October 27, 2022

A Start on Estimating Retiree Medical Costs

New Medicare enrollees can expect their uncertain medical expenses to take roughly $67,000 out of the household budget, on average, over the rest of their lives.

Since this estimate is only an average, some retirees will pay less and some will pay much more. And the estimate, revealed in a new brief by Karolos Arapakis at the Center for Retirement Research and based on a larger study, includes only the copayments and cost-sharing charges paid by retired households over 65. It excludes their single largest medical expense – monthly insurance premiums.

The estimate is, nevertheless, a useful benchmark for older workers and retirees who want to get a better handle on their health care spending, which is very difficult to plan for. The study takes into account the unexpected cost of things like a broken arm, as well as the cost of managing chronic medical conditions, which accumulate over the years.

To estimate total medical costs, the researchers linked a periodic survey of retirees that includes out-of-pocket spending to their Medicare insurance records – for Parts A, B and D, and Medicaid  – and to a separate data source that tracks private insurance policies such as Medicare Advantage plans and other smaller public and private sources.

The various government and private insurers pay around 78 percent of older households’ total lifetime health care costs, excluding premiums, the researchers found. The retirees pay the remaining 22 percent, or about $67,300 for an older household with average spending for medical care.

However, retirees with the most serious medical problems will spend two times more out-of-pocket during their lives, and relatively healthy people will pay less. …Learn More

December 2, 2021

Disability Overpayments Discourage Work

About one in five people on federal disability has some type of job, but the government limits how much they can earn without jeopardizing their cash benefits.

The Social Security Administration wants disability beneficiaries to hold down a job if they can. But when they earn more than the allowed limit in a given month – $1,310 in 2021 – the government sometimes ends up overpaying them for benefits that should’ve been withheld that month. This usually occurs because workers forget to notify the agency they had started a job or fail to provide their earnings information in a timely way.

When the mistake is discovered, Social Security sends a notice asking that the overpaid benefits be returned in the form of a cash payment or a reduction in future disability checks. But the repayments, which usually span several months, are a lot of money – around $9,000 – for a financially vulnerable population.

The problem, according to a Mathematica study forthcoming in the journal Contemporary Economic Policy, is that some people, soon after receiving a notice, reduce their hours or stop working altogether. One beneficiary described the repayment requests as a “penalty for working.”

In an analysis of an SSA database that tracks overpayments, the researchers examined the impact of the notices on working disability recipients who received them between 2007 and 2014. Six months prior to receiving a notice, 58 percent were employed and earning over the limit.

This employment rate declined gradually each month, presumably due to natural attrition. But the researchers find that the drop in the rate accelerated in the month they received the overpayment notice and in the following month, falling by 8 percent over that two-month period. About half of that decline was a response to the notices.

Leaving a job conflicts with Social Security’s goal of encouraging beneficiaries to maintain at least part-time work and improve their overall well-being – and if they have a milder disability, eventually return to the labor force full-time and end their reliance on benefits. …Learn More

July 14, 2020

College Debt Boosts Disability Requests

During the steel and coal busts of the 1980s, applications for federal disability benefits rose in areas where these industries had laid off workers. Now there’s a 21st century reason to apply: student loans.

College debt is extremely difficult to discharge in the bankruptcy courts. But the U.S. Department of Education in 2013 opened a new avenue for potentially eliminating federal student loan debt. Former college students whose disabilities are severe enough to qualify them for disability benefits can then apply to the Department of Education for loan forgiveness.

Since 2015, the typical person approved for the program has eliminated $17,500 in college loans.

The prospect of discharging the onerous debt created a powerful financial incentive. After the program began, the probability that an individual with student loans would apply for disability with the U.S. Social Security Administration was much higher than for individuals with no loans, a new study found. The increase in applications was largely from people who had not earned any money the previous year and may have had few options for paying their debt.

The older workers who took out student loans – sometimes on behalf of their children – may be “aching to retire” anyway, the researchers said, and receiving disability and loan forgiveness would accomplish that. But the younger people who applied may simply have been motivated by a desire to discharge their college debts.

However, seeking disability benefits as a strategy for eliminating the debt didn’t work very well. …Learn More

March 19, 2020

People on Disability Use Payday Loans

Taking out a high-cost payday loan is an act of desperation, and people on federal disability are some of the biggest users.

Nearly 6 percent of households under 66 and on disability use payday loans, compared with 4 percent of the general population, according to Haydar Kurban at Howard University, who did the analysis for the Retirement and Disability Research Consortium.

The financial vulnerability of disability recipients was starkest in the months after the 2008-2009 recession, when their use of payday loans spiked to 22 percent. The rate of borrowing also rose at the time for the general population but by much less.

Disability benefits under the federal Supplemental Security Income (SSI) program average about $900 a month. To eke out a living, people on disability try to supplement their income with food stamps, Medicaid, some work, or housing assistance from the government or a family member – and some use payday loans to raise quick cash. (A small share of people in this study are not disabled but receive SSI to supplement their Social Security benefits.)

Despite the very low incomes of the disability beneficiaries, they are attractive customers for payday lenders, Kurban said, because the benefit checks provide extra assurance the loans will be repaid. …

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February 25, 2020

Have You Misplaced a Retirement Plan?

Wouldn’t it be nice to find some money sitting in a long-forgotten retirement account somewhere?

It’s not hard for workers to lose track of an old account as they move from employer to employer, often across state lines. Each state government keeps a repository of unclaimed property – most have been doing this since the 1980s – and residents and former residents can check online through a simple name search in the state’s unclaimed-accounts database.

But not everyone takes the trouble to search for the money or is even aware it exists. So billions of dollars have accumulated nationwide in various types of unclaimed accounts, including retirement plans, insurance policies, trusts, and brokerage and bank accounts – so much so that firms have sprung up that will do the legwork required for individuals to claim their money. But little has been known about how much sits idle in unclaimed retirement accounts.

A new study estimates conservatively that about $38 million, accumulated over many years in some 70,000 retirement savings plans nationwide, had not yet been claimed in the states’ property accounts as of 2016. Most of these are 401(k)-style plans but they also include IRAs and pension checks.

The average account value is only about $550. But the largest ones are anywhere from $5,000 to $13,000, which could be meaningful to retirees who are struggling financially. …Learn More

July 16, 2019

Spotlight on Our Research, Aug. 1-2

Topics for this year’s Retirement and Disability Research Consortium meeting include the opioid crisis, retirement wealth inequality over several decades, trends in Social Security’s disability program, and the impacts of payday loans, college debt, and mortgages on household finances.

Researchers from around the country will present their findings at the annual meeting in Washington, D.C. Anyone with an interest in retirement and disability policy is welcome. Registration will be open through Monday, July 29. For those unable to attend, the event will be live-streamed. The agenda lists all of the studies.

Here are a few:

• Why are 401(k)/IRA Balances Substantially Below Potential?
• The Impacts of Payday Loan Use on the Financial Well-being of OASDI and SSI Beneficiaries
• The Causes and Consequences of State Variation in Healthcare Spending for Individuals with Disabilities
• Forecasting Survival by Socioeconomic Status and Implications for Social Security Benefits
• What is the Extent of Opioid Use among Disability Applicants? …

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March 14, 2019

Drug Discounts, Other Help Available

Consumers are powerless to control spiraling medication prices, but low-income, uninsured and under-insured individuals can often get help paying for their drugs.

The help, in the form of subsidies or prescription price reductions, comes from four sources. The first is exclusively for seniors on Medicare, but the rest are available to everyone.

Federal aid

Medicare’s Extra Help program provides up to $4,900 to subsidize retirees’ drug copayments and Medicare Part D premiums. Individuals are eligible for this assistance if their income is less than $18,210 and the value of their investments, bank accounts and other assets is under $14,390. The limits for couples are $24,690 in income and $28,720 in assets.  Retirees who own their homes do not have to include the property’s value in this limit. Social Security’s website explains what does and does not count as assets.

Social Security takes the applications for this Medicare program. Applications can be submitted either online (SSA form 1020) or in person by making an appointment at a local Social Security office.  Social Security also notifies seniors about whether they qualify.

Price discounts in an app

If your drug is not covered by your health insurance, Consumer Reports suggests trying two cell phone apps (or go online) to search for the lowest-cost prescriptions at various pharmacies in your area. On the apps – GoodRx and BlinkHealth – search your drug name and dose and enter your zip code to find the discounted prices, which can vary dramatically. These companies act as middlemen between consumers and Pharmacy Benefit Managers, which buy generic and brand-name medications in bulk from manufacturers and pass the volume discounts on to consumers. GoodRx provides a coupon that can be saved on a phone or printed out for the pharmacist. BlinkRx requires consumers to pay for the drug on its website and provides a voucher for the pharmacist. These cash prices will not be run through insurance – and won’t count against your deductible – said Lisa Gill, Consumer Reports deputy editor and a specialist in medication pricing.

Walmart also offers discounts on generic drugs, and Costco has very low retail drug prices. Which option is best for you? “It’s going to depend on which medication you take and probably where you live,” Gill said. Not everyone will have success in reducing their costs but, she added, “if the drug’s not covered by insurance, it’s worth trying.” …

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