

Steve’s body began to act in strange ways almost immediately after he was diagnosed. “I would wrap my arms around him, and I could feel these little chi-chi-chi-chi-chi-chi movements in his muscles,” says Pam. “It was like holding twinkling stars.”

Those movements are formally called fasciculations, a kind of muscle twitching in ALS patients caused by the steady degeneration of the nerves.

As Steve and Pam struggled to come to terms with the severity of his disease, a second shock wave followed: ALS, they were learning, was going to be very expensive.

“There were hundreds of decisions to make,” Steve recalls. Would they have to move? Quit their jobs? How would they manage their money so that Steve could be cared for, while still leaving enough to support the household?

The questions loomed even larger when they looked beyond Steve’s death. Would their retirement savings be enough to support Pam for the rest of her life? And if she had to go back to work after a long period of time off, what could she reasonably expect to earn, if she could even find a decent job?

Steve is reflective, not somber, talking about that initial period of coming to terms with ALS. “There was sadness early on, in recognizing what it meant, but it didn’t really last that long,” he says. “There was also anxiety, not so much over the prospect of dying, as getting things situated for the rest of our lives.”

The first question they tackled was whether to move. Their three-story, six-bedroom Tudor Revival house was hardly ideal, but they decided to stay, making necessary renovations to adjust to the rapid deterioration of Steve’s body.

Their home was just a few minutes’ walk from the regional rail line, and they were blessed with neighbors who were willing to pitch in and help at short notice. That would become increasingly important as Steve’s condition worsened.

So they began essential renovations late in 2009. First they spent $500 to put railings on stairwells and in the bathroom. An elevator was installed for about $24,000. More work followed in February 2010. The bathroom was revamped, with a new toilet and wheelchair access to the shower, while the bedroom was enlarged to make room for medical equipment by breaking through the wall of an adjoining room to create a single, bigger space, for $28,000. A ramp to the front door ran them another $2,000. Total price tag: $54,500, which they paid for out of savings.

The necessity of the changes soon became apparent, as Steve’s leg muscles began to deteriorate. For the first year of his illness, he was able to get around with a cane. Then, after another five months, he needed a walker. When his legs could no longer support him, he switched to a foldable wheelchair, the kind that anyone might need after a bad leg fracture or a hip replacement.

By the fall of 2010, as he grew weaker, he could no longer operate a chair under his own power. He moved into an electric wheelchair. The first ones were loaned to him by the ALS Association, but then they bought a pricey custom-made model that required upgrades as his condition worsened. To transport Steve in the chair, he and Pam bought a specially designed Braun Entervan for $36,000.

Fortunately, as the expenses mounted, they still had Steve’s salary to rely on. For the first couple of years, he was able to work full-time, initially in the office and later from home. Skype was a great help, as was voice-recognition software that allowed him to operate a computer by verbal commands. (He still can navigate a computer, using voice software and the one finger he can get to move.)

Pam, however, found maintaining a full work schedule tough, as helping Steve required more and more of her time. She tried moving her marketing business close to home, but in late 2010 decided it would be better if she stopped working altogether and devoted herself to helping Steve.

Being a full-time caregiver, Pam soon learned, was physically draining and at times “a real whack on the identity.” (She found herself feeling resentful a few months back when a hospital intake person listed her occupation as “homemaker.”)

More trying was dealing with people who refused to accept the truth of Steve’s situation. Pam describes how a local storekeeper kept asking, “How is Steve? Is he cured yet?” Pam would respond, “There is no cure.” Finally, she took her business elsewhere: “How many times do you have to say, ‘Incurable’?”

With less income but expenses rising, Steve and Pam found money getting tight. Contributing to the strain: His private health insurance policy proved inadequate when dealing with ALS.

Decisions on coverage for equipment, such as the power wheelchair and a lift to help Steve in and out of bed, took two to four months at times, impractical for an illness in which patients deteriorate so quickly. (Pam remembers one insurance company person she spoke to on the telephone who admitted he didn’t realize ALS was a fatal disease.)

Even when approval came through, Pam says, the benefits sometimes felt stingy. Case in point: The specialized power wheelchair that Steve needed once he lost use of his arms would have cost them $22,000 in co-payments. After researching, Pam found out that if she bypassed the insurance company and bought the chair directly from the dealer, they’d instead pay $17,000.

“Doing battle with insurance was the biggest nightmare until we got into Medicare,” says Pam. (As an ALS patient, Steve qualified for Medicare earlier this year, once he stopped working and began collecting Social Security disability benefits.)

By contrast, the ALS Association provided valuable assistance from the start. Early on, Pam and Steve would pack a lunch and spend hours at a clinic affiliated with the association, meeting with seven or eight specialists. They saw an occupational therapist, a social worker, a counselor, an MD, a respiratory therapist, and whatever other medical experts he needed. All were covered by insurance. In addition, the association lent them medical equipment such as a folding wheelchair and walker at no charge, saving Steve and Pam thousands of dollars.

The rest of their family also pitched in. Pam’s son, Mark, lived with them for a year and helped take care of Steve, getting him in and out of bed.

When Mark moved to Los Angeles in May 2011, Pam hired a home health care aide for four hours a day, first two, then seven days a week. Steve’s daughter helps out with the costs, contributing to the $2,400 monthly fee to the aide’s agency.

Neighbors in their community of Chestnut Hill have provided a constant stream of assistance as well. They drop in frequently, offering food and companionship. When Pam pinched a nerve earlier this year, her neighbors took over the task of getting Steve into bed every night. It was difficult to ask for help at first. But as time went on, Pam realized that folks weren’t just being polite — they really wanted to help. And Pam realized she needed it.

Early in 2012, the muscles in Steve’s torso became weaker, affecting his breathing and eroding his energy. He was forced to quit work for good.

In the months since, ALS has steadily robbed him of more and more. Steve can no longer feed or bathe himself. His breathing capacity is less than 20% of normal, and speech is a chore, as he struggles to gather the lung capacity needed to utter more than a few sentences.

Pam and Steve still go out almost daily, strolling through the neighborhood, visiting local parks, stopping at coffee shops and stores. Friends, neighbors, and family drop by frequently to help out and spend time with Steve. Adjustments are subtly made. Steve can no longer embrace Pam’s granddaughter, Gracie, when she stops by each day for a visit, so instead the 2-year-old climbs into his lap, burrowing against his chest. Their black-and-white cat, Oreo, set in its ways at 16, was at first miffed at Steve’s inability to pet him but has learned to rub against his inert hands.

The daily jaunts and visits from well-wishers, though welcome, are becoming more difficult as time goes on. Steve tires easily and needs to nap. Both Steve and Pam know the day is fast approaching when Steve will not be able to swallow.

“With a ventilator and a feeding tube, your life can be significantly prolonged,” says Steve. “But it’s not very pleasant for anybody, family or patient.” It’s not an option Steve plans to take.”

NEXT: How she will manage once he is gone

As Pam looks ahead to a life without Steve, her consuming worry is how much money she will need to earn to support herself. The dream of growing old with her husband is gone, and she has a long future of her own to pay for.

The couple are fortunate that they have considerable resources to work with. In addition to their retirement accounts, they have $108,000 left in their taxable accounts. Pam will also be the beneficiary of Steve’s life insurance policies, totaling $375,000.

Since his departure from his company earlier this year, Steve has been getting buyout payments of about $37,000 a year, and those payments will continue after his death — assuming the company is profitable. The Social Security disability benefits he’s been collecting since his retirement in January, along with private disability payments, bring in an additional $7,800 a month, but that income will end with his death.

Pam has always depended on Steve to manage their finances. Even now she leans on him for advice, and he continues to oversee the household books. And Pam is struggling to make the math work.

As best as she can determine, she’d have to go to work right after Steve dies and make perhaps $100,000 a year, to avoid drawing down the retirement accounts soon afterward — worrisome considering that’s far more than she made before he became ill. And that anxiety about money is eating into the time she has left with Steve.

THE ADVICE

To help Pam and Steve sort through their options and separate fact from fears, Money turned to Priscilla Gilbert, a financial planner with J. Cole Financial Advisers in Philadelphia.

Gilbert examined various scenarios for the years ahead, working with Pam on her job and lifestyle expectations following Steve’s death and over the long term. Here are the planner’s recommendations:

Deal with the immediate challenges. Over the next several months Steve and Pam face high and rising expenses as his condition worsens.

In addition to his medical bills, the couple will need to hire extra home help, which isn’t covered by Medicare. Combined with their current spending on other household items, Gilbert estimates that they’ll need about $145,000 to get by.

With Steve’s current life expectancy they can probably cover most of that from Steve’s buyout and disability payments. The planner also urges them to review the titles on their nonretirement accounts to make sure they are held jointly or in Pam’s name alone. That will help avoid probate and ensure she has access to that money.

Create a livable income stream. After Steve’s death, Pam will no longer be contending with a $45,000 annual bill for medical and home health care costs. Gilbert suggests Pam look for other ways to save money — for instance, aiming to pare food and household incidentals, which now run the couple nearly $1,500 a month, to $700.

Even with these cutbacks, however, Gilbert estimates that Pam faces expenses of about $100,000 a year, since she plans to keep living in the house. Yet her only income will be from Steve’s buyout payments of $37,000 a year.

Where will the rest of the money she needs come from? Gilbert suggests that Pam ease back into the workforce starting in 2014, with a goal of making $25,000 in after-tax earnings that year and $55,000 in 2015 — levels that Pam thinks are realistic.

After setting aside $40,000 for an emergency fund, Pam can then tap non retirement savings to make up the shortfall — first bank accounts and mutual funds, and later relying on the proceeds of Steve’s life insurance policies.

When the buyout payments end in 2019, Pam will be 60 and can replace part of that money by taking Social Security survivor benefits on Steve’s earning record. That would bring in nearly $1,200 a month.

Keep retirement savings options open. Gilbert recommends keeping the retirement accounts in Steve’s name for maximum flexibility. If for some reason the couple need to use the funds while Steve is alive, they’ll be able to withdraw money without penalty since he is already over the required minimum age of 59½ (he turns 61 this month); Pam would then be able to withdraw from the accounts after his death without penalty, if needed.

Ideally, they’ll be able to leave the retirement accounts alone so that they can continue to grow tax-free for as long as possible. (Tax rules require that once IRA withdrawals begin, they must continue.) If the accounts remain in Steve’s name, Pam will not have to take distributions until 2022, the year Steve would have turned 70½.

As 2022 approaches, Pam can elect to roll the IRAs into her name if she doesn’t need the cash right away. That will enable her to further defer withdrawals until she reaches 70½ in 2029.

Fix the investment mix. The retirement portfolios are currently invested mostly in midcap U.S. stocks, an asset mix that Gilbert feels is too aggressive for their circumstances. She suggests that they keep nearly half their assets in fixed-income investments (mostly investment-grade bonds), 35% in larger U.S. stocks and developed-nation foreign equities, and most of the rest in smaller domestic and emerging-market securities. They can follow the same asset allocation for the life insurance proceeds.

With her financial picture clarified, Pam says that she can focus on the time she has left with Steve. She is trying to remain upbeat about everything, including the demands of caring for a husband with ALS.

“When I met him, I wanted to get 30 years out of him,” she says. “I may get only 10, but I have him 24/7, so that adds up to 30.”

Stoic about what lies ahead, the couple occasionally take time for reflection. Years ago, when Pam was a reporter, she recalls, she would write obituaries noting that somebody “lost a battle” with cancer or another disease. “I know people who have battled, but I don’t think we’re battling. We accept death,” she says. Steve chimes in softly, “When I die, the disease dies with me, so that’s at least a draw.”

MONEY

Cutting the High Cost of End-of-Life Care

End-of-life care is expensive and too often fails to improve the quality of life. Photo: Mauricio Alejo

One out of every four Medicare dollars—over $125 billion—is spent on care near the end of life, and the financial burden on families can be staggering. Yet aggressive treatment too often fails to improve or lengthen the lives of the terminally ill. Here's how to ensure a loved one's final days bring true comfort.

You’ve gotten the phone call no one wants to receive: A close family member has been diagnosed with a life-threatening illness, or one battling a terminal condition has begun to fail. And so begins a medical saga that could last weeks, months, or years, during which you will face some of the most difficult choices you’ll ever make.

Should your 82-year-old dad, who has been declining after a stroke, get hip surgery after a fall? Would your 43-year-old sister, fighting late-stage cancer, benefit from an experimental drug that could have serious side effects?

These are wrenching decisions. And while no one wants to think about money at such times, they are also expensive ones — for families and for the country.

One out of every four Medicare dollars, more than $125 billion, is spent on services for the 5% of beneficiaries in their last year of life. Yet even with Medicare or private insurance, you’re likely to face a big bill: A recent Mount Sinai School of Medicine study found that out-of-pocket expenses for Medicare recipients during the five years before their death averaged about $39,000 for individuals, $51,000 for couples, and up to $66,000 for people with long-term illnesses like Alzheimer’s.

For more than 40% of these households, the bills exceeded their financial assets. Says study co-author Amy Kelley, an assistant professor of geriatrics: “Many people are shocked by the high out-of-pocket health care costs near the end of life.”

If spending all that money helps ensure that the people you love get the best care at the end of their life, you probably think the price is worth it, no matter how high. Yet that’s often not the case.

With the process frequently driven by the medical system’s focus on performing aggressive interventions at any cost — and the reluctance of families to talk about death — many people who are dying do not get the care they want.

Worse, they often suffer through unnecessary, even harmful treatments. Says Ira Byock, director of palliative medicine at Dartmouth-Hitchcock Medical Center and author of “The Best Care Possible”: “When patients have a terminal illness, at some point more disease treatment does not equal better care.”

You and your family don’t have to accept the status quo. There are steps you can take so you know what your relative really wants — and family members know what you want — and to ensure that doctors follow suit. There is research to inform you about which treatments help and which cause more harm than good. And there are services you can rely on — increasingly available but vastly underutilized — to improve quality of life in the final weeks or months of life.

Last month, Money magazine ran Part One of its three-part series on the financial challenges families face when a loved one is dying. The first part, “The high cost of saying goodbye,” tackled funeral costs and the tactics some in the funeral industry use to manipulate you into overspending. The final installment, “Looking beyond,” profiles a man who has Lou Gehrig’s disease and is planning for his wife’s financial future without him.

In this story, the second in Money’s series, you’ll see how frank talk, planning, and the right information about costs and options can help make the end of life as comfortable and comforting as possible. Here is what you need to know.

DENIAL IS THE ENEMY

People do not like to talk about death — to prepare for its inevitability when they’re healthy or to acknowledge its proximity when a family member is terminally ill. Consider: Six out of 10 people say they don’t want their family burdened by end-of-life decisions, according to a recent California Healthcare Foundation survey, but nearly as many (56%) have not communicated their preferences.

Here’s the problem with denial: By not telling your family the kind of care you want, you give up decision-making power to others — the hospital, doctors, or a relative who may not know or share your preferences.

Even though most Americans say they would prefer to die at home, for instance, only 24% of those over 65 do so, according to 2009 federal data. The rest spend their last days in hospitals or nursing homes.

Ending up in the hospital often means aggressive, high-cost treatment at the expense of quality of life. A 2010 Dartmouth study of elderly cancer patients nearing death found that 9% had a breathing tube or other life-prolonging procedure in the last month, and at most academic medical centers, more than 40% of the patients saw 10 or more doctors in the last six months of their lives.

“If hospitals have the resources, they are always used,” says Dartmouth professor David Goodman.

Even when the person who is dying has made his wishes known, they may be ignored, or his medical team may not be aware of them. A 2010 study in the Journal of Palliative Medicine found that only 15% to 22% of seriously ill elderly patients had their preferences in their medical records.

Studies by the Agency for Healthcare Research and Quality show that 65% to 76% of doctors whose patients had documents outlining end-of-life wishes weren’t aware they existed.

What to do

Stop pussyfooting. The best time for family members to share their thoughts about the kind of care and intervention they want at the end of their life is before there’s a crisis. If that conversation doesn’t happen before a person becomes seriously ill, waiting is no longer an option.

Among the questions to ask: What kind of life-sustaining treatment — CPR, feeding tube, ventilator — do you want, if any? Where do you want to be cared for? When you think about the last phase of your life, what’s most important to you? (For more guidance, go to TheConversationProject.org.)

Make the choices binding. Only one-third of Americans have advance directives, such as a living will, which lays out preferences for life-sustaining treatment, and a health care proxy, which appoints a person to make medical decisions for you if you cannot.

“Choosing a health care proxy is even more important than a living will, since that person will be interpreting your wishes and making sure they’re carried out,” says Charles Sabatino, director of the American Bar Association’s Commission on Law and Aging.

If you haven’t prepared these documents, get on it now. At Caringinfo.org, you can get state-specific advance-directive forms that can be completed without a lawyer or prepared by one as part of estate planning.

Get doctor’s orders. Advance directives may not be enough to ensure your relative’s wishes are followed. Take an extra step and see if your state is among the 15 (including California and New York) that have adopted a POLST form, or Physician Orders for Life Sustaining Treatment, which is designed to be carried by patients or their caregivers from hospital to home.

Since it is signed by a doctor, it often holds more weight than a living will and is recognized by all medical professionals, including EMTs. (Get more info at ohsu.edu/polst.) If your area hasn’t adopted it, ask the doctor about putting a do-not-resuscitate order in place.

MORE IS NOT BETTER

Lacking a clear understanding of the medical prognosis, families may be overly optimistic about the likely success of aggressive, often costly interventions. A recent study in the New England Journal of Medicine found that nearly 70% of patients with advanced lung cancer and 81% of those with late-stage colon cancer did not understand that chemotherapy was unlikely to cure them.

The same is true for many common supposedly lifesaving treatments. Only 6% of cancer patients who get CPR recover enough to leave the hospital, a 2006 study found. And CPR can cause blunt-force trauma, especially for elderly patients, says Harvard Medical School professor Angelo Volandes.

Feeding tubes can lead to infections while doing little to prolong life in the elderly. And a breathing tube may extend life but detract from its quality — many patients must be restrained or sedated to avoid pulling out these supports.

When they learn more about the outcomes of aggressive interventions, patients are more likely to reject them.

In one recent study, a group of 101 elderly nursing-home patients watched a video that showed attempted CPR, as well as less aggressive treatment. They were then given a choice of life-prolonging care, limited curative efforts with comfort care, or just comfort care. Eight out of 10 opted for comfort care. Among those who heard only verbal descriptions, just 57% wanted comfort care, while most of the rest wanted life-prolonging or limited treatment.

What to do

Press for the prognosis. Many doctors are reluctant to be frank with families.

A 2010 study in the journal Cancer found that one out of three physicians wouldn’t discuss the prognosis with a cancer patient who has four to six months to live and is still feeling well. Instead, the doctors would wait for symptoms to appear or until there are no more treatments to offer.

“Having a discussion about what matters most to a seriously ill patient is uncomfortable for many physicians,” says Diane Meier, a geriatrics professor at Mount Sinai School of Medicine. Doctors also have little financial incentive to initiate these talks.

A White House effort to set up Medicare reimbursement for physicians discussing end-of-life options was dropped amid a political uproar — remember the “death panels”? — three years ago.

Bottom line: If the doctor doesn’t volunteer facts about the chances of recovery, the effectiveness of various treatments, and possible side effects, you have to ask.

Rely on others who have been down this path. Realistic information about treatments and outcomes can often be found at the websites of nonprofit associations affiliated with the condition, such as Cancer.org or Heart.org; major hospital sites, such as MSKCC.org, can be helpful too.

Patient and caregiver support groups may also be invaluable for insight into real-world experiences with different interventions.

COMFORT CARE IS NOT GIVING UP

Palliative care, a specialty that focuses on relieving the symptoms, pain, and stress of serious illness, is one of medicine’s best-kept secrets. It’s widely available: Two-thirds of hospitals with 50 or more beds offer palliative services. Patients who get this type of care usually enjoy improved quality of life and may even live longer.

For instance, a 2010 study of patients with advanced lung cancer who got palliative care along with standard cancer treatment found they had fewer symptoms, needed less chemotherapy and hospitalization, and lived 2.7 months longer than those who did not get those services. And the costs are usually covered all or in part by Medicare and private health insurance.

Yet only 8% of consumers have a good understanding of what palliative care is, according to a 2011 poll by the Center to Advance Palliative Care. And studies show that many physicians are also unfamiliar with it or fail to recommend it, partly because they equate palliative services with hospice or end-of-life care.

That’s not the case — you can receive palliative care along with treatment. And you don’t have to be dying to get these services; anyone with a serious illness is eligible.

Whether or not the patient’s condition is terminal, the team-based approach is the same: A palliative-care doctor, along with a nurse, social worker, and other medical experts, works with your family and your doctors to coordinate treatment, provide services that alleviate suffering, and offer counseling, says Porter Storey, executive vice president of the American Academy of Hospice and Palliative Medicine.

Say your brother has advanced cancer and diabetes and is suffering pain and nausea from chemotherapy and elevated sugar levels. A palliative-care doctor would talk to his oncologist and endocrinologist to come up with drugs and treatments that are more effective at minimizing the chemo symptoms while bringing his diabetes under control. A visiting nurse would help with his care, while a social worker might meet with him and the rest of the family to talk about ways to relieve stress.

Palliative services do seem to be gaining more widespread acceptance. Last year New York became the first state to require hospitals and other health care facilities to provide access to palliative care; the state also requires doctors and nurse practitioners to inform patients with terminal illness about their options.

And in October the U.S. Department of Health and Human Services proposed a landmark settlement in a class action that would extend Medicare coverage of skilled nursing and therapy services at homes, hospitals, and nursing homes to any patient who needs it, not just those with the potential to improve.

The terms of the settlement need to be approved by a federal judge, but it’s likely to expand services for palliative care, says Terry Berthelot, senior attorney at the Center for Medicare Advocacy, which represented the named plaintiff in the suit.

What to do

Make the first move. If the doctor doesn’t suggest palliative care, ask about it. The physician or hospital should be able to offer a referral.

The range of services can vary widely and may be administered through a hospital, hospice program, or independent agency. For a state directory of hospital providers, go to GetPalliativeCare.org; at PalliativeDoctors.org, you’ll find listings of physicians.

Tailor the care. To get the most benefit from palliative care, talk to the program coordinator about what your loved one needs most.

Relief from pain, nausea, or other symptoms of the disease? Help managing side effects of drugs or the stress of illness? Guidance with treatment options? Also ask about what other services are available — in addition to the typical core team members of doctor, nurse, and social worker, many palliative care programs work with a nutritionist, pharmacist, massage therapist, chaplain, and other specialists.

WAITING MAY BE YOUR BIGGEST REGRET

Hospice care, which provides intensive comfort care to the terminally ill, is difficult for many families to pursue because it means accepting that no cure is possible.

Getting this care sooner rather than later, though, often makes a dying person’s final days more comfortable. It may also give him more time: A 2007 Journal of Pain and Symptom Management study found that hospice patients lived 29 days longer on average than those who did not receive such services — perhaps in part, the authors suggest, because of improved monitoring and psychosocial support.

To get the most relief, patients typically need to be in hospice care at least four to six weeks, experts say. Yet the median stay in 2010 was just 20 days, and more than a third of patients die within seven days, the National Hospice and Palliative Care Organization reports.

“The most common thing people say about hospice is, ‘I wished I’d done it sooner,’ ” says NHPCO president Donald Schumacher.

Like palliative services, hospice focuses on comfort care but with a broader array of services, including bereavement counseling for the family.

Most hospice care is delivered at the patient’s home or nursing home, with medical costs covered by Medicare and most insurance plans, though you may have co-pays for drugs and treatments. To qualify, your relative’s doctor must certify that he is expected to die within six months; if he lives longer, the hospice can renew the certification.

Another benefit: With its focus on comfort care and less aggressive intervention, hospice may also lower health costs for the country. Duke University researchers report hospice use cuts Medicare spending in the last year of life by an average $2,300 per beneficiary and up to $7,000 for cancer patients.

What to do

Vet the program. Most of the 5,000 or so hospice programs nationwide are administered by independent agencies, though some are part of a hospital or nursing home.

Make sure the program is approved to receive Medicare reimbursements, and find out if the hospice has expertise with a certain kind of illness — say, cancer or dementia. If the patient’s home can’t easily accommodate the equipment that might be needed or if the kind of care required is complex, a hospice residence or hospital may be a better choice, says Schumacher. For more advice on selecting a hospice, see CaringInfo.org.

Look for backup care. Even with home hospice care, you may need assistance from health aides or private nurses.

Be forewarned: This help does not come cheaply. Families can easily spend several hundred dollars a week or more. Unfortunately, the costs usually aren’t covered by Medicare or private insurance (some long-term-care plans will cover a portion of the expenses; check the policy for details).

It won’t pay the bills or change the outcome for your family member. But making sure she is as comfortable as possible, in the setting she prefers, is exactly the kind of treatment — not aggressive, last-ditch interventions — that can result in a better end for the person you love.

MONEY Health Care

Check Out of the Hospital and Stay Out

200248746-001
Orderly pushing patient on stretcher into emergency entrance Keith Brofsky—Getty Images

Hospital stays are costly. Here's how to reduce your chances of landing right back inside.

Spending time in the hospital is bad enough. Worse, there’s a decent chance you’ll have to return for a second round shortly after departure.

According to a study in the New England Journal of Medicine, about 20% of Medicare beneficiaries are readmitted to the hospital within 30 days of discharge.

Common reasons for readmission include infection, medication errors, and confusion about your ongoing care plan.

“The majority of this is preventable,” says Eric Coleman, co-author of the study and director of the care transitions program at the University of Colorado.

Besides being unpleasant, landing back in the hospital isn’t cheap.

The average stay for re-hospitalized patients is 13% longer than for patients with the same condition who hadn’t recently been hospitalized. Re-admissions account for 17% of Medicare’s hospital payments (in October the agency began penalizing facilities deemed to have excessive rates).

The Center for Studying Health System Change found that the average total bill for a readmission is $14,500. Hospital patients usually have to pay at least $500 to $1,000 out of pocket, says Coleman, but you could owe far more if you have a high-deductible plan or co-insurance that requires you to pay 20% to 30% of the tab.

The following tips can help you and your family members limit return trips.

Prevent errors

A recent study in Health Affairs found that patients are unintentionally injured in about a third of hospital stays, far more than previously thought.

These events, often errors, increase your risk for both extended stays and readmission later on, says David Classen, a University of Utah professor and co-author of the study. Since medication issues are the most common problem, it’s a good idea to ask nurses to say your full name and the drug name and dosage each time they hand over pills or insert an IV.

Get a companion for discharge

Patients are typically satisfied with their in-hospital care. It’s the exit process that earns poor marks.

“We call it drive-by discharge,” says Coleman. Before you walk out the door, you need to be clear on when it’s okay to resume normal activity and what warning signs to look out for. Fever, redness, and confusion, for example, can indicate infection, which can lead to septic shock, a fatal condition.

Find out whom to call if you have questions or if symptoms develop, and ask the person who will serve as your primary caregiver at home to listen and take notes.

You’ll also want to make sure the hospital doctor has the names and dosages of any medications you were taking at home and tells you if and when to resume taking them.

Some patients leave the hospital with a prescription for a generic drug, not realizing it’s the same as the brand-name version they’re already taking, says Nancy Foster, vice president for quality at the American Hospital Association. And some drugs, like blood thinners, require a follow-up test to make sure the dosage is correct.

Finally, inquire about home support. Medicare and insurers cover home care for some patients who need help with medical things like changing bandages and administering injections, but don’t pay for home aides for routine activities such as bathing and dressing.

Some hospitals or insurers, however, have begun sending transition coaches to patients’ homes to teach them and their family how to manage post-hospital self-care.

Follow up with your doctor

Though your hospital doctor is supposed to communicate with your primary-care doc, it doesn’t always happen.

As soon as you leave the hospital, notify your primary-care physician and arrange for a follow-up appointment. About half of nonsurgical hospital patients readmitted within 30 days never followed up with their physician, according to the New England Journal of Medicine study.

Feeling healthier than Dr. Oz by the time your appointment date arrives? “Your physician may want to tweak what the hospital has prescribed,” says Foster, “so go see the doctor anyway.”

MONEY Health Care

4 Medicare Enrollment Mistakes to Avoid

Enrolling in Medicare? Don't get tangled up up in mistakes that are easily avoided. Photo: Massimo Gammacurta

Signing up for the health program isn't as straightforward as you might think. These common missteps will cost you.

When Houston attorney Barbara Quackenbush retired at age 67, she decided to stay on her company health plan through COBRA rather than sign up for Medicare. But as her COBRA coverage neared expiration, she learned that this choice will saddle her with a Medicare penalty requiring her to pay 20% higher premiums.

Even scarier, she’ll be left without coverage for 10 months. When Quackenbush found out, she says, “I was so upset I nearly dropped the phone.”

Reaching the big six-five is your ticket to guaranteed, affordable insurance via the Medicare system—provided you comply with a byzantine set of rules.

Getting the sign-up process right can be tricky for anyone, but it’s become a major headache for the growing number of folks working past 65, say advocates, particularly now that Medicare enrollment no longer comes at the same time people start collecting full Social Security.

“There are pitfalls you must watch out for,” says David Lipschutz, a policy attorney at the Center for Medicare Advocacy. Here are four big ones to avoid.

Mistake no. 1: Not enrolling because you’re employed.

If you’re still working, and have coverage from your job, you don’t have to sign up at 65. Many workers, though, benefit from enrolling, especially when you consider that you can take parts A and B at different times.

Who should sign up?

Part A, which covers hospitals, is a no-brainer for most people. It’s usually free and may pick up costs your job does not.

If you work for a small company, your firm may require that you take Part B, which covers doctor visits, so that Medicare can start paying most of your expenses. Anyone with a high-deductible plan can also benefit from Part B, since it often picks up costs before you’ve met the deductible.

A caveat: If you have a health savings account, you must stop making deposits.

Who should hold off on Part B?

Workers at large companies. The plan costs at least $100 a month and often provides little benefit beyond what their job covers.

Mistake no. 2: Failing to sign up when you or your spouse retires.

You must enroll in Part B eight months from your last month of work, even if you have retiree benefits or COBRA. Miss that date and your coverage won’t kick in for three to 15 months. You’ll also face a 10% premium penalty for every 12 months you delay.

For Quackenbush, going on COBRA for 18 months without enrolling in Part B triggered a penalty and waiting period.

If you’re 65 or older and get benefits from your spouse’s job, remember that the same rules apply when she retires, says Frederic Riccardi of the Medicare Rights Center: You must sign up within eight months of her final month.

Mistake no. 3: Accidentally voiding retiree coverage.

Signing up for an Advantage plan, which offers coverage as an alternative to parts A and B, could prompt your former employer to kick you off its insurance.

Going with a private Part D plan, which covers drugs, may have the same effect. The reason, says John Grosso, a consultant at Aon Hewitt, is that most retiree coverage is designed to work with traditional Medicare and isn’t compatible with private plans.

Mistake no. 4: Not considering Medigap early on.

The first six months after you enroll in Part B is usually the cheapest time to buy a Medigap plan, which covers deductibles and other costs not picked up by Medicare.

People still covered by their job may not need Medigap right away, but if you buy after this six-month period, your monthly premium could jump by $50 or more, especially if you have a health problem. Worse, you could end up being denied.

 

For more information about the Medicare program, see the Ultimate Guide to Retirement.

 

MONEY Medicare

Election 2012: Tackling Medicare Costs

The 2012 election has become a fight over the future of Medicare. Photo: Ryan Mesina

One of the key pocketbook issues of this year’s election is the skyrocketing cost of Medicare.

Each candidate has a very different take on how to rein in those costs — with very different potential consequences. In this second installment of Money magazine’s three-part series on voting your wallet, see where the candidates stand on Medicare, why their promises may be hard to keep and what the impact may be on your family’s finances.

Tackling Medicare costs

What’s at stake: This core middle-class entitlement has long been considered untouchable.

Because of demographic changes and rising health care costs, the program’s spending is projected to balloon from 3.7% of the economy today to 6.7% in 25 years, according to the nonpartisan Congressional Budget Office, making it the biggest driver of America’s long-term budget gap. So it’s game on for Medicare.

As House budget chairman, Ryan made his name with sweeping proposals to change Medicare, and Romney says his approach will be similar.

Obama’s health reform law lays out a very different blueprint for restraining costs. Analysts at the Urban Institute calculate that lifetime Medicare benefits will be worth over $500,000 for a mid-career couple today, so the fight over the program is one of the biggest pocketbook issues you’re voting on.

Obama

The promise: If the Obama campaign would like you to know one thing about the President’s Medicare policy, it’s that he won’t change anybody’s benefits. And if there’s a second thing, it’s that he won’t change anybody’s benefits.

This much is true: The Affordable Care Act, a.k.a. Obamacare, didn’t change the core Medicare benefit — that is, the share of your medical costs the government covers. It also made Part D prescription coverage more generous by reducing seniors’ out-of-pocket costs.

That doesn’t mean Obama and the Democrats in Congress aren’t tinkering with Medicare.

Even if they don’t touch how you pay for care, they do have plans for changing how doctors and hospitals are paid. Some of the ways are fairly blunt: The ACA reduces projected spending on Medicare by about $716 billion over the next decade by slowing the growth of payments to private Medicare Advantage plans and to hospitals and other providers (but not to doctors).

Other fixes aim to overturn a system in which health providers are paid more for doing more things — a system that has left the U.S. with the world’s most expensive health care. For example, the law sets up networks of providers charged with coordinating patient care, rewarding doctors and hospitals financially if they deliver quality care at a lower cost.

The catch: Can Medicare get hospitals and doctors to deliver care more cheaply without also hurting some patients?

Conservative critics of the ACA say the government can’t be expected to get it right. “You end up with queues that diminish access to care,” argues James Capretta, a former George W. Bush budget official who advocates Ryan’s alternative approach.

The potential impact: Since August, much of the campaign rhetoric has been about whether the $716 billion reduction to Medicare spending comes at the expense of current seniors. The short answer is that you may not see any changes, but that doesn’t mean there are no risks.

A big chunk of the cuts hits private Medicare Advantage plans. Delivering care through those plans has cost taxpayers about 10% more than traditional Medicare, making them a prime target for cuts. If Medicare Advantage plans get less generous payments, some could drop out of the market, possibly forcing you to pick a new plan; others might pare benefits, such as lower co-pays or vision care.

As for lower payments to hospitals, they could eventually put some institutions in financial jeopardy.

If that happens, says Boston University health policy professor Austin Frakt, “they’ll cut wherever is easiest. They might trim staff. A system might close a hospital.”

Offsetting that risk is the fact that health reform reduces the number of Americans without insurance, which means hospitals are less likely to be stuck with unpaid bills. Also, having the Medicare system spend less and stay solvent longer could stave off more drastic changes later on.

“It extends the life of the program,” argues Obama campaign policy director James Kvaal.

Romney

The promise: Medicare would be divided in two under Romney. Those 55 and older now would be able to stay in the current system. Younger people would face dramatic changes.

Medicare would no longer be an open-ended benefit but instead a kind of voucher. (Republicans prefer the term “premium support.”)

You’d get financial help to buy your own insurance, either from the Medicare system or from a private company, which would have to offer “comparable” benefits.

Crucially, though, the amount that the government kicks in would be fixed each year, based on what the second-cheapest plan on the market says providing care would cost.

In practical terms, this is likely to mean that your cheapest option will be a private plan that uses a managed-care network or an HMO.

If you want regular Medicare coverage, which today allows you to see just about any doctor, you might have to pay extra. The idea is that competing, profit-driven private insurers will find new ways to provide effective care for less.

“It changes the whole business dynamic,” says Joseph Antos, a health economist at the American Enterprise Institute.

The catch: While markets are often a great spur to innovation and efficiency, health care has a way of thwarting such disciplines.

“All health care spending is growing unsustainably,” notes Frakt, in the private market as well as in Medicare.

And if you’re nervous about Obama’s plan to have bureaucrats pressuring doctors to find cost savings, be aware that private insurers will probably try many of the same things.

“The real debate is, Who do you trust more, the federal government or private insurers, to make really tough decisions?” says former Medicare trustee Marilyn Moon.

What happens if competition doesn’t produce big savings? Romney hasn’t specified this, but his running mate has. All of Ryan’s many reform proposals have included a budget cap that keeps Medicare from growing faster than a certain preset rate.

How that happens would be left up to Congress’ sausage-making process. One option could be an ACA-style squeeze on providers. Another is capping the value of the vouchers, putting the remaining cost on you.

The potential impact: Right off the bat, Romney could reverse the $716 billion brake on Medicare spending. This might not leave your wallet any fatter.

Because Medicare premiums are set as a percentage of program costs, bringing back higher spending would mean raising premiums and out-of-pocket costs an average of $342 a year over the decade, according to calculations by Moon. ACA repeal could also wipe out the extra coverage for out-of-pocket drug costs.

In the long term, the question of how remaking Medicare would work is tough to answer. Lawmakers may cut future benefits deeply or not so deeply. The goal is to spend less, and the Republican model for doing that is to create more incentive for seniors to seek out less expensive care, or pay more to make up the difference.

READ MORE ON VOTING YOUR WALLET:

The candidates and your taxes

Reigniting the economy

MONEY

What Health Care Reform Means to You

During the many months of talking, yelling, finger-pointing and partisan spinning about the best way to reform our health care system, it was hard for Americans to actually understand exactly how any sort of overhaul would affect them. Given how often things were moving and changing, even this blogger — who covers health care as one of her beats — found it difficult to stay on top of what the various bills meant to consumers, and what provisions were in or out.

With all that noise finally behind us, it’s now possible to focus in on how the newly-definitive details will affect Americans. So here’s a look.

Most of the major provisions of the legislation, including a requirement that most Americans purchase insurance or pay a penalty, do not go into effect until 2014. Yet there are a few big benefits that will kick in this year. Here are three of them:

  • Many young adults will be allowed to remain on their parents’ health insurance plan until age 26.
  • Senior citizens who fall into the Medicare “doughnut hole” will get some help in paying for their prescriptions.
  • People with pre-existing medical conditions that left them struggling to find affordable coverage in the past may now be able to get it through a government program.

For more details, Kaiser Health News has published two clear stories of what health care reform means to you, both immediately and down the road.

Follow MONEY on Twitter at http://twitter.com/money.

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser