August 11, 2016
Medicare Advantage: Know the Pitfalls
Baby boomers on Medicare are streaming into Medicare Advantage plans, with nearly 18 million people currently enrolled in them.
But a new study identifies pitfalls that might not be obvious to those signing up.
Advantage plans are HMOs or PPOs that provide both basic Medicare Part B coverage and many of the benefits offered by supplementary Medigap insurance policies. But Medicare beneficiaries’ premiums for an Advantage plan plus Medicare Part B coverage are roughly half, on average, of the premiums for a Medigap policy plus Part B.
One reason is that Medigap policies typically cover more out-of-pocket costs. Another is that insurers offering Advantage plans assemble networks of hospitals and physicians to control their costs and reduce customers’ premiums.
But, the researchers point out, Advantage plans frequently limit “access to certain providers and increase the cost for care obtained out-of-network.”
In nearly half of the 20 U.S. counties examined in a new study by the Kaiser Family Foundation, Advantage plans had limited networks of hospitals, potentially increasing consumers’ costs. Further, a large majority of Advantage plans did not include their county’s top-quality, high-cost cancer treatment center in the networks of approved health care providers.
And it can be very difficult to compare access to care and the future out-of-pocket medical costs that will result from a decision to go with an Advantage plan. Costs vary greatly among Advantage plan networks, with coverage often described in complex, incomplete, or confusing insurance plan documents, Kaiser said.
Consumers also face a dizzying array of choices. One example: In Cook County, which includes Chicago, eight difference insurance companies are selling 19 Advantage plans with 10 different provider networks.
Many retirees learn the ins and outs of the network only after they try to access medical care under the plan. The Kaiser report’s key findings provide a roadmap of things consumer should watch for: …
July 21, 2016
Inner-City Teen Interns Are Better Off
High school students who participated in Boston’s summer jobs program in 2015 work on a public beautification and landscaping project.
It’s a spring rite in Boston. The mayor’s office and private and non-profit employers hustle to get ready for a program employing more than 10,000 inner-city teens for the summer.
A new study of the summer 2015 participants shows that the high school students made remarkable strides, compared with the kids who applied but were not accepted for the limited number of slots available in the program. New York and Chicago have similar, large programs.
The Boston teens, who are mostly either black or Hispanic and from low-income neighborhoods, improved their job readiness, from showing up on time to developing their resume-writing skills, and also boosted their confidence and sense of identity. Perhaps most important, the program increased aspirations, particularly among black males.
Two out of three participants have single parents, and one in three is from immigrant families who do not speak English. While college-bound children of wealthy parents may choose summer camp over a summer job, being idle in the summer can be a big disadvantage for inner-city kids.
“These kids just have less opportunities to develop [job] skills just by growing up in the neighborhoods they do,” said Alicia Modestino, the Federal Reserve Bank of Boston researcher who studied the program. “Fewer people in their lives have a job. They’re living in a neighborhood with fewer job opportunities.” Further, single parents in low-income households often work nights or have multiple jobs and are too pressed for time to help their children develop these skills.
The jobs in Boston’s program are primarily either with private-sector employers – some of the top-tier internships are with major corporations – or with non-profit organizations such as local YMCAs, Sociedad Latina, the Boys and Girls Clubs of Dorchester, and the New England Aquarium. A requirement of the summer program – one of the nation’s oldest – is that each high school student attends sessions in which they learn to write resumes, practice job interviews, and answer questions properly on online applications.
Modestino was surprised that the strongest results in the study came in the category of “social engagement.” For example, her study found a sharp increase in the share of participants reporting they felt they “had a lot to contribute.” …
July 5, 2016
Parents, Start Student Loan Homework!
Here’s a reminder that parents should start their homework this summer to minimize college loan repayments over the long haul. A few basic decisions can add or subtract thousands of dollars.
A little help came last week, when the interest rates on all federal student loans were reduced. Despite the declines, the rates for the PLUS loans available to parents remain much higher than the loans available to their offspring – taking out a PLUS loan will nearly double the interest paid on $50,000 over 20 years, compared with an undergraduate Stafford loan.
This is an argument for having prospective students take out the loans, rather than the parents. As for paying them back, financial advisers tend to agree that young adults with decades of work ahead of them can share in that responsibility at a time their parents are facing retirement. This complex family decision depends on myriad factors, including how much income the graduate can expect to earn after college and how comfortable the parents are.
There are one-time, upfront fees on federal student loans, and they are also much higher for parent PLUS loans: 4.272 percent of the loan’s principal amount versus 1.068 percent for Stafford loans for undergraduates – these fees will go up for loans disbursed after Oct. 1.
The Institute for College Access & Success has put together an excellent cheat sheet explaining the federal loan options, who qualifies for various types of loans, and the costs of each. To see this sheet, click here.
Below is the institute’s summary of the new loan rates, effective July 1: …Learn More
June 9, 2016
Medicare vs Medicaid in Nursing Homes
When a spouse or parent requires long-term care, quality is the top priority. But a report last year by the US Government Accountability Office (GAO) cited concerns about the quality of the federal data essential for monitoring the quality of care. For example, three key indicators point to improvements: better nursing staff levels and clinical quality and fewer deficiencies in care that harm residents. Yet consumer complaints jumped 21 percent between 2005 and 2014, even though the number of nursing home beds has remained roughly flat in recent years.
Anthony Chicotel, an attorney with the San Francisco non-profit California Advocates for Nursing Home Reform, said care quality is intertwined with affordability, payment sources, and dramatic changes under way in nursing home economics. For his views on this important topic, Squared Away interviewed Chicotel, who is also part of a national coalition of attorneys advocating for patient rights.
Question: Recent Boston Globe articles have highlighted substandard care at nursing home companies that allegedly sacrificed resident care quality for profits. Are these a few bad actors or is this a larger problem?
Problems exist in the traditional buyer-seller marketplace for nursing homes and long-term care services. Providers all get paid pretty much the same rate regardless of whether the care they provide is good or bad. It’s usually the government who’s paying, and they’ve got an imperfect monitoring system to make sure the rules are followed.
The bottom line is that dollars can be extracted from a for-profit facility that don’t go into patient care. What you sometimes see is a nursing home affiliated with a number of other companies that provide services to the nursing home at above-market rates. The same web of companies running the nursing home might be in charge of the linen supplies, medical equipment, therapy, and the above-market rents for the facilities. If they’re paying, say, $12,000 a month for linens instead of sending it to a non-affiliated company, and it costs only $7,000 per month to supply the linens, they’re making a $5,000 profit. I don’t think the government’s going to catch that or account for that money.
Q: Long-term care is so expensive – more than $6,000 per month, on average. What are the top three financial issues that face nursing home patients and families? … Learn More
April 21, 2016
Game of Loans: Refinancing Student Debt
Brendan Coughlin, who runs the student loan refinancing unit for a major bank, is very upfront about this: some young adults should not refinance their loans.
One example is a graduate new to the labor force who doesn’t feel stable yet in his or her job. Refinancing a federal student loan with a high interest rate can make sense and saves money. But one reason not to refinance federal loans is that they have a major advantage over loans refinanced by private lenders: flexible repayment options for those who might have difficulty meeting their monthly payments later.
Another reason not to refinance is that the government forgives the debt after five or 10 years for certain types of teachers and public service workers.
Understanding whether to refinance is so important that Coughlin, as president of Citizens Bank’s consumer lending unit, instructs the bank’s loan officers to talk prospective customers through the pros and cons three or four times – to make sure they’re clear about what’s at stake.
“We really don’t want to have a customer swap out their loans and have a surprise. We want to make sure they’re making the right decision,” he said.
If you clear the hurdles, however, it might be time to refinance into bank loans with lower interest rates than the steep 6.8 percent currently charged for some federal student loans – and the double-digit rates on some private loans. Citizens Bank estimates that more than 40 percent of the $1.3 trillion in student loan debt outstanding is both held by someone who could qualify for refinancing and has interest rates high enough to potentially make it worthwhile. …Learn More
March 31, 2016
401ks: an Employer-Employee Disconnect
A survey throws a new spotlight on the employer-employee disconnect over 401(k)s that has also been well-documented in research studies.
The survey of 1,000 employees reveals that workers lack confidence in their ability to navigate basic aspects of their retirement plans, while the 200 employers also surveyed have a more optimistic view of how workers are doing.
Consider the most basic question of how much to put away for retirement. Two-thirds of employers believe their workers know how much to save, while only one-third of employees feel they know, according to BlackRock. And while nearly two-thirds of employers believe the majority of workers save enough, a minority of workers does.
Most employers also believe their workers understand their investment options. Yet less than half of the workers say they do – and only 30 percent feel like they’ve made the right investment choices, according to the BlackRock survey. (Full disclosure: BlackRock is a corporate partner of the Center for Retirement Research at Boston College, which supports this blog).
Squared Away has written numerous blogs over the years about what academic research and other data reveal about the employer-employee relationship. Summaries of past articles continue on the next page, with links to the specific blogs mentioned: …Learn More
March 15, 2016
Private Student Loans: Borrower Beware
Privately financed college loans were less than 10 percent of the $1.3 trillion in unpaid student debt last year, according to the Consumer Financial Protection Bureau. The bulk of student loans are funded by the federal government. But the minority who borrow from private financial institutions often learn painful lessons after graduation: it is much more difficult to negotiate affordable repayment plans with private lenders. Private loans are unlike federal student loans, which have standardized repayment options and procedures.
This blog is intended to help parents and future college students avoid getting into difficult situations in the first place with private loans. Squared Away interviewed two student loan experts at Clearpoint Credit Counseling, an Atlanta non-profit: Terrence Banks, a counselor who works directly with borrowers, and Thomas Bright, a blogger.
Question: Graduates trying to renegotiate their private loans conveyed some harrowing stories in Clearpoint’s 2013 blog post. Have things improved since then?
Terrence: The complaints are still valid and still rampant. But some – not all – private lenders have stepped up to the plate to make private loans a bit more financially feasible.
Q. What would you advise parents and matriculating students do when making their first borrowing decisions?
Terrence: Exhausting the federal loan option is paramount before you go to the private loans. If you find yourself in trouble where you can’t make a payment, you have more options under the federal than the private loans. Also try to find out the potential income for your future profession before going down this road and borrowing at all. And then look for grants – there’s a slew of grants that are untapped each year because people don’t take the time to access them because student loans are so readily available.
Q. How do borrowers get themselves into the situations like this one, described on your blog? “I am able to consolidate my federal loans (big help on the monthly payments) but not my private loans.” Borrowers also talk about inflexible private lenders and being harassed with phone calls from these lenders. … Learn More