A Bigger Bite Out of Social Security

Social Security chartMost retirees didn’t notice the $5 cost-of-living increase in the average Social Security check. That’s because the Part B Medicare premium deducted from their checks went up nearly as much (from $104.90 in 2016 to an average $109 this year).

Beyond premium hikes, the bigger issue for retirees are the additional out-of-pocket costs they must pay as part of their Part B coverage for doctor visits and outpatient care. When rapidly rising copayments are added to the basic premium, they together consumed more than 15 percent of the average Social Security benefit last year. That is more than double the percentage in 1980, and it’s expected to exceed 17 percent by 2030, according to the Centers for Medicare and Medicaid (CMS).

The CMS estimates were made prior to the announcements of 2017’s final COLA and Part B increases. But the trend of eroding benefits was confirmed by Juliette Cubanski, associate director of Medicare policy for the Henry J. Kaiser Family Foundation. …Learn More

Rights of Low-income Medicare Users

A 2014 report from the Consumer Financial Protection Bureau (CFPB) said that the largest category of financial complaints by seniors was debt collection, with nearly half of their complaints involving “continued attempts to collect debt not owed.”

texas-medicaid-CardThe CFPB just followed up with a missive directed at some 7 million older Americans enrolled in the Qualified Medicare Beneficiary Program (QMB). People who qualify for this Medicare designation receive such small Social Security checks – less than $1,010 per month for individuals and $1,355 for couples – that doctors, hospitals and other medical providers are barred from billing them directly for services rendered. The CFPB said that it, as well as the Centers for Medicare & Medicaid Services, continue to hear from QMB participants who report they are receiving unjustified medical bills.

Here’s how the CFPB suggests that QMBs or family members deal with improper medical billing:

  • Prevent the problem by repeatedly reminding your doctor or medical service provider that you are a Qualified Medicare Beneficiary. QMB cards aren’t required federally but the District of Columbia and at least one state, Texas, provide members with a card to prove it.
  • If you are billed, tell the medical provider or debt collector they are barred from charging you for Medicare deductibles, coinsurance and copayments, because you are enrolled in QMB.
  • You have a right to a refund for a bill paid in error.
  • If the medical provider will not stop billing you or refuses to issue a refund, call 1-800-Medicare (1-800-633-4227).
  • Submit online complaints about debt collection practices by clicking here. …

Learn More

Feature

Unpaid Water Bills Open Door to Advice

Nearly half of the low-income residents in some sections of Louisville are delinquent on their city water bills. In Newark, water customers’ unpaid balances have been known to reach $4,000.

The shutoff and reactivation fees that some cities charge when they stop a customer’s water service create another problem in places like Houston: they add to the unpaid balances of customers who are already struggling financially. Cities are also becoming more aggressive about collecting on their debts, hiring third-party collection firms.

Researchers and the National League of Cities tried an alternative in the form of an ambitious pilot program involving five city water departments: Houston; Louisville, Kentucky; Newark, New Jersey; Savannah, Georgia; and St. Petersburg, Florida. Driving the program was the recognition that unpaid water bills are an indication of deep financial distress. So the cities, which are loathe to turn off this essential service, embraced a broader vision: providing financial counseling to empower families with delinquent water bills to better manage their situations.

While every city’s pilot program was slightly different, Ohio State researcher Stephanie Moulton said they had two things in common: an agreement to restructure residents’ unpaid water bills to make them affordable, and at least one private session with a financial counselor or coach already working for the city or a local non-profit. Some cities added other services, such as screening for public benefits if a job loss had caused a resident to fall behind on the water bill.

Houston, for example, trained and certified six customer service representatives in its Department of Public Works to act as financial coaches, said Bonnie Ashcroft, a departmental section chief. The counselors who coached clients on their household finances also advised them on how to reduce their water bills.

It’s not possible to do a rigorous analysis of the pilot’s overall effectiveness, because each city’s water department is unique. But individual analyses of each city found three that showed marked improvements in their water payments, Moulton said. These successes were presented in a recent webinar. …

In Houston, customers’ unpaid account balances declined, on average, from $544 to $374. Unpaid account balances in Newark went from $969 to $605. The frequency of payments in these cities also increased, Moulton said. Learn More

Retiree Benefits: Tale of 2 Cities (States)

Some of the workers and retirees around the country who count on having a government pension surely get nervous when they see headlines about the most troubled state and local plans – in places like Illinois, New Jersey, Connecticut, Chicago, and Detroit.

A broader perspective on retirement benefits, however, shows that the results are more mixed.  A study by the Center for Retirement Research, which sponsors this blog, estimated long-term costs for pensions, retiree health benefits, and general debt service as a share of revenues for the 50 states, 178 counties, and 173 cities.

The findings are summarized below:

States:

  • Many states’ combined costs – pensions, other post-employment benefits (OPEBS) such as health insurance, and payments on all government bonds – appear manageable.
  • More worrisome are the eight states with the highest combined costs: Illinois, New Jersey, Connecticut, Hawaii, Kentucky, Massachusetts, Rhode Island, and Delaware. [States with high pension burdens also tend to have high costs for retiree health benefits].

               Figure 5

Counties:Learn More

Man caught in web

Wrong People Seek Financial Info, Help

Most of the 1,000 people who took the financial well-being quiz posted here last year felt content with their situations. Their well-being score averaged 16.4 out of 20 points possible on the quiz.

This happy response completely conflicts with a statistically more reliable survey showing that three out of four Americans report feeling “financially stressed.” Our quiz makes no claim of representing the adult U.S. population and was taken by a hodgepodge of regular readers, Twitter followers and Facebook friends.

So why are Squared Away loyalists so content with their finances?

The blog is “attracting people who are in the action phase. I’m guessing they’re motivated and ready to move,” said Brad Klontz, a financial psychologist in Hawaii – he is both a certified financial planner and trained psychologist.

But the flip side of this is that those who do not seek out financial information and advice – and don’t take blog quizzes – are often “in total denial, and you’re probably not going to catch them,” he said.

Indeed, Klontz’s research has identified avoiding dealing with difficult money issues as among the unconscious behaviors that ensnare people who are in poor financial health, measured by being overloaded with debt or not saving for retirement.

For the avoiders, the psychology is that they know their behavior hurts them but feel it’s due to a character defect – “lazy, crazy, or stupid” – he said. “Shame keeps you stuck. If I’m such a terrible person, why should I try?  I’m not going to ask anyone for help.”

When people with money problems recognize the psychological underpinnings, he said, it can lead to changes that can end the pain.

The question for personal finance bloggers and financial advisers remains: how do we reach the people who can’t be reached? …Learn More

Woman at computer

Managing Money with Cognitive Decline

Despite the normal cognitive challenges that people in their 70s and 80s inevitably face, most are sharp enough to be in charge of their financial affairs or oversee them.

But the significant minority of seniors who do have trouble is explored in a new summary of the research by Anek Belbase and Geoffrey Sanzenbacher at the Center for Retirement Research, which supports this blog.

One such group is people learning for the first time how to carry out financial tasks. Widows, not surprisingly, are often required to negotiate this financial learning curve, which gets steeper as a senior’s ability to process new information erodes. With guidance from a family member or professional, however, the novices can usually figure things out.

Seniors with mild cognitive impairment might also develop problems. Mild impairment becomes fairly common by the time people reach their 70s, affecting their financial judgment and potentially their ability to manage their affairs in ways that promote their best interests.  Among those with mild impairment, 82 percent can independently handle the various financial tasks they face, such as paying bills, managing bank accounts, and maintaining good credit.  This compares with 95 percent of unimpaired seniors.

Another danger facing seniors with mild cognitive impairment is their vulnerability to fraud.  They are usually aware they’re slipping, yet they may remain confident about their ability to handle their financial affairs. …Learn More

hands holding a picture of a family

Good Health Insurance is What Counts

Having health insurance is no guarantee that medical care is affordable.

Some families, despite being covered by the Affordable Care Act (ACA) or employer policies, say that high premiums and deductibles mean they can’t afford to see a doctor. This distinction – between having insurance and receiving care – will be crucial as Congress considers proposals for ACA’s replacement.

One comprehensive 2003 study demonstrates how individual medical decisions change when they receive one longstanding, and what the researchers called “generous,” type of insurance: Medicare. Their study focused on changes in the use of the health care system – more so than improved health – by comparing people who’ve recently gone on Medicare with people a couple years away from turning 65 and becoming eligible. The analysis adjusts for the fact that some, though not all, people under 65 have employer coverage and that many people also retire around this age, sometimes receiving special retiree health benefits.

Once people turn 65 and are on Medicare, the researchers found that:

  • The probability of seeing a doctor at least once a year increased, based on data from the National Health Interview Surveys, which track the frequency of routine medical care.
  • Medicare eligibility led to a “surprisingly large” 5-10 percent increase in hospitalizations in California and Florida, particularly among white Americans. The increase was driven by elective surgeries such as joint replacements and heart bypass surgeries.
  • There were large increases in preventive care for less-educated whites, such as getting flu shots and cholesterol tests, based on analyses of the Behavioral Risk Factor Surveillance System, which tracks preventive care use.
  • Minorities, who are at much higher risk of untreated high blood pressure, were more likely to receive this diagnosis after going on Medicare. …
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