Posts Tagged ‘Medicare’

The Need for Self Reliant Health Care

Tuesday, January 24th, 2012

 

I came across one of the best articles I’ve seen regarding Medicare funds or rather, the dissension thereof. For anyone over the age of 40, the issues at hand matter – a lot.

 

The biggest takeaway I got from the article? It is seemingly apparent relying on Medicare to provide like coverage in perpetuity is not very plausible. While it is difficult/annoying/painful for most of us to think 20 and 30 years beyond today, the potential for future health and financial challenges in our lives dictates otherwise.

 

One of the hardest hitting highlights of the article was an example about disbursements made using an average salary of $43,500 per year. A recently retired couple with that salary would have paid in almost $120,000 in Medicare taxes during their working lives. But according to the Urban Institute the medical benefits this couple would receive will average $357,000. Needless to say, this is not a sustainable model.

 

Another cited concern provided that 1 in 5 doctors restrict the number of Medicare patients they will take on at any given time. This number jumps to 31% for primary care physicians. The AMA reasons this is due to low reimbursement rates and that Medicare is deemed to be an unreliable payer by the medical profession.

 

Compounding these exasperating facts and figures is fictitious recipients. In 2010, it is reported that Medicare Part D paid $3.6 million to deceased beneficiaries. Similarly, 142,000 procedures on 5,000 dead people were paid for between 2004 and 2008 to the tune of $33 million.

 

According to the National Health Care Anti-Fraud Association, “The United States spends over $2.5 trillion on health care every year. Of that amount, NHCAA estimates that tens of billions of dollars are lost to health care fraud.” Mismanagement to say the least is costly and cannot be tolerated in any organization let alone one facing financial crisis.

 

Much is also written about “the gap in coverage” regarding prescription drugs. Yet the biggest gap occurs in long term care costs for home care, assisted living and skilled nursing facilities. Ironically, while our current system reimburses the deceased, it does not provide for the most financially devastating expenses the (still) living can incur.

 

This article is a major eye-opener to the current state of a program many of us are depending upon for health care services in retirement. Reading it should at the very least provoke further consideration for yourself and your family. Check out the entire article at Smart Money.

 

Kurt Rusch  CLU, ChFC

Proactive Retirement Planning

Tuesday, October 18th, 2011

 

I just read an article entitled, “5 Biggest Planning Retirement Mistakes”. The problem with titles like these in general is they are negative, and many times, as misleading as they are disheartening.

 

Proactive retirement planning on the other hand, is a different workhorse (pardon the pun) altogether. It should be ongoing and positive, starting over the course of your working years and cultivated throughout your retirement years. It also involves deliberate consideration beyond the lone act of making regular payments to employee contribution plans.

 

What type of proactive things should you be doing to plan for a life of leisure? Consider these 5 things now (even if you’re still working):

 

1.      VALUATION  

 

Project your current retirement programs forward to see how big of a lump sum you will have when you reach retirement and begin systematic liquidation.  While this may seem a monumental undertaking with market upheavals and historic lows in fixed income options, getting to that number will provide the baseline figure you need to work with.

 

If you tend to be risk averse, project your account balances into the future by using rates of return that could be obtained using less volatile investment choices. The worst case scenario here is that things change and you receive a higher rate of return netting a larger sum of distributable retirement funds.

 

On the other side of the coin, the market tends to be a lot more dependable over long periods of time than generally assumed. Utilizing these returns has not historically been as risky as you may think.  A volatile market is, in reality, a friend to those systematically investing via retirement plans at work and independently because: fixed amounts invested on a regular basis will always purchase more when the markets are at their lows and less when they are at their highs. This system allows you to buy low without ever having to consciously make investment decisions.

 

2.      DISRUPTION   

 

No one can possibly plan for every “what if?” in life, but addressing the types of disruptions to retirement income streams which may occur is essential.

 

Case in point; what would you do if Social Security changed drastically by the time you were counting on receiving it? Currently, with no modifications or adjustments, the Social Security Administration projects that by 2036 the Social Security Trust Fund will only be able to pay 75% of their obligations.  Would you be able to handle this decrease? Or any other type of unplanned reductions? If not, have you considered what you can do to make up possible shortfalls?

 

If you begin making up the gap sooner rather than later, the amount that would need to be set aside on a regular basis would be comparatively small. Conversely, if this gap is left unaddressed, the magnitude of future contributions could be daunting. Remember: Compound interest (really) is the Eighth Wonder of the World.

 

3.      VISUALIZATION 

 

Envision (literally) your retirement and what you (actually) want it to look like. While there are numerous statistics and figures utilized in planning, the best way to assure that you are planning for YOUR retirement is to personalize it.

 

Some people may think this silly but if you’ve never really taken a moment to think about how you’d like to see yourself in this future, you may be surprised what comes to mind. Are you planning on traveling a lot? Are you planning on working? If so, what is the magnitude of your commitment to work? What do you envision your living situation as being?

 

These kinds of questions and many more will affect the dynamics of your retirement plan. For example, if extensive travel is part of your plan, you must put more money aside than someone without these ambitions. On the other hand, if you plan on working, that may decrease the amount that must be set aside to meet expenses in retirement.

 

Housing will also greatly affect your financial situation. Many people “downsize” in retirement. Downsizing can often free up funds that can be invested to subsidize other plans already in place. These are just a few examples to consider.

 

4.      SAFEGUARDING

 

Have you safeguarded your plan for longevity?

 

If a husband and wife have plans in place as a couple in retirement, will they still be okay if one of them was no longer around? Upon passing, a surviving spouse will receive the higher of the two spouses’ Social Security payment. Would you be able to live the retirement lifestyle you envisioned without the aid of dual Social Security payments? Beyond Social Security, pension options must also be reviewed closely.

 

Pensions generally have irrevocable options that must be elected at the time of retirement. A sample of the array of these types of elections would include a single life option for the pensioner. This option would yield the highest monthly payment because it would continue only for the life of the pensioner. There would be no continuation of payment to a surviving spouse if the pensioner predeceased him/her.

 

At the other end of the spectrum, is a spousal option paying the surviving spouse 100% of the pensioner’s payment at the time of the pensioner’s death. This option would yield the lowest monthly payment to the recipient because essentially this pension plan is buying life insurance on the pensioner to be used to continue payments in the event of predeceasing their spouse. Examination of these costs should be made to see if the pensioner would be better off financially to receive the higher single life pension payment in combination with a taking out a private life policy to provide for the surviving spouse. This would also provide the flexibility to drop the policy or change beneficiaries to children in the event of the spouse predeceasing the pensioner.

 

5.      INCAPACITY   

 

Have you addressed the possibility of incapacity? While this is a very distasteful subject to broach, statistics indicate that up to 75% of couples will have at least one spouse needing some sort of long term care within their lifetimes. Given the state of rising healthcare costs, this situation can devastate a retirement plan very, very quickly.

 

Those who elect not to address the subject make a default decision to self-insure. This works out well only if you remain healthy without the need for support services. It is also a risky choice to make for the time period in your life when your options for financially rectifying an error in planning will be drastically limited.

 

Chicago nursing home costs currently run about $200 per day. For those who assume that this will be handled by Medicare, you are mostly incorrect. Medicare only covers follow up treatment after release from a hospital. There is no provision for convalescent care (long term daily living) from Medicare.

 

Coverage for long term care is available through Medicaid but to qualify, your assets must be liquidated and spent down. This radically limits your future choices. Home health care is also not covered by Medicaid. Many of the better nursing facilities may also refuse admittance to people   already on Medicaid. The last thing your loved ones need to face at a time like that is the challenge  of finding a geographically desirable and decent facility to take you in.

 

Valuation, Disruption, Visualization, Safeguarding and Incapacity are all key factors in planning for life after work. Safe, secure and solid navigation of this terrain should be done with the assistance of a licensed professional.

 

Kurt Rusch  CLU, ChFC

Mature Health: Time Sensitive Changes

Friday, September 30th, 2011


This is a MUST READ for Adults 65 & Up, Caregivers, Adult Children and Estate Managers!

 

New Changes to Part D Enrollment Period

 

The Annual Enrollment Period (AED) has changed for Medicare Part D plans. This is a big deal for anyone 65 and older because failure to make changes within this period will result in Part D benefits remaining the same as were elected in 2011. While this may not affect some people, it will be vital to others.

 

Historically, the Part D Annual Enrollment Period ran from November 15th through December 31st each year. However, plan changes with an effective date of January 1, 2012 must be executed within the new AED time frame: October 15th through December 7th.

 

 

EHealthInsurance reports that 65 percent of seniors are not aware of these enrollment date changes. It is imperative to review and revise any and all Part D information within this time frame to assure that current plans are still preferable or amended accordingly.

 

 

 

 

Medicare Advantage Premiums

 

The Department of Health & Human Services announced that enrollees will see their Medicare Advantage premium shrink 4 percent next year. Prescription drug premiums will not change.

 

Drug Deductibles

 

Part D Deductibles will increase by $10 from $310 to $320 in 2012. It is also important to keep in mind that the lists of formulary drugs are constantly changing. There is no safe assumption that  prescriptions will continue to be treated in the same manner from one year to the next.

 

Cost of Living Adjustment

 

The Annual Cost of Living Adjustment (COLA) for Social Security is predicted to rise in 2012 by a few percent; this would be the first increase in three years. If the increase does come through as expected, it may not automatically translate into additional pocket dollars for beneficiaries.

 

The links between changes in Social Security and Medicare each year are complex – that’s putting it mildly. There are numerous factors involved. For example, your annual income and the date when you began Medicare, could ultimately squash much or all of the COLA gains from higher Medicare premiums. (Help Link: 10 Ways to Boost Your Social Security Checks.)

 

The many moving parts within the machinations of Medicare, Supplements, Part D and Social Security, must be reviewed annually. This is not an option, but a necessity to assure consistent and proper coverage. Please feel free to contact me for assistance in maneuvering the healthcare minefield.

 

Kurt Rusch, CLU, ChFC

 

 

 

 

 

Medicare Mix: Costs Affect Us All

Friday, February 25th, 2011

My mother-in-law received a $250 check in the mail from Medicare last month. It was her “onetime rebate” for reaching the doughnut hole in her prescription drug coverage – that was for 2010. This year she’ll get a 50% reduction in the cost of brand-name scripts when she reaches the hole. An escalating discount to 75% by 2020 will ensue.

This new provision is brought to us by Obamacare and while the current and not too distant senior population will benefit from it, other seniors will ultimately be paying for it. Specifically, those most commonly reported now as the “richest” and “most affluent” seniors.

How much affluence do you have to have to be hit? The answer to that question actually began in 2007, when new provisions dictated that higher income Medicare recipients would be charged more for Medicare Part B premiums. As of January 2011, the new healthcare law extends the income concept to Medicare Part D. The law also freezes the higher income thresholds through 2019 which does not take inflation into consideration; a pitfall which many forecasters say will put more and more seniors into the higher end category.

In 2011 Medicare Part B premiums will average around $115 per month. Higher income seniors will pay between $162 and $372 per month. The Part D premium average is $32 per month while affluents will pay between $44 and $101. The premise behind these changes is one of “means-testing” – those that have the means will pay more to help others that don’t.

The CMS (Centers for Medicaid & Medicare Services) currently provides that less than 2 million seniors will be paying the higher premium for Part B in 2011, and less than 1 million will be affected by higher Part D costs. Further estimates provide that by 2019, 20% of new Part B enrollees will pay higher premiums.

Current debates on the subject question whether the ‘richest’ seniors will make a mass exodus to the private sector if they begin paying $400 or more per month for Medicare coverage. While that, and a likely advent of new products specifically designed for this senior niche could occur, high income seniors would also have to consider the lost values of guaranteed issue.

There is another extremely important point to consider in this Medicare mix: How can less than 3 million high income seniors, roughly 16% of the total senior population, sufficiently subsidize these provisions?

A 2007 study done by the National Center for Policy Analysis further provides, the ratio between Medicare premiums and Social Security checks will be beyond astounding if deficit challenges prevail as noted below:

Medicare premiums consumed less than 10% of the average new retiree’s Social Security check in 2006.

By 2030, if Medicare deficits are covered by increasing premiums, premiums will consume more than half of the average retiree’s Social Security check.

By the 2070, premiums will almost consume the entire Social Secu­rity check of an average new retiree.

One final thought… all wage earners, regardless of age, contribute to the funding of Medicare through taxation. The NCPA study suggests that Medicare payroll taxes could reach double digit rates if the current situations remain un-remedied.

Kurt Rusch  CLU, ChFC