Social Security Debate Shifts From Benefit Cuts To Bigger Checks
Center moves as Democrats seek to extend the program’s life and expand benefits, while Washington consensus stays out of reach. Social Security Debate Shifts From Benefit Cuts To Bigger Checks
The Social Security debate has moved left.
That shift, evidenced by presidential candidates’ plans and a bill backed by nearly 90% of House Democrats, departs from years of conversations about an elusive bipartisan compromise where Democrats agree to lower promised benefits and Republicans accept higher taxes.
Instead, President Trump has ruled out cuts to future benefits. Democrats have lined up behind larger benefits and higher taxes.
Democrats’ proposals show a party growing more comfortable with tax increases and shifting away from trying to reduce budget deficits. They have been nudged by activists trying to reset Social Security discussions dormant in Congress since the failure of President George W. Bush’s partial privatization plan.
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Now, Democrats want to expand the popular program, emphasizing low-income retirees, widows and people who left the workforce to care for family members.
“Whatever we do is going to be bold,” said Rep. Dan Kildee (D., Mich.).
President Trump’s no-benefit-cuts position in 2016 shrank the partisan divide, tempering the Democrats’ advantage on the issue. Positions taken since then by House Democrats and candidates Elizabeth Warren, Bernie Sanders and Joe Biden widen that gap again.
“It’s an interesting story of how a policy position, whether I agree with it or not, can go from being a fringe position to a dominant position of a political party in a relatively short period of time,” said Andrew Biggs, resident scholar at the conservative American Enterprise Institute.
Unlike other safety-net programs such as food stamps, Social Security is viewed as an earned benefit, because it is largely funded through payroll taxes and check sizes are calculated based on earnings. It enjoys unique support across age groups and political affiliations.
In a 2018 Pew Research Center poll, 78% of Democrats and 68% of Republicans opposed cuts in future benefits. Younger voters showed more support for reducing future benefits, and 42% of people ages 18 to 29 assume they won’t get any benefits.
Social Security presents a political challenge, but it is also a math problem. Today’s taxes must generate enough money to pay benefits that today’s recipients accrued over their working lives. That math is changing. The demographic bulge of baby boomers is retiring, and living longer. Because high-income workers have experienced faster wage growth than the rest of the population, a greater share of U.S. wages is now exempt from the payroll tax, which stops at $132,900. That smaller tax base contributes to the long-run shortfalls.
Costs are projected to exceed income next year for the first time since 1982, forcing the program to dip into its nearly $3 trillion trust fund, built up when payroll taxes exceeded benefits.
Unless Congress acts, that trust fund will be depleted in 2034 and benefits would be automatically cut by more than 20%. Congress could fill the gap by raising payroll taxes or diverting general-fund revenue. Less disruptive changes now could close the shortfall, but lawmakers have little incentive to move.
Make benefits richer, and the trust fund runs out sooner. Raise taxes, increase the retirement age or slow benefit increases, and the program stays solvent longer.
Ms. Warren would increase everyone’s benefits by $200 a month, paid for in part by taxing investment income. Mr. Biden would give a bonus to the oldest Americans, and raise payments to surviving spouses. Mr. Sanders would tax wages above $250,000 to extend the program’s solvency and raise minimum benefits.
That is all far from where Democrats were earlier this decade, when both parties focused on deficit reduction. As part of a deal, President Obama proposed a formula under which Social Security benefits would grow more slowly.
By late 2016, however, Mr. Obama embraced more generous benefits, and presidential candidate Hillary Clinton backed expansion. Mainstream Democrats joined progressives like former Sen. Tom Harkin of Iowa in support of boosting benefits.
“Now, we’re seeing some variations on a theme,” said Nancy Altman, president of Social Security Works, an advocacy group. “It becomes a clear distinction between the parties.”
A plan from Rep. John Larson (D., Conn.) would expand benefits, raise payroll taxes and lower income taxes on benefits.
Mr. Larson’s Social Security 2100 Act would gradually bump the tax rate from 6.2% each on employers and employees to 7.4% each by 2043. That would hit every worker, including low-income ones. Social Security’s progressive benefit structure counteracts that regressive tax.
Mr. Larson would also impose payroll taxes on wages above $400,000, leaving an exemption for wages between $132,900 and $400,000. Eventually, inflation would erase that gap and all wages would face Social Security taxes.
His plan would extend Social Security’s solvency for at least 75 years, according to the chief actuary of the Social Security Administration. But the Congressional Budget Office, using different methodology, says solvency would last only through 2041.
Mr. Larson wants a House vote soon, though his bill stands little chance of becoming law with Republicans running the White House and Senate. He said the way the 2008 financial crisis sapped private retirement savings underscored the importance of Social Security’s guarantee and helped drive Democrats toward benefit expansion. Nearly 90% of House Democrats, 209, have signed on to the bill.
“This is a bipartisan issue across the country,” he said. “Not a bipartisan issue in Congress. But I think once people have to vote on it, it might become more bipartisan than people imagined.”
Republicans call the Democratic proposals nonstarters, but they haven’t coalesced around anything.
Some GOP lawmakers say they are open to a combination of revenue and spending changes and emphasize bipartisanship—as in 1983, when President Reagan and congressional Democrats raised the retirement age and accelerated scheduled tax increases.
Legislatively, that is likely required for any plan to become law. The fast-track, simple-majority procedure used for the 2017 tax cut and 2010 health law doesn’t apply to Social Security. One party would either need to get 60 votes or scrap the Senate filibuster.
Social Security is expected to exhaust its trust fund over the coming decades, triggering automatic benefitcuts unless Congress acts.
“Democrats want to raise the payroll tax. Republicans aren’t wild about that, but it’ll be a compromise,” said Sen. Rob Portman (R., Ohio). “It has to happen soon to avoid the train wreck, so the sooner the better.”
But Mr. Trump vowed in 2016 to preserve promised Social Security benefits, helping himself politically but putting him at odds with many GOP lawmakers. Also, Republicans now rely more on older voters, making them more reluctant to reduce future benefits.
“It leads to them abandoning their prior policies on Social Security, but not knowing what their future policies are,” Mr. Biggs of the American Enterprise Institute said.
Nonpartisan groups still produce proposals along the old-compromise lines. Recently, the Concord Coalition and the Committee for a Responsible Federal Budget offered one designed to boost economic growth. It would encourage older workers to delay retirement and provide a “poverty protection benefit” for low-income workers.
But in Congress, there is little urgency or appetite for compromise proposals. Social Security may stumble toward insolvency in 2034—sooner if there is a recession or later in a booming economy.
Rep. Tom Reed (R., N.Y.), the top Republican on the Social Security subcommittee, said some benefit increases might be worth examining. He opposes across-the-board increases or adding investment-income taxes.
“The longer we wait, we have fewer and fewer solutions that can be implemented in a practical way,” he said. “[I] would love to do this without tax increases or revenue increases, but it is clear if you do the math that is becoming more and more difficult.”
A Drop In Social Security’s Average Wage Index Could Hurt Four Million People
Fortunately, legislators are already proposing fixes.
I understand that not everyone savors, with as much enthusiasm as I do, testimony by Steve Goss, Social Security’s chief actuary. But I always find it very helpful.
His most recent appearance before the House Ways and Means Subcommittee on Social Security touched on a number of ways that COVID-19 might affect the program and clarified the implications of a drop in the Average Wage Index (AWI) and how proposed legislation might address the problem.
The 2020 Trustees Report projected that the AWI, which equals total wages in the year divided by the number of wage earners, would increase by 3.5% from 2019 to 2020. But, in the wake of COVID-19, the Average Wage Index in 2020 is likely to decline rather than increase.
As a result, those born in 1960 (who turn 60 in 2020) could see a permanent cut in their benefits. The problem arises because past earnings and the benefit formula are adjusted by Social Security’s AWI.
More specifically, benefits are calculated in two steps. The first step is determining the worker’s Average Indexed Monthly Earnings, which involves adjusting nominal earnings for each year up to age 60 by the AWI and identifying the highest 35 years for calculating the average. To the extent that the AWI declines, average monthly indexed benefits will be lower.
The second step involves calculating the Primary Insurance Amount — the benefit payable at the Full Retirement Age of 67 — by applying Social Security’s progressive benefit formula to the worker’s Average Indexed Monthly Earnings. The thresholds in the benefit formula are also indexed by the AWI. If the thresholds decline, workers will find more of their earnings in brackets with lower replacement rates.
So, what might happen to the AWI this year? Although no one knows for sure, experience so far in 2020 suggests that total wages will be about 10% lower than projected in the 2020 Trustees Report and the number of workers will be about 1% lower than projected. (The number of workers doesn’t decline very much because AWI includes all wage earners even if they only worked for the month of January.) If these percentage declines play out, then the average wage index will be 9.1% (1 — 90/99) lower than projected for 2020.
One more calculation is required to get at the likely change in the AWI between 2019 and 2020. As noted, the assumptions in the 2020 Trustees Report imply that the AWI in 2020 would equal 1.035 of the AWI in 2019. However, because of the pandemic, the 2020 AWI will be only 0.909 (90/99) of the projected level. Therefore, the 2020 AWI would actually equal only 0.941 (0.909 x 1.035) of the 2019 value — a decline of 5.9%.
Assuming these declines come to pass, about four million people will receive benefits that are 9.1% less than expected or 5.9% less than benefits awarded in 2019. These reductions apply throughout the beneficiary’s lifetime. This loss is meaningful.
As a result, two bills have been submitted to offset these impending losses. While legislation could restore the entire 9.1% shortfall, both focus on eliminating the 5.9% drop in the AWI from 2019 to 2020. Senators Tim Kaine (D-VA) and Bill Cassidy (R-LA) introduced the “Protecting Benefits for Retirees Act.” This bill would not allow the AWI to drop from one year to the next for benefit computation purposes, but instead would use the highest previous level — in this case the 2019 AWI.
Congressman John Larson’s (D-CT) “Social Security COVID Correction and Equity Act” would also eliminate the reduction in benefits due to the drop in the AWI, but only for those who become newly eligible two years after the decline. The bill, however, also provides one-year increases for many Social Security beneficiaries and Supplemental Security Income recipients in 2020. Neither bill would have a significant effect on the actuarial status of the program.
Social Security Is In Line For Biggest Percentage Bump For Inflation In 40 Years
When Social Security announces its 2022 cost-of-living adjustment later this year, beneficiaries are likely to get the biggest percentage bump in 40 years thanks to inflation that has surged amid the pandemic recovery.
With inflation subdued in 2020, Social Security recipients received an increase of 1.3% in January, which resulted in an estimated average benefit increase of about $20 per month, according to the Senior Citizens League, a nonpartisan advocacy group for seniors.
But the government inflation measure used to determine the cost-of-living adjustment, or COLA, has surged over the past year and the Senior Citizens League now predicts a COLA of 6.2% for 2022 payments. That would result in a boost of $96.40 a month for those receiving the average monthly payment of about $1,555.
“With one-third of the data needed to calculate the COLA already in, it increasingly appears that the COLA will be the highest paid since 1982 when it was 7.4%,” says Mary Johnson, Social Security and Medicare policy analyst for the Senior Citizens League.
For its part, Moody’s Analytics estimates the 2022 COLA will be 4.6% and even lower the next year as inflation moderates. The surge in inflation over the past few months is a reflection of the fading pandemic, says Mark Zandi, chief economist at Moody’s Analytics. “By this time next year, certainly these supply side issues will be ironed out, supply will pick up and demand will moderate,” he says. “My sense is that the COLA adjustment for 2023 will probably be 2.5%.”
Since 1975, COLAs have been automatic; increases were set by legislation before that. The adjustment is now determined by applying the percentage increase, if any, in the Labor Department’s consumer-price index for urban wage earners and clerical workers, or CPI-W, from the third quarter of the prior year to the third quarter of the current year. The index is a measure of the monthly price change in a market basket of goods and services, including food, energy and medical care. Any adjustment is generally announced in October, and begins to be paid in January.
Since 2000, Social Security benefits have lost 30% of their buying power, based on inflation through March, according to research by the Senior Citizens League.
For many Social Security recipients, much of the benefit increases over the past decade have been eaten up by increases in their Medicare Part B premiums, says David Certner, legislative counsel and director of legislative policy for government affairs at AARP. Most Medicare enrollees have their premiums for Medicare Part B, which covers doctor visits and other types of outpatient care, deducted from their Social Security payments.
Last year, the Medicare Part B premium increase was limited by a federal spending bill to 25% of what it otherwise would have been. The standard Part B premium, which is what most people pay, for 2021 is $148.50 per month, up less than $4 from $144.60 per month in 2020. There is no estimate yet for any change to this year’s premium.
“The thinking is that we may be in for a larger increase in Part B premiums in 2022 than we’ve seen in the past,” Johnson says.
Some are calling for a change to the way the COLA is calculated, which they say would boost Social Security benefits. The Fair COLA for Seniors Act of 2021, a bill introduced in Congress in July, calls for calculating the adjustment based on changes in the consumer-price index for the elderly, or CPI-E, rather than the CPI-W. The CPI-E better reflects the real rising costs for seniors because it weighs items that seniors typically spend on, such as healthcare, more heavily, advocates say.
In most years, a COLA calculated using changes in the CPI-E would be moderately higher than a COLA reflecting changes in the CPI-W, Johnson says. However, with data currently available, using the CPI-E to project the COLA payable in 2022 would result in an increase of 5%, lower than projection reflecting the CPI-W, she says. That’s because the CPI-W is more heavily weighted for gasoline prices, which are high this year, she says. The 2017 COLA of 0.3% would have been 1.5% had the CPI-E been used, Johnson says.
Most of $9.2 Billion In Questionable Medicare Payments Went To 20 Insurers, Investigators Say
Insurers gained higher payments by recording more medical conditions for patients, using controversial methods, according to investigators.
Medicare insurers drew $9.2 billion in federal payments in one year through controversial billing practices, with 20 companies benefiting disproportionately and together accounting for more than half of the total, according to federal health investigators.
The findings by the Office of Inspector General of the Department of Health and Human Services are the latest sign of growing scrutiny of Medicare Advantage insurers, which offer private plans under the federal benefit program.
The inspector general’s report focuses on certain procedures used by insurers to document health conditions, which helps determine how much they are paid. The investigators said the findings raise concerns that insurers might be gaming the process to improperly boost federal payments.
Among the 20 companies flagged in the report, the investigators found that one received approximately 40% of the questionable payments, or $3.7 billion, while enrolling only 22% of Medicare Advantage customers.
The report didn’t name the company. Federal data compiled by analysts at BMO Capital Markets shows that enrollment share closely matched that of industry giant UnitedHealth Group Inc.’s UnitedHealthcare during the period covered in the report.
The company highlighted in the report “definitely stood out and looked quite different from the other companies,” Jacqualine Reid, who led the OIG team that wrote the report, said in an interview.
UnitedHealth said, “UnitedHealthcare’s in-home clinical care programs provide significant benefits to seniors and for years have been valuable offerings to ensure our members continue to receive cost-effective, appropriate care.
Our Medicare Advantage risk-adjustment program is transparent and compliant with CMS rules.” CMS—the Centers for Medicare and Medicaid Services—oversees the Medicare Advantage program.
A CMS spokeswoman pointed to its responses included in the report, in which it said the recommendations would be taken under consideration and that CMS is “committed to ensuring that diagnoses that [Medicare Advantage organizations] submit for risk adjustment are accurate.”
The new report, which The Wall Street Journal reviewed ahead of its expected release on Wednesday, focused on enrollment and documentation in 2016, and the resulting payments in 2017.
At the heart of the investigation were the ways insurers in the Medicare Advantage program document diagnoses for enrollees. The payments the companies receive from the federal government are tied to the health status of their customers. Patients with more, and more serious, diagnoses generally draw higher payments for the health plans.
The HHS inspector general’s investigation focused on two controversial strategies used by Medicare Advantage companies to tally diagnoses.
In one, the insurers or their contractors review patients’ charts for evidence of diagnoses that doctors didn’t specifically flag. The other involves health-risk assessments, or HRAs, that are often conducted by the vendors in patients’ homes.
Both strategies are allowed under Medicare rules, but “our findings raise concerns about the extent to which certain MA companies may have inappropriately leveraged both chart reviews and HRAs to maximize risk-adjusted payments,” the report said.
The report focused on diagnoses generated by these two methods that weren’t also found in the insurers’ records of services rendered to patients, implying that patients didn’t get care tied to these diagnoses.
The suspect diagnoses were linked to around $9.2 billion in payments to Medicare Advantage plans in 2017, according to the report. The 20 companies that benefited disproportionately together drew 54% of that total while representing 31% of enrollment, the report said.
The remaining 46% of the $9.2 billion went to 142 companies that collectively enrolled 69% of the Medicare Advantage membership.
The unnamed large company highlighted in the report generated about 58% of the payments in the analysis drawn by health-risk assessments. Its share was particularly large in payments tied to certain diagnoses, such as respiratory arrest, protein-calorie malnutrition and major depressive, bipolar and paranoid disorders, according to the report.
The report’s recommendations include having CMS “take additional actions to determine the appropriateness of payments and care for the one MA company that substantially drove risk-adjusted payments from chart reviews and HRAs.”
UnitedHealth is the biggest player in Medicare Advantage, a major growth engine for the industry.
The total number of people enrolled in Medicare Advantage plans has risen to more than 26 million this year, according to a Kaiser Family Foundation analysis released in June. That is about 42% of all Medicare beneficiaries, up from 31% five years ago.
Concerns that insurers are inflating the “risk scores” that result from documenting enrollees’ diagnoses are longstanding, but federal prosecutors’ and investigators’ focus on industry practices has increased in recent years.
In March 2020, federal prosecutors sued Anthem Inc., alleging the Indianapolis-based insurer had fraudulently reaped overpayments from the federal government by failing to delete inaccurate diagnosis codes.
Federal prosecutors in July of this year announced they were intervening in whistleblower suits against Kaiser Permanente, also focused on risk-score documentation.
Last week, the Justice Department joined another whistleblower action, suing Independent Health Association, a Buffalo-based insurer. The suit alleged that Independent Health submitted diagnosis codes that weren’t supported by evidence.
Anthem declined to comment. Kaiser Permanente said in a previous statement that it was “compliant with Medicare Advantage program requirements, and we intend to strongly defend against the lawsuits alleging otherwise.” A spokesman for Independent Health said it denied “all allegations of wrongdoing in this lawsuit.”
In April, the HHS Office of Inspector General released an audit of diagnosis codes submitted by Humana Inc. that found the company, the-second biggest Medicare Advantage provider after UnitedHealth, was overpaid about $200 million for 2015.
Humana said at the time that the inspector general’s “methodology is inconsistent with statistical and actuarial principles,” and said it would work cooperatively to resolve the review.
The HHS inspector general also released reports last year and in 2019 looking at the industry’s diagnosis-documentation practices.
Worried About Social Security? Panic Can Lead To Bad Decisions
A reality check on news headlines about the financial status of Social Security.
Be on your guard against sensational headlines about the latest Social Security Trust Fund’s status.
Some of the more doomsday of those headlines have led some to believe that Social Security is about to completely run out of money and therefore be unable to pay any benefits.
In fact, according to the latest report from the actuaries at the Social Security Administration, Social Security will still be able to pay about 75% of scheduled benefits after 2033, the year in which the Social Security trust funds are projected to become depleted.
How this issue is framed makes a big difference, according to a recent study from Boston College’s Center for Retirement Research. Near-retirees who read more sensational and doomsday headlines are more likely to claim their Social Security benefits at an earlier age, for example. This runs counter to the consensus advice from most financial planners.
The study is entitled “Does Media Coverage of the Social Security Trust Fund Affect Claiming, Saving, and Benefit Expectations?” It was conducted by Laura Quinby and Gal Wettstein, both research economists at Boston College’s Center for Retirement Research.
The study is timely, since the Social Security Administration just two weeks ago released its latest report on the financial status of its trust funds.
For their study, the economists created a simulation in which respondents’ reported their attitudes toward Social Security. The respondents were broken into four groups, and each group was presented with a single article reporting on the Social Security trust funds’ solvency. For all four groups the article was identical except for the headline.
The Four Headlines Were The Following:
* Social Security Faces A Long-Term Financing Shortfall
* The Social Security Trust Fund Will Deplete Its Reserves In 2034
* Social Security Fund Headed Toward Insolvency In 2034, Trustees Find
* Revenues Projected To Cover Only 75 Percent Of Scheduled Social Security Benefits After 2034
(Note that the questions assumed the trust fund deletion date would come in 2034, not 2033 as is projected in the latest report from the Social Security Administration. That’s because the survey was conducted this summer, before this latest report was released. In last year’s report, the projected deletion date was 2034.)
One of the questions that survey participants were asked was when they would claim their Social Security benefits. As you can see from the accompanying chart, those who were confronted with more alarmist headlines were more likely to pick an earlier claiming age.
You might be inclined to downplay the significance of the differences plotted in the chart, since they might seem modest in the context of the range of possible claiming ages—as early as 62 and as late as age 70. But note that the sole cause of these differences, which are statistically significant, is the wording of the headline. I find it noteworthy that there is any difference at all.
The issue is tricky, however, since each of the four headlines that the economists used in their survey is technically accurate. Their differences are a matter of emphasis. But now that we have the benefit of this new study, columnists and headline writers can’t claim ignorance of the consequences of what they write.
Alarmist headlines might elicit more reader interest, but they also make “many workers fear an unrealistically severe cut to their future Social Security benefits,” as this study’s authors put it.
The headlines that the economists used in their survey are just some of those that appear regularly and which needlessly alarm retirees and near retirees. One theme that often emerges is the implication that Social Security’s financial position has deteriorated significantly in recent years.
The corresponding headlines suggest that it’s breaking news that Social Security is slated to run out of money in the 2030s.
It’s not news, as I’ve pointed out many times before. As long ago as four decades ago, the last time that changes were made to augment Social Security’s finances, actuaries at the Social Security Administration were projecting that their trust funds would be unable to pay full benefits beginning at some point in the mid-2030s. The real story here is how accurate they were in their projections.
Another common alarmist headline is that the Social Security trust fund is already bankrupt—we don’t have to wait until 2033. That’s because the federal government supposedly has already taken all the money from that trust fund and spent it.
But only in a trivial sense is that true. By law, the Social Security Administration must invest its trust funds in U.S. Treasurys, and on those trust funds’ balance sheets you’ll find a corresponding line entry for those Treasurys. They are one of the safest assets in the market, and can be redeemed at any time.
It’s no different than for a corporation that invests some of its cash surplus in U.S. Treasurys; yet I know of no one who claims that such a company no longer owns that asset because the government “has taken the money and spent it.”
The bottom line? Don’t base your retirement decisions on headlines.
Dentists’ Group Fights Plan To Cover Dental Benefits Under Medicare
ADA opposition could be factor as Democrats look to trim $3.5 trillion spending plan.
The American Dental Association is mobilizing its 162,000 members to fight a proposal to include dental coverage for all Medicare recipients, opposition that could prove pivotal as Democrats look to make cuts in their $3.5 trillion domestic policy agenda.
Giving dental, vision and hearing benefits to the 60 million older and disabled Americans covered by Medicare will provide needed care to people who otherwise might not afford it, supporters say.
The ADA contends that Medicare won’t reimburse enough to cover their costs and is pushing an alternative plan that would limit benefits to the poorest Medicare recipients. It is asking members to contact lawmakers in opposition.
“There aren’t endless amounts of federal dollars, so the question is how do you maximize dollars to do the most good?” said Michael Graham, the ADA’s senior vice president for government and public affairs. “If you don’t focus on low-income seniors, you are just wasting your money.”
The ADA is one of Washington’s most powerful health professional organizations, doling out more in campaign contributions last year than even the political-action committee for the American Medical Association, according to the nonpartisan Center for Responsive Politics. The ADA’s $2.3 million in lobbying expenditures was more than every other dental group combined.
The association’s Medicare position puts it at odds with smaller dental trade groups, including ones of Black and Latino dentists, as well as the AARP and other seniors coalitions.
“Dental care is a medical necessity, and I’m happy to see the door open to adding it to Medicare,” said Dr. Raymond Gist, a dentist in Flint., Mich. He is a member of the National Dental Association, a professional group of primarily Black dentists, and served as the ADA’s first Black president from 2010-2011.
“My concern is that once policy makers see any opposition to something with a big price tag, it gives them a reason to eliminate it from consideration,” he said.
The Medicare expansion would cost an estimated $358 billion over 10 years—roughly two-thirds of it, or $238 billion, for dental, according to a Congressional Budget Office assessment. Even without adding dental, vision and hearing, the Medicare program faces insolvency in the coming years.
Trade groups for vision and hearing specialists haven’t been lobbying against adding those benefits to Medicare, lawmakers say.
The ADA’s own Health Policy Institute found in an online survey given to a random sample of licensed, professionally active members in January 2018 that 71% agreed that Medicare should include comprehensive dental benefits.
Recent polls show that adding dental, vision and hearing coverage to Medicare is popular with voters in both major parties. Even so, the ADA’s opposition could gain traction as progressive and centrist Democrats negotiate a pared-down spending bill that can pass only if all 50 Democratic-voting senators agree to it.
Republican leaders have said they expect none of their members to vote for any version of the legislation. The plan to expand Medicare benefits is also opposed by the private insurance industry, which would stand to lose business if it is adopted.
After meeting with President Biden last week, Democrats developed a list of possible ways to pay for a sweeping domestic agenda that would finance more child care, education, healthcare and climate programs. Industries on the hook for new revenue streams, including tobacco, pharmaceuticals and oil, are lobbying to take proposed tax increases off the table.
Like many proposals in the Democratic spending plan, the details of the possible Medicare expansion are fluid. The Centers for Medicare and Medicaid Services says it is prepared to implement whatever Congress approves; lawmakers said the office has told them it will take years to craft a fee schedule for dentists and get the program started.
Adding dental benefits across Medicare is wasteful because some seniors can afford to pay dentists out of pocket or buy private insurance, the ADA says. Medicare Advantage, a type of coverage that Medicare recipients can purchase from private insurers to supplement the basic federal plan, includes some dental benefits.
About half of Medicare recipients have no dental coverage, according to a 2019 study by the Kaiser Family Foundation.
The ADA’s plan would cover Medicare beneficiaries with incomes of up to 300% of the federal poverty level. Rep. Kurt Schrader (D., Ore.) advocated for that approach and voted against the Medicare expansion as proposed in a committee hearing this month. Mr. Schrader didn’t respond to a request for comment.
Rep. Drew Ferguson (R., Ga.), one of five dentists in Congress, all Republicans, said it makes more sense to improve Medicare Advantage.
“It’s disingenuous to tell seniors they’re getting a new benefit when it will all be greatly reduced in a few years because of insolvency,” Dr. Ferguson said.
Some dentists also worry that the financials of Medicare won’t work for them: Paperwork for the program will be too time-consuming and reimbursements for care too low, potentially reducing provider participation and leaving seniors and disabled people searching far from their homes for a dentist who accepts Medicare.
That has been a common problem in Medicaid, a federal- and state-funded health insurance for the poor that does include dental benefits.
The ADA, founded in 1859, successfully lobbied against the inclusion of dental care when Congress first established Medicare in the 1960s, arguing, as it does now, that federal aid should be provided only to the needy.
The ADA’s political-action committee’s donations tend to favor Republicans. It has a super PAC that occasionally helps a preferred candidate by running independent ads.
The PAC’s donations are more Democratic this year than usual.
In late June, the ADA’s PAC gave $5,000 to Sen. Ron Wyden (D., Ore.), chairman of the Senate Finance Committee. It was the association’s first contribution to him since August 2016, records show. An aide to Mr. Wyden said the senator supports adding dental benefits to Medicare.
Will Medicare Pay For My Dentures?
A few basics about dentures, dental care and how to pay for it.
Original Medicare doesn’t pay for dentures or related dental appointments for fittings or tooth extractions. To get some coverage of these substantial costs, you’ll need to enroll in Medicare Advantage or private dental insurance.
Medicare excludes all dental services, except in some specific and unusual circumstances where dentistry or oral surgery is required in a broader plan of medical treatment. But dentures are never covered.
There Are Different Types Of Dentures
Before you consider whether to get dental coverage through Medicare Advantage or a private insurer, it helps to understand a few basics about dentures.
Partial versus full dentures: Partial dentures are recommended when you have enough healthy teeth in the correct positions to anchor a dental appliance. Full dentures replace all upper and/or lower teeth.
Removable versus implant dentures: You take out removable dentures each night to clean them. Implant dentures are installed permanently with surgery that embeds them in your jaw. Removable dentures are typically much less expensive than implant dentures.
(Implant dentures are different from dental implants, which replace just one tooth at a time.)
Ask a dentist or prosthodontist (a specialist in replacing missing teeth) to evaluate your potential need for dentures and to estimate the cost, which will help you decide on a Medicare Advantage plan or private dental insurance.
What Medicare Advantage May Cover
Most Medicare Advantage plans include some dental coverage. But premiums and coverage limits for dentures and other dental services vary widely, so shop around.
Consider the amount of coverage for the specific dentures you’ll need, as well as other aspects of the plan’s dental coverage, such as the annual maximum benefit. If you have a preferred dentist or prosthodontist, make sure they’re in your Medicare Advantage plan’s network.
What Private Or Group Dental Insurance May Cover
Especially if Original Medicare provides all the care you need except for dental, you may want to consider private dental insurance instead of Medicare Advantage.
As with Medicare Advantage, premiums and benefits for stand-alone dental insurance span a wide range, so it pays to look at the offerings of multiple insurers. If you have a preferred dentist or prosthodontist, make sure they’re in your private dental insurance’s network.
Finally, if you or your spouse is still working, you may be eligible for group dental insurance through the employer. Just be sure the plan’s coverage for dentures meets your needs.
Took Social Security Benefits Too Early? How To Undo It
Many older Americans who lost their jobs early in the pandemic and claimed Social Security benefits before reaching their full retirement age are now working again and regret the decision to start collecting. But there are options.
Financial advisor Morris Armstrong, of Cheshire, Conn., helped such an individual, a 63-year-old man who had panicked when he lost his engineering job early in the pandemic and immediately applied for Social Security before seeking guidance. Soon afterward, however, the man started to wonder what his snap decision would mean if the pandemic eased and he could go back to work again.
“I couldn’t blame him for panicking,” Armstrong says. “At the time, millions of people were losing jobs. We were watching scenes on TV of caskets in the streets.”
Starting Social Security before full retirement age can cut lifetime benefits by thousands of dollars. So people are typically advised to delay taking Social Security as long as possible to get the maximum possible benefits, and to postpone starting benefits if they intend to keep working in a well-paying job.
But if a person has already started Social Security in their early 60s during tough times, as was the case for many during the pandemic, returning to work isn’t a mistake. And the snap decisions made during the pandemic don’t have to lock in lower Social Security benefits for life.
Take A Do-Over
The tidiest solution for people who find jobs soon after filing for Social Security before full retirement age is to take what some financial planners call a mulligan, or a do-over.
If no more than 12 months have passed since an individual started Social Security, he or she can withdraw the application for benefits and start the clock fresh on maximizing credits for Social Security. The person’s previous decision to begin Social Security early will be undone.
And from that point on, the Social Security formula that boosts benefits each month—while people work or delay retirement—will be active again. That will maximize what an individual will get as they wait until full retirement age, or even to 70, to finally decide to start Social Security.
Armstrong had his client do a mulligan even though the engineer still had no job. Claiming Social Security at age 63 had cut 23% from the benefit the man would have received if he had been able to wait until full retirement age near 67. Armstrong figured the man would eventually get a job paying at least $80,000 a year given his strong background in engineering.
Meanwhile, the client wasn’t in as dire shape as he imagined. He could dip into savings or a retirement account to tide him over for several months. So Armstrong had him contact the Social Security Administration, withdraw his application, and live on savings until he could go back to work.
Taking the mulligan was an easy process. Because the man had been getting Social Security checks for only a couple of months, he was within the 12-month window that lets people change their minds after starting Social Security. He was able to repay the few months of benefits he’d already received, effectively wiping the slate as clean as if he’d never requested Social Security in the first place.
While financial planners are using mulligans for individuals who acted in haste to claim Social Security in the pandemic, advisors have been using them for years for other clients who grabbed Social Security in their early 60s without appreciating the consequences.
Sometimes people assume erroneously that once they are 62, they can start Social Security immediately and keep working full time. They figure they will have the best of both worlds—a plump paycheck plus a monthly Social Security check.
But it doesn’t work that way for people who haven’t reached full retirement age near 67, notes Elaine Floyd, who trains financial planners about Social Security claiming strategies. And that’s where a mulligan may be used to undo the situation.
If a person who claims Social Security is younger than full retirement age and earns more than $18,960 in a job, benefits will be reduced or cut completely, depending on the salary.
The ‘Earnings Test’
The government uses what’s known as an earnings test. If a person earns more than a limit on a job, which is $18,960 this year, he or she will have Social Security cut $1 for every $2 earned. Each year until full retirement age, the government makes an adjustment if the earnings test limit applies. During the year when a person is going to reach full retirement age, the limit jumps. This year it’s $50,520 and $1 of $3 is cut from Social Security.
The earnings tests took people by surprise during the pandemic when people afraid of Covid at work decided to quit, take Social Security early, and augment their income with part-time jobs in safer positions.
During the pandemic, financial planner Andrea Eaton in Edina, Minn., helped a 64-year-old woman in that situation. Given her age and work record up to that point, the woman was eligible for $1,396 a month in Social Security and her job would pay $2,000 a month, for a total of roughly $3,400.
The income met the woman’s needs, but she wasn’t aware of the earnings test that was going to crush her budget expectations. Because of her job, the government would apply the earnings test to her $2,000 monthly income, plus about $18,000 she’d earned that year on her full-time job before quitting. The result: Social Security benefits were only going to average $396 a month that year.
While the reduction will vary yearly depending on the earnings test, her monthly income was going to be $1,000 less than she had assumed.
At first glance many people in similar situations look at the earnings test as a penalty and conclude that it’s a mistake to work or that they have lost their Social Security benefits permanently. But the hit is temporary, applied only during the periods when the earnings test applies before full retirement age.
No Benefits Are Lost
And people who missed the 12-month window to take a mulligan for claiming Social Security early in the pandemic don’t have to kick themselves now. They have not lost any Social Security.
Wade Pfau, author of the Retirement Planning Guidebook and professor at the American College of Financial Services, gives this example: A woman lost her job and started Social Security at 62, and for 18 months relied on Social Security while unemployed.
Then she went back to a high-paying job and now earns so much each year that Social Security payments stop completely due to the earnings test.
Even though she doesn’t get Social Security checks during those years of hefty paychecks from a job, the Social Security money isn’t lost forever. It will be provided to her when she reaches full retirement age. At that age, the government recalculates the benefits people should be provided, notes Pfau.
If the woman is about 67 at full retirement age, her benefits will be calculated as though she was about age 65½ instead of 67. That’s because she previously got Social Security for 18 months after applying for benefits at age 62.
But even though the earnings test stopped her from getting Social Security checks for a couple of years, she is still due the money. And full retirement age sets the process in motion.
Even then, the woman retains the right to try to beef up her income even more. At full retirement age, there is no longer an earnings test. So she can collect full retirement benefits and work as much as she wants without any reduction in her Social Security checks. And if she wants to beef up Social Security further, she can suspend her benefits at full retirement age, and let them keep inflating all the way to age 70.
Medicare Drug-Pricing Debate Pits Savings Against Innovation
Proposal to allow Medicare to negotiate for lower prescription-drug prices is central to Democrats’ healthcare, child care, education and climate package.
Much of the debate on Capitol Hill over whether to allow Medicare to directly negotiate with pharmaceutical companies centers on one question: how government intervention would affect drugmakers’ ability to develop new treatments.
The proposal is key to Democrats’ larger healthcare, child care, education and climate package. Such a provision is widely popular with the public, and it likely would generate hundreds of billions of dollars in savings for the federal government, which Democrats want to tap to fund expanding other health programs.
But it is contentious even among Democratic lawmakers, who must reach near unanimity if they want to pass legislation opposed by all Republicans.
Pharmaceutical companies say the push would sharply curb their revenue, diminishing their ability to invest in research and to draw outside investments to produce new prescription drugs. Supporters of allowing Medicare to negotiate say the industry is exaggerating the impact and using an emotional appeal to distract the public from focusing on its prices.
“Their argument has always been Western civilization is going to end,” if Medicare can negotiate, Senate Finance Committee Chairman Ron Wyden (D., Ore.) said to reporters last week. “That just isn’t close to what’s really happening.”
Republicans and some Democrats say they worry that reducing the revenue from some drugs would make companies and investors more reticent about putting money into the development of new treatments.
“Venture capital has a choice where to spend their money to get a better rate of return—it doesn’t have to be for a new cancer drug,” Sen. Bill Cassidy (R., La.), a gastroenterologist, said in an interview last week. “We take it for granted that they do.”
The nonpartisan Congressional Budget Office estimated in August that legislation similar to what House Democrats have proposed would result in two fewer new drugs being introduced the first decade, 23 fewer drugs the next decade and 34 fewer drugs in the third decade, a reduction of about 8%.
Over the past decade, the Food and Drug Administration has approved anywhere from 22 to 59 new drugs each year.
“We cannot support and will not support policies that also restrict patient access and destroy our ability to develop the next generation of innovative new products, and that is what’s being proposed on the Hill right now,” David Ricks, chairman and chief executive of Eli Lilly & Co., told reporters last month.
The House Democratic proposal would allow Medicare to negotiate prices with drug companies over a group of the most expensive and commonly used drugs that don’t face competition, as well as insulin.
Those negotiated prices couldn’t go above 120% of the drug’s average price in a group of six developed countries, which typically are lower than in the U.S. If companies refuse to negotiate or didn’t agree to the price, they would be subject to an excise tax of as much as 95% of that drug’s sales.
Senate Democrats are working on their own approach, which Mr. Wyden said will still bolster drugmakers’ ability to produce new drugs and might be phased in over time. Mr. Wyden has released principles guiding his approach but no details.
Healthcare experts said there is uncertainty over what kind of prices Medicare would be able to negotiate, how that would affect drugmakers’ decisions on research and development and which specific drugs might not ever come to market.
“There’s no question that there is some trade-off from lower prices,” said Larry Levitt, executive vice president for health policy at Kaiser Family Foundation, a nonprofit focused on health policy.
Mr. Levitt said the government is more likely to drive a hard bargain on drugs that don’t offer much additional benefit to patients than on drugs that are truly innovative. “It’s unlikely that the federal government would force the price of a new lifesaving drug down so much that the manufacturer would pull it from the market. That would be politically crazy on the part of the federal government,” he said.
Democrats in both chambers plan to pass the broader package, a vast expansion of the social safety net, through a process tied to the budget that allows them to clear the Senate with just a simple majority, rather than the 60 votes most bills need. But to do so, they must reach nearly unanimous agreement on its contents, because they can afford no more than three defections in the House and none in the evenly split Senate.
The drug-pricing proposal has raised tensions in both chambers. A group of five House Democrats introduced their own pricing legislation and some have voted against the bill in committee, in large part because of concerns about its effects on research and development.
“We have to be cautious to ensure that innovation, whether it be in the pharmaceutical industry or any other is preserved, because you want the lifesaving, life-enhancing drugs that they produce,” Sen. Robert Menendez (D., N.J.) said in an interview last week. “It’s an issue that needs to be considered in the mix.”
But many Democrats in Congress said pharmaceutical companies are already highly profitable and choose to direct much of those profits to shareholders, rather than plowing it into research.
A July report from Democrats on the House Oversight Committee looking at the finances of the largest 14 pharmaceutical companies found that between 2016 and 2020, they spent more than $577 billion on stock buybacks and dividends for investors, $56 billion more than they spent on research and development.
One concern some patients raise is that if drugmakers pare back their research, treatments for rare diseases that affect fewer people would receive the first cutbacks.
“There aren’t as many of us, so it’s obvious the priority for R&D would be very low,” said Sumaira Ahmed, a 32-year-old who was diagnosed seven years ago with neuromyelitis optica, a rare autoimmune disease that targets the optic nerves and spinal cord.
“It already feels like that, to be honest, but these types of provisions would further underscore the sentiment that rare diseases would be at the bottom of the list and that’s frightening,” said Ms. Ahmed, a volunteer patient advocate with Voters for Cures, which works with the drugmakers’ trade group known as PhRMA.
Current federal law has incentives for drug companies to develop drugs for rare diseases, including tax credits, a waiver of an application fee that drug companies usually pay the Food and Drug Administration, and a guaranteed period of market exclusivity.
Lawmakers acknowledge they want to preserve drugmakers’ ability to create new drugs and some say the industry’s warnings are calculated to elicit an emotional response from the public.
“The threat from pharma is that if we do anything to make pricing reasonable, then the person we love won’t be able to get the drug they need,” Rep. Peter Welch (D., Vt.) said in an interview last week. “It’s preying on the anxiety of every one of us.”
Social Security Benefits To Increase 5.9% For 2022
Increase in payments for seniors and other Americans reflects surging inflation during pandemic.
Seniors and other Americans receiving Social Security benefits in 2022 will see the largest increase in their payments in four decades, reflecting surging inflation during the pandemic.
Next year’s cost-of-living adjustment, or COLA, will be 5.9%, the Social Security Administration said Wednesday. The increase will translate to an addition of $92 to retirees’ average monthly benefit next year, bringing the amount to $1,657, the agency estimates.
The nearly 6% cost-of-living adjustment is the largest since 1982, according to Social Security Administration data. The adjustment is calculated based on the Labor Department’s measure of inflation faced by blue-collar workers.
The Labor Department said its broader measure of inflation, the consumer-price index, rose 5.4% in September from a year earlier, the largest annual gain since 2008.
The Social Security Administration also said the maximum amount of earnings subject to the Social Security tax will increase to $147,000 in 2022 from $142,800 this year, a 2.9% increase.
That smaller increase is based on the agency’s own calculation of the change in annual wages. Other data shows recent wage increases are not keeping up with inflation. Average hourly earnings for private-sector workers rose 4.6% in September from a year earlier, according to the Labor Department.
The extent to which the larger-than-usual Social Security adjustment makes retirees’ and other recipients feel more well off will largely depend on whether inflation eases next year compared with 2021, said Naomi Fink, a retirement economist at Capital Group, an investment manager.
Consumer prices have risen at the fastest rate in more than a decade this year because trillions of dollars in economic stimulus have supported consumer demand at a time when supplies for everything from toilet paper to new cars have been constrained because of pandemic disruptions.
“If price rises turn out to be fleeting and reflect temporary supply shocks and they subsequently show much more modest rises in 2022, then that would be quite positive for those that got that windfall cost-of-living adjustment,” said Ms. Fink, who added that scenario could position Social Security recipients to boost consumption.
“If in 2022 we see equal or even greater price rises and revisions to long-range inflation forecasts, it’s a different picture,” she said.
Federal Reserve Chairman Jerome Powell and other Fed officials have said they expect elevated inflation to be temporary and to ease as frictions associated with the economy’s reopening fade. Mr. Powell told lawmakers recently that it was difficult to pinpoint when that cooling in inflation might happen.
“Higher prices are generally not good for people who are living on fixed incomes,” said David Certner, legislative counsel at AARP. “Social Security may have a cost-of-living adjustment, but most other income sources that seniors may have—for example, pension income—are not adjusted for inflation. So even if Social Security is keeping up with inflation, it may very well be that other sources of income are not.”
Roughly half of Americans aged 65 and older relied on Social Security for 50% or more of their income in 2019, according to an AARP analysis of Census Bureau data. About a quarter of seniors 65 and older relied on the benefits for 90% or more of their income, the analysis found.
Mr. Certner said that items seniors tend to purchase more frequently, such as medical care and prescription drugs, often have costs that consume a significant portion of the annual cost-of-living increase.
Medicare’s trustees in August projected the standard 2022 monthly premium for Medicare Part B, which covers doctor visits and other types of outpatient care, would increase by $10 to $158.50. That would consume around 11% of the increase in retirees’ average monthly Social Security benefits.
Kathy Dykstra, of St. Clair Shores, Mich., retired in January from her role as a special-education teacher. Ms. Dykstra, age 63, said she had intended to retire between age 65 and 67, but the stresses of her job during the pandemic caused her to stop working earlier than planned.
“The demands were just really, really, really hard. So I ended up choosing my mental health over all the expectations,” she said.
Ms. Dykstra said she now lives on an income of roughly $1,700 a month, $1,100 of which comes from Social Security, compared with about $3,200 monthly when she was working.
She said she has noticed higher prices recently, particularly for gas and groceries. Those increases, combined with her reduced income, have made her choosier about how she spends her money, she said. For instance, Ms. Dykstra would dine out two to three times a week when she was working, but now does so once a week or every two weeks.
“At the point I’m at right now, any increase would be just wonderful. It really is down to budgeting every dollar that I have,” she said of the coming Social Security adjustment.
Among those who receive benefits are elderly Americans, those with disabilities and minor children and spouses of recipients who have died.
The Social Security Board of Trustees in an August report said the trust fund that pays benefits is projected to become depleted by 2034, a year earlier than estimated in 2020. At that time, Social Security income would be sufficient to pay about 78% of scheduled benefits.
Anqi Chen, assistant director of savings research at Boston College’s Center for Retirement Research, said her rough calculations show that 2022’s cost-of-living adjustment could move up that depletion date by about three months, given its larger-than-normal size.
The determining factor will be how quickly overall wages paid to U.S. workers rise relative to the adjustment, Ms. Chen said, since payroll taxes fund the program.
“If wages are not increasing at the same rate as inflation in a given year, then what’s going in is going to be increasing less than what’s going out in benefits,” Ms. Chen said. “That’s when you get the mismatch.”
8 Things To Know When Choosing A Medicare Plan
The choices can be confusing, and the fine print is important. But it’s crucial to choose wisely, because it may be hard to change your mind.
When most Americans turn 65, they have three basic options for health coverage: traditional Medicare; Medicare plus supplemental insurance to cover costs that Medicare doesn’t; or Medicare Advantage, a range of managed-care plans.
Making the decision isn’t easy. There’s a lot of fine print when it comes to expenses and coverage. But choosing the wrong plan for your individual circumstances can be a costly mistake—and one that may be hard to undo, depending on where you live. Most states make it difficult to switch plans, so it’s often crucial to pick wisely.
With that in mind, here are eight things that every person should know when selecting the Medicare plan that makes the most sense for them. Keep these in mind, and you’re less likely to make a choice that you’ll later regret.
1. Supplemental insurance is usually the best option for people who can afford it or who have health issues.
Ken Schumm of Olympia, Wash., who turns 65 later this year, had planned on buying a Medicare Advantage plan. It seemed the sensible and most-affordable option. Still, he wanted to be sure, since he has rheumatoid arthritis and takes expensive drugs to combat it.
To help him decide which coverage to choose, Mr. Schumm hired Medicare consultant Melinda Caughill, co-founder of 65 Inc., who calculated that with traditional Medicare with supplemental medical and drug insurance, he would face a total of $11,324 a year for premiums and his deductible.
By contrast, if he chose an Advantage plan, the consultant calculated, his costs—including out-of-pocket spending for medical care and drug purchases—could run as high as $18,325 a year. Mr. Schumm’s medical costs are high in part because his out-of-pocket prescription costs will top $6,000 annually with either an Advantage plan or with traditional Medicare plus a drug supplemental plan, 65 Inc. calculated.
Advantage plans are financially risky for patients with health issues, Ms. Caughill says. With an Advantage plan, “Ken could potentially save $3,000 if he had no health needs,” she says. “But his worst-case scenario is thousands of dollars worse.”
Based on his current health needs, she calculates that his annual costs with an Advantage plan would range from $8,325, if he uses only his drugs and doesn’t require doctor visits, to $18,325 if he uses doctors a lot and hits his plan’s spending caps.
By choosing Medicare and supplemental insurance, Mr. Schumm also will be able to go to any doctor or hospital that accepts Medicare without referrals. The most popular Medicare supplemental plans, such as the F or G plans, have no copays, though the G plan does have a $203 annual deductible.
In fact, people who are affluent are almost always better off with a Medicare supplemental plan, says David Armes, a California Medicare consultant. That is because, as noted later, eventually most people will have significant medical needs. Supplemental plans, while more expensive upfront, offers better coverage than the alternatives.
2. Having Medicare alone is risky.
Some 5.6 million Americans enroll in traditional Medicare but don’t buy supplemental insurance, according to the Kaiser Family Foundation. They all pay a monthly Medicare premium—people buying supplemental coverage or enrolling in Medicare Advantage must also pay this premium—but face no other costs except for drugs, if they don’t seek medical care.
The problem is if they get sick or injured and require a long-term stay in a hospital or skilled nursing facility. In that case, they are less protected from costs than patients who have supplemental coverage or who are in Medicare Advantage.
Suppose you are in a bad car accident, and have to spend months in a skilled nursing facility. Medicare covers all of the costs for the first 20 days. For the next 80 days, you have a copay of $185.50 a day.
“It is like not getting home insurance,” says Mary Jeanne Cullen, a Medicare consultant in New Jersey. “There is financial risk.”
Enrollment In Medicare Advantage Has More Than Doubled Over The Past Decade
3. Medicare Advantage plans are cheaper for seniors in good health.
If you’re not going to the doctor a lot and usually stay in-network, Medicare Advantage is a less-expensive option than Medicare with a supplement. Not only do many Advantage plans have no monthly premiums, but they often include a drug plan and extra benefits like dental, vision or hearing care not covered by Medicare. Some offer gym memberships.
The catch, and it’s a big one: Medicare Advantage patients must use in-network providers or face copays that are substantially higher than what people with Medicare supplemental insurance customarily pay. So if you need to go to the top cancer hospital, and it isn’t in your plan, you might incur thousands of dollars in additional costs.
One other important point: You can’t just consider your current health in the decision. Starting in an Advantage plan, and figuring you can switch to a supplemental plan down the road if your health worsens could be a risky strategy, depending on where you live.
In most states, the companies that sell supplemental insurance have the right to charge you more or deny you coverage altogether after that initial sign-up period.
4. Not all Advantage plans are created equal.
Some Advantage plans are set up as health-maintenance organizations, where you must stay within network to get coverage; others are set up as preferred provider organizations, which generally will pay a portion of costs when you go out of network. PPOs give patients a lot more freedom than HMOs, health experts say.
Stephen O’Brien, an insurance agent in Maine, says most of his clients can’t afford the $200-plus monthly premiums charged by popular Medicare supplemental insurance plans.
He steers his clients to a no-premium PPO with annual out-of-pocket maximums of $5,900 for in-network care and $10,000 for both in- and out-of-network care. It allows patients to go to top hospitals and doctors in Boston, many of which are in network.
“If something really happens,” Mr. O’Brien says, “you want to go where you need to go.”
5. Supplemental plans are the better option for people who travel.
Medicare Advantage plans usually have a network of doctors in a certain state or portion of a state. If you’re traveling, they generally will cover treatment for medical emergencies, but not for routine or chronic problems.
There are exceptions. Some Advantage plans do have national networks in which you have access to certain hospitals and doctors outside your service plan.
Supplemental coverage, by contrast, can be used with any doctor or hospital that accepts Medicare in the U.S.
6. Supplemental plans usually get more expensive as you get older.
Most supplemental plans use attained-age pricing, meaning the premium automatically goes up for each year you hold it. The plans often have additional increases to cover rising medical costs.
7. It can be difficult switching to Medicare with supplemental insurance.
During the first six months after you enroll in Medicare Part B, which covers doctors and other outpatient services, you are guaranteed the right to buy supplemental insurance. You won’t have to answer health questions from the insurance company selling it, and you can’t be rejected for pre-existing conditions.
If you try to buy supplemental insurance after that six months runs out, however, the insurer can charge more because of health issues or deny coverage altogether. A supplemental plan at that point might be impossible or unaffordable.
It is a slightly different story for patients in Advantage plans. In most states, whether you started out in an Advantage plan or switched to one later, you have 12 months from when the plan began to switch instead to Medicare and buy supplemental insurance without having to answer questions from an insurer, says Ms. Caughill of 65 Inc. Any point during that time, she adds, “you can change to original Medicare plus a supplement.”
Some states have even more liberal policies for switching. A few—including New York, Connecticut, Massachusetts and to a degree, Maine—use a health-insurance system known as community ratings, which legally requires insurers to offer all consumers in that state the same rate regardless of age or health.
In those states, people can move from an Advantage plan to traditional Medicare plus supplemental coverage after their initial enrollment period, without having to answer health questions from the insurance company selling it, and you can’t be rejected for pre-existing conditions.
8. Don’t forget the “nuclear option.”
For people who don’t live in one of these states and are in desperate need of affordable health coverage, Ms. Caughill of 65 Inc. will sometimes recommend what she calls the “nuclear option.” Such patients can get a redo by moving outside their Advantage plan’s service area.
Any time you move out of an Advantage plan’s service area, which could be a county, several counties, or an entire state, you have the right to get supplemental insurance in the new service area as if you were just entering the market. The insurer can adjust the price based on age, gender or smoking status, but it can’t charge more because of existing conditions.
“You get a Medicare enrollment do-over,” she says.
Ms. Caughill had one client with lung cancer who moved from Wisconsin to Colorado to get into a supplemental plan. But she cautions people they must actually move. “Otherwise,” she says, “you’re committing insurance fraud.”
Why Is Signing Up For Medicare So Complicated And Potentially Expensive?
Healthcare for seniors — or anyone — shouldn’t be so hard to understand.
So it begins again—trying to figure out the mess that is Medicare.
A 132-page book from the Department of Health & Human Services arrived in the mail recently. “Medicare & You 2022” is four pages longer than the 2021 edition I received earlier this year, when I was turning age 65.
I could barely bring myself to pore through the pages of that one, as I endeavored to understand the myriad choices facing me as I hit that magic milestone. Does this task really need to be so complicated and potentially expensive?
Last time around, I spent many hours on the subject and, even then, I was just barely comfortable making my Medicare choice. All of you who hit 65 this year will also know that the “official U.S. government Medicare handbook” is among a mountain of mail you received from insurers, many hoping to sell you a Medigap or prescription drug policy.
A volunteer from the nonprofit program SHINE (short for “serving health insurance needs of elders”) was of considerable help during the three sessions I attended. But just two months into the plan, I’m now questioning my choice.
I selected a Humana HMO—a Medicare Advantage plan, instead of traditional fee-for-service Medicare—because all my doctors were in the plan, and the copay for one of my major prescriptions was relatively low. The Humana plan also offers zero copays for all office visits, including specialists.
My first annoyance came right away: The plan chose a primary care physician (PCP) for me who wasn’t my doctor for the past eight years. I spent an absurd amount of time on the phone getting that corrected.
My current frustration is obtaining authorization from Humana for specialists I need to see. Others had warned me against Humana for this reason. Now I know why.
Why should healthcare for seniors—or really anyone—be this hard to understand? Why should there be so many pitfalls?
I could have chosen traditional Medicare. But experts recommend you add a Medigap policy. If you don’t, there’s no ceiling on what you might owe, and you will need a drug plan, too. That adds up. By contrast, the Medicare Advantage plan I chose has no premium, other than for Medicare Part B, and there’s an annual $3,400 out-of-pocket maximum.
I was exhausted today trying to determine whether my PCP, Humana and a specialist were communicating correctly. Through calls and online chats, I learned there’s a difference between a referral and authorization.
But I’m unsure either of the doctors’ offices understands what’s needed and when, so I’m facing delays getting an appointment and the procedure that the specialist recommended. I didn’t expect this nonsense.
I have the option to change plans before Dec. 7, but that means more research and sessions with the SHINE volunteers. This is already my third healthcare plan in one year. After retiring at 64, I continued my employer’s plan under COBRA.
I paid $800 a month for COBRA coverage for four months, and then switched to an Obamacare plan for $400 a month for another four months. Do I want to change again—and possibly not end up with something better?
I don’t care to use up brain cells figuring out all this. If it’s confusing for me at 65, what will it be like when I’m 85?
Seniors Get The Biggest Social Security Raise In Years — And It’s Already Been Eaten Up By Inflation
When inflation exceeds COLA.
It was only a month ago that seniors got some very good news: Social Security was getting a 5.9% cost of living adjustment (COLA) to help them keep up with inflation.
Turns out, even that hike—the biggest in years—isn’t enough. That’s because prices are now rising even faster than that. The Labor Department said Wednesday that the consumer-price index—which measures what Americans pay for goods and services—rose by 6.2% last month from a year ago. It’s the biggest 12-month rise since 1990, and the fifth straight month over 5%.
Here’s How The Price Increases Break Down—Again This Is Compared With A Year Ago:
* Gasoline: 49.6%
* Utility Gas Service: 28.1%
* Used Cars/Trucks: 26.4%
* Meat, Poultry, Fish, Eggs: 11.9%
* New Vehicles: 9.8%
* Car Maintenance: 5.4%
* All Food: 5.3%
* Fruits/Vegetables: 3.0%
* Rent: 2.7%
You might look at this and point out that two absolutely indispensable items—“all food” and “rent” are actually well below 6.2%. That’s good, right? Perhaps, but have rental costs really gone up just 2.7% over the past year? If your home is heated or cooled by natural gas, just look at the whopping 28% gain for the “utility gas” category.
If you’re in a rental and utilities are covered by a landlord, you can be sure that these costs will eventually be passed on to you in the form of higher rents. I’d argue that true housing costs are up—or at least soon will be up—more than 2.7%. Instead of turning up the heat to stay warm this winter, consider putting on an extra layer of clothing,
And meat, poultry, fish and eggs are up nearly 12%, but the “all food” category is up 5.3%? That doesn’t sound right to me. You could certainly survive (and probably be healthier) eating nothing but fruits and vegetables (up 3.0%), but most people won’t/can’t do this. No poultry, fish, meat or eggs? Not exactly realistic.
Parsing about the individual categories aside, it’s important to remember the bottom line here: the cost of living adjustment that seniors get each year is only supposed to keep up with inflation, not exceed it. It is calculated to help seniors maintain their standard of living, but not improve it.
There is no margin for error, then, when inflation exceeds the COLA.
Frankly, even before Wednesday’s bad inflation data, you could argue that seniors—even with a 5.9% cost of living adjustment—were falling behind. Look at the above categories. What’s missing? One big source of senior spending: Healthcare.
How big? As I’ve mentioned many times, the average couple retiring this year at age 65 will need an extra $300,000 to pay for healthcare that Medicare and Medicaid don’t cover. That figure, adjusted upward each spring by is calculated by Fidelity Investments, the Boston-based asset management giant, has increased about 88% since 2002.
In a separate study, MedicareGuide.com recently estimated that prescription drugs alone gobble up more than $7,500 a year and “are rising ‘substantially faster than general inflation in every year.”
To adjust Social Security each year without taking these things into better consideration is frankly nuts, but that’s the way the government does it. A big cost of living adjustment not withstanding, millions of seniors are falling further behind.
Find Out What Social Security Knows About You
Get comfortable with this important retirement resource.
Your account at Social Security, known to SSA as “my Social Security,” has recently undergone some changes.
Before, you were able to view and download the old, familiar paper statement — the one that’s been around for a long, long time, and that used to be mailed out to you once a year. That’s all changed now, and if you get a mailed statement, you’re in the minority.
Nowadays, all the cool kids are looking at their Social Security eligibility information and other records online. You can still view and print the statement if you’d like, but the statement itself has undergone a makeover as well.
The first item you’ll see on your my Social Security account is the link for your Social Security statement. This is the replacement for the original statement that used to be mailed out once a year.
If you were familiar with the old statement, you’ll notice some major changes with the new one. First of all, it is now only two pages in length, while the old one was four. The new statement is also more visually appealing, in that there is a graph on the first page depicting your potential benefits at various ages.
Before, this information was summarized as only a few different points (at age 62 or your current age if older, at full retirement age, and at age 70), but now you can see the effect on your potential benefit amount for each year’s delay in filing age.
Included on the first page is a warning that your potential benefits could be different if you are participating in a retirement plan or pension that was not covered by Social Security taxation (more on this a bit later).
The next section gives you information about your eligibility for Social Security benefits. Here you’ll find an indicator of whether you have currently earned enough credits (quarterly earnings credits) to qualify for Social Security benefits.
Typically you must earn 40 quarterly credits to qualify for Social Security retirement benefits. This number may be lower for Social Security disability benefits if you’re younger.
An important statement is included in this paragraph, indicating that the projections displayed by the graph on the right are based on the assumption that your Social Security-covered earnings from your most recently-reported year will continue at the same rate until at least the filing age indicated in the graph.
If your earnings are more or less than the most recent sample (the actual amount is listed), then your potential benefit could be more or less.
Next comes a statement about your eligibility for disability benefits. As mentioned above, depending on your age, you might be eligible for disability benefits with fewer quarterly earnings credits than the typical 40 required for retirement benefits. The amount of disability benefits, if you’re eligible, will be listed as well.
Following the disability paragraph, you’ll find a paragraph about potential survivor benefits that might be available to your surviving spouse (for two possible situations, either as a mother’s or father’s benefit while caring for your child under the age of 16, or simply as a surviving spouse with no young children) as well as benefits for your surviving dependent children under 18 or that are disabled.
Lastly in this section will be a total family benefit amount that could be a limiting factor for your dependents that are receiving benefits based on your earnings record.
The last item on this first page is an overview of your eligibility for Medicare benefits, which includes the age and condition limitations for eligibility as well. Included here is information regarding timing of your enrollment for Medicare, as well as how to find more information to enroll.
On page 2 of your statement, you’ll find information about your lifetime earnings record. This portion of the statement is condensed from the complete earnings records. Your earliest years of earnings are compiled by decades, showing only the aggregate amount of earnings subject to Social Security and Medicare taxation.
Your last decade of earnings is typically listed year-by-year, which is helpful to review to make sure there aren’t any recent problems with the amounts that Social Security has maintained on your record.
If you need the full year-to-year listing of your earnings record, you simply need to go back to the my Social Security account and scroll down a bit to the link “Review your full earnings record now”; this will provide you with a listing of all of the years of your earnings record on file with Social Security, in case you need to correct any issues.
Next on the statement is a summary of the amount of taxes you and your employer have paid based on your earnings over your lifetime. Often this is a surprising amount — it’s been a lot of money over the years.
However, if you put the tax numbers into context with the benefit amounts listed on the first page, it’s actually a pretty good deal all around — assuming you live long enough to receive the benefits for a good while.
In the right hand column of page 2, you’ll find information that was alluded to at the beginning: if you had earnings that were not covered by Social Security taxation and those earnings produced a pension (or other retirement benefit), the Windfall Elimination Provision (WEP) might reduce your Social Security retirement benefit.
In a similar fashion (but calculated much differently), if you are receiving such a pension from a governmental entity while also receiving Social Security benefits based on someone else’s record (such as your spouse, ex-spouse, or late spouse), then the Government Pension Offset (GPO) could impact the amount of your benefit.
The very last portion of the statement gives you some good information and insight into how Social Security benefits work, for you, your spouse, and your dependents, if they qualify. There are also references to websites that you might want to review to get more information on your potential benefits.
Going back to the my Social Security account page, next on the page after the statement is a link to a fact sheet called “Retirement Ready”. This fact sheet will give you a brief overview of what you need to know as you approach retirement age.
Another link is available which goes over what you need to know about WEP and GPO, if you have had earnings that were not covered by Social Security.
There is also a link that you can use to access the form to request a replacement Social Security card if you’ve lost yours.
Lastly in this section, you may also produce a letter from Social Security providing attestation that you either are or are not currently receiving Social Security benefits. Some other benefit applications or agencies may require this attestation letter.
Next up is a graphic display of your quarterly earning credits – indicating where you stand in terms of your eligibility for benefits. Just beneath this graph is the link to view your complete earnings record that I mentioned before.
The next section, possibly the most valuable section, is a planning tool which you can use to model different changes to your circumstances. Initially this tool will show your potential Social Security retirement benefits based on the assumptions that Social Security makes when projecting benefits.
This includes the fact that your earnings will remain the same from now until your “retirement”, and that you are working and earning at that rate until the date your Social Security retirement benefit begins.
These factors can be adjusted — you can model a larger or smaller earnings amount, as well as model the inclusion of your spouse’s Social Security benefits, which can help you discover whether or not spousal benefits are applicable for you or your spouse. This can be a low-cost, high level overview to help you in your decision about when to file for Social Security retirement benefits.
This section also includes a link to start your application for retirement benefits, as well as more information about what you’ll need as you apply for benefits.
Following the planning tool, you’ll find information about Disability benefits, Medicare benefits, and other information that might be useful to you as you plan your retirement.
Baby Boomers Discover That Therapy on Medicare Doesn’t Come Easy
Patients say it can be tough to find a mental-health-care provider who takes Medicare. But there are some strategies to get treatment.
Baby boomers seeking mental-health care are getting an unpleasant surprise when they turn 65: Finding a therapist who takes Medicare can be harder than finding one who takes private insurance.
That discovery came as a jolt to Janis Zimmermann. Ms. Zimmermann, 69 years old, had a long relationship with her psychologist. She hadn’t seen her for several years when she made an appointment last year seeking help to cope with the stress of caring for her disabled partner and her elderly parents.
When Ms. Zimmermann, who retired from a job in land protection in Madison, Wis., arrived at her appointment, she was told that her therapist didn’t accept Medicare.
Ms. Zimmermann, who’d had to pay the psychologist a small copay when she had private insurance through her job, paid $190 out of pocket for the session. She hasn’t been back to therapy since, though her stress and worries haven’t gone away.
“I feel very isolated. I’ve just been dealing with all the stuff on a day-to-day basis,” she says.
Surging demand for mental health care has made it difficult for many people to find therapists, particularly those who will accept their insurance. The task is even tougher for many baby boomers, therapists say, because many psychologists, psychiatrists and social workers—even those who participate with private insurance plans—don’t take Medicare.
Baby boomers were the first generation to embrace therapy in significant numbers, notes Vaile Wright, senior director of healthcare innovation at the American Psychological Association.
In the 1950s and 1960s, new approaches like cognitive behavioral therapy were developed that generally took less time—and were more accessible—than the then-popular psychoanalysis that often demanded years of intensive treatment. As baby boomers aged, the number of mental-health professionals grew dramatically.
Why Many Therapists Don’t Participate In Medicare
The reasons therapists decide not to participate in Medicare are similar to why some don’t take private insurance plans either: Therapists say reimbursement rates are too low and the paperwork is arduous. Medicare pays about $103 for a 45-minute individual therapy session with a clinical psychologist and about $77 for one with a licensed clinical social worker, according to the federal Centers for Medicare & Medicaid Services.
The going rate for a session with an experienced clinical psychologist can be as much as $300. The typical fee for a session with a licensed clinical social worker costs between $120 and $180, says Anna Mangum, deputy director of programs at the National Association of Social Workers.
There are additional obstacles for Medicare patients. Many people with private insurance have out-of-network benefits, allowing them some reimbursement when they see therapists who don’t take insurance. Medicare limits what its participating providers can charge and doesn’t allow practitioners to bill patients for the difference between its cap and their typical fee.
Many psychologists opt out of Medicare as a result, says Stephen Gillaspy, senior director of health and healthcare finance at the American Psychological Association. Medicare patients who want to see therapists who don’t participate in the program generally have to pay the full rate.
Ms. Zimmermann says she would happily pay the difference between what Medicare covers and the $190 her therapist charges for a session if it were allowed. “I really don’t want to go see anybody else,” she says.
Medicare also doesn’t cover most services of entire groups of mental-health providers, including licensed professional counselors. Legislation has been introduced in Congress that would allow counselors to participate in and directly bill Medicare.
The Centers for Medicare & Medicaid Services says that it has taken several actions to increase access to mental-health care for Medicare patients during the pandemic, including allowing them to receive therapy by phone. CMS didn’t respond to requests for comment on therapists’ complaints about reimbursement and administrative issues.
Challenges With Medicare Patients
Treating Medicare patients can be complicated, says Robert Trestman, a psychiatrist at the Carilion Clinic in Virginia and chair of the American Psychiatric Association’s Council on Healthcare Systems and Financing.
“When I’m seeing patients who are 70 years old, they are typically on a dozen medications. It’s not unusual for me to talk to an endocrinologist, a primary-care doctor and a rheumatologist for a single patient and a lot of that is uncompensated time,” says Dr. Trestman, who treats Medicare patients. The combination of low reimbursement and high complexity pushes some psychiatrists to opt out of the program, he says.
Demand at Carilion’s outpatient clinic has soared during the pandemic: The waitlist for new patient appointments for psychiatric care numbers 800 people, Dr. Trestman says. About one-third of those patients are on Medicare.
About 55% of U.S. psychiatrists accepted Medicare in 2009-2010, according to a study published in 2014 in JAMA Psychiatry that used data collected by the Centers for Disease Control and Prevention. About 86% of physicians in other specialties took Medicare. Dr. Trestman says he believes those numbers are similar now.
People enrolled in Medicare Advantage plans administered by commercial insurers often face narrow networks of providers. In 2014, about 30% of psychotherapy services received by Medicare Advantage members were out of network, according to a study published in 2019 in the journal Health Affairs.
Jessica Koblenz, a clinical psychologist in New York City, recently looked into taking Medicare after receiving several calls from Medicare patients looking for treatment. Colleagues told her about long waits for payments and difficulties in fixing errors. And the reimbursement rates “were nowhere near what I would find worthwhile,” said Dr. Koblenz, who specializes in treating trauma and bereavement.
“It’s a shame because there’s such a need,” she says.
What Medicare Patients Can Do
Therapists suggest making plans for mental-health care months before your 65th birthday. If your current therapist doesn’t take Medicare, ask them to consider enrolling in the program so you can continue treatment. Or you can transition to a therapist who does accept it.
Matt W. Wolff, a licensed professional counselor in McKinney, Texas, says he starts working with clients several months before they enroll in Medicare to find them a psychologist or social worker who can bill the program. He also keeps three slots in his weekly schedule for long-time clients who have transitioned to Medicare. He works with them for free until they can wrap up treatment.
Many therapists have sliding scales, so out-of-pocket costs could be lower. And telehealth can give you access to a larger pool of providers, including therapists who are far away from you. Larger practices and hospital-based clinics are more likely to accept Medicare, says Dr. Trestman.
It is also worth looking into what are known as collaborative care practices. These practices, which are growing in number, incorporate treatment from psychiatrists, psychologists and social workers into primary care. They often take all kinds of insurance, including Medicare.
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