Introduction

Dealing with the costs of a serious or chronic disorder can be as distressing as dealing with the disorder itself. The costs are often beyond the personal resources of most people. For older people, most health care expenses are paid for by Medicare, Medicaid, or other government programs such as the Department of Veterans Affairs (VA). Medicare was set up to help people who are old. Medicaid was set up to help people who are disabled or poor. The VA provides health care for honorably discharged veterans. These programs are supplemented by private insurance or personal funds, including those of family members.

Understanding how Medicare, Medicaid, or other government programs work is complicated. What is completely paid for, what is partly paid for, who pays for how much of what, and how the payments are arranged are hard to figure out. Part of the problem is that regulations vary from state to state and that they change frequently. The government and health care foundations provide current information about these programs on the Internet and in booklets available by mail. But part of the problem is the complexity and fragmented nature of the health care system (lack of continuity of care) and of the payment system for health care.

Health care can be paid for in two ways: as fee for service or as part of managed care.

• With the fee-for-service approach, each hospital stay, each visit to a health care practitioner, each test, and each treatment is paid for as it happens. The fee may be paid by the person, Medicare, Medicaid, or private insurance.
• In managed care, a fee is paid regularly to a managed care organization, such as a health maintenance organization (HMO). The fee may be paid by Medicare, Medicaid, the person, or by the person's employer as a benefit. When care is received, the person may pay only a small part of the charge for that care (as a deductible or copayment). The managed care organization pays the rest. In some cases, the managed care organization pays all of the costs for care received.

See the table Who Pays for What?