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Posted by Allen Heffler on 07/30/2014 Allen Heffler – The Truth about Social Security and Medicare, Straight from the Trustees REUTERS If you worry about the future of Social Security and Medicare, this is the week to get answers to your questions. The most authoritative annual reports on the long-term health of both programs were issued on Monday, and while the news was mixed, there are reasons to be encouraged about our two most important retirement programs. Under the Social Security Act, a board of trustees reports annually to Congress on the status and long-term financial prospects of Social Security and Medicare. The reports are prepared by the professional actuaries who have made careers out of managing the numbers and are signed by three cabinet secretaries, the commissioner of Social Security and two publicly appointed trustees – one Republican, one Democrat. Here are my five key takeaways from this year’s final word on our social insurance programs. – Imminent collapse nowhere in sight. Social Security and Medicare face long-term financial problems, but there’s no cause for panic about either program. Social Security’s retirement program is fully funded for the next 19 years. It has $2.8 trillion in reserves, and that figure will rise to $2.9 trillion in 2019, when the surplus funds will begin depleting rapidly as baby boomer retirements accelerate. Although you’ll often hear that Social Security spends more annually than it receives in taxes, the program actually took in $32 billion more than it spent last year, when interest on bond holdings and taxation of benefits are included. The retirement trust fund will be depleted in 2034, at which point current revenue would be sufficient to pay only 77 percent of benefits – unless Congress enacts reforms to put the program back into long-term balance. Medicare’s financial outlook improved a bit compared with last year’s report because of continued low healthcare inflation. The program’s Hospital Insurance trust fund – which finances Medicare Part A – is projected to run dry in 2030, four years later than last year’s forecast and 13 years later than forecast before passage of the Affordable Care Act (ACA). In 2030, the hospital fund would have enough resources to cover just 85 percent of its expenditures. (Medicare’s other parts – outpatient and prescription drug services – are funded through beneficiary premiums and general revenue, so they don’t have trust funds at risk of running dry.) Could healthcare inflation take off again? Certainly. Some analysts – and the White House – chalk up the recent cost-containment success to features of the ACA. But clouds on the horizon include higher utilization of healthcare, new medical technology and a doubling of enrollment by 2030 as boomers age. – Medicare is delivering good pocketbook news. The monthly premium for Medicare Part B (outpatient services) is forecast to stay put at $104.90 for the third consecutive year in 2015. That means the premium won’t take a larger bite out of Social Security checks, and that retirees likely will be able to keep most – if not all – of the expected 1.5 percent cost-of-living adjustment (COLA) in benefits projected for next year. (Final numbers on Part B premiums and the Social Security COLA won’t be announced until this fall.) – Social Security Disability Insurance (SSDI) requires immediate attention. The program faces a severe imbalance, and only has resources to pay full benefits only until 2016; if a fix isn’t implemented soon, benefits would be cut by 20 percent for nine million disabled people. That can be avoided through a reallocation of a small portion of payroll tax revenues from the retirement to the disability program – just enough to keep SSDI going through 2033 while longer-range fixes to both programs are considered. Reallocations have been made at least six times in the past. Let’s get it done. – Aging Americans aren’t gobbling up the economic pie. Social Security outlays equaled 4.9 percent of gross domestic product last year and will rise to 6.2 percent in 2035, when the last baby boomer is retired. Medicare accounted for 3.5 percent of GDP in 2013; it will be 3.7 percent of GDP in 2020 and 6.9 percent in 2088. – Kicking the can is costly. There’s still time for reasonable fixes for Social Security and Medicare, but the fixes get tougher as we get closer to exhausting the programs’ trust funds. Social Security will need new revenue. Public opinion polls show solid support for gradually eliminating the cap on income subject to payroll taxes (currently $117,000) and gradually raising payroll tax rates on employers and workers, to 7.2 percent from 6.2 percent. There’s also strong public support for bolstering benefits for low-income households and beefing up COLAs. Medicare spending can be reduced without resorting to drastic reforms such as vouchers or higher eligibility ages. Billions could be saved by letting the federal government negotiate discounts on prescription drugs, and stepping up fraud prevention efforts. And an investigative series published earlier this summer by the Center for Public Integrity uncovered needed reforms of the Medicare Advantage program, pointing to “tens of billions of dollars in overcharges and other suspect billings” (bit.ly/1pRaj57). Your move, Congress.   (The opinions expressed here are those of the author, a columnist for Reuters.)

Posted by Allen Heffler 07/24/2014 New for 2015- Medicare Part D Standard Benefit Model Announced Recently Announced by CMS 2015 Medicare Part D Standard Benefit Model Plan Details Below are the highlights for the CMS defined Standard Benefit Plan changes for 2015 compared to 2014. This Standard Benefit Plan is the minimum benefit allowable plan to be offered.

• Initial Deductible: For 2015- Increased to $320 (in 2014, it was $310, an increase of $10)
• Initial Coverage Limit: For 2015- Increased to $2,960 (in 2014, it was $2,850, an increase of $110)
• Out-of-Pocket Threshold:

For 2015- Increased to $4,700 (in 2014, it was $4,550, an increase of $150)

• Coverage Gap (donut hole): Starts when you reach your Medicare Part D plan’s initial coverage limit of $2,960 (in 2015) and ends when you spend a true out of pocket total of $4,700 (in 2015.)
• NEW FOR 2015! In 2015, Part D enrollees will receive a 55% discount on the total cost of their brand-name drugs purchased while in the donut hole. The 50% discount paid by the brand-name drug manufacturer will still apply to getting out of the donut hole, however the additional 5% paid by your Medicare Part D plan will not count toward your TrOOP. Enrollees will pay a maximum of 65% co-pay on generic drugs purchased while in the coverage gap.
• Minimum Cost-sharing in the Catastrophic Coverage Portion of the Benefit**: will increase to greater of 5% or $2.65 for generic or preferred drug that is a multi-source drug and the greater of 5% or $6.60 for all other drugs in 2015
• Maximum Co-payments below the Out-of-Pocket Threshold for certain Low Income Full Subsidy Eligible Enrollees: will increase to $2.65 for generic or preferred drug that is a multi-source drug and $6.60 for all other drugs in 2015

Part D Standard Benefit Design Parameters:	2015	2014
Deductible – (after the Deductible is met, Beneficiary pays 25% of covered costs up to total prescription costs meeting the Initial Coverage Limit.	$320	$310
Initial Coverage Limit – Coverage Gap (Donut Hole) begins at this point. (The Beneficiary pays 100% of their prescription costs up to the Out-of-Pocket Threshold)	$2,960	$2,850
Total Covered Part D Drug Out-of-Pocket Spending including the Coverage Gap – Catastrophic Coverage starts after this point.See note (1) below.	$6,680.00 (1) plus a brand discount of 55%	$6,455.00 (1) plus a brand discount of 52.50%
Out-of-Pocket Threshold – This is the Total Out-of-Pocket Costs including the Donut Hole. 2015 Example: $320 (Deductible) +(($2960-$320)*25%) (Initial Coverage) +(($6680.00-$2960)*100%) (Cov. Gap) = $4,700 (Maximum Out-Of-Pocket Cost prior to Catastrophic Coverage – excluding plan premium)	$4,700 $320.00 $660.00 $3,720.00 $4,700.00	$4,550 $310.00 $635.00 $3,605.00 $4,550.00
Total Estimated Covered Part D Drug Out-of-Pocket Spending including the Coverage Gap Discount (NON-LIS) See note (2).	$7,061.76	$6,690.77
Generic/Preferred Multi-Source Drug (3)	$2.65 (3)	$2.55 (3)
Other Drugs (3)	$6.60 (3)	$6.35 (3)
Part D Full Benefit Dual Eligible (FBDE) Parameters:	2015	2014
Deductible	$0.00	$0.00
Copayments for Institutionalized Beneficiaries	$0.00	$0.00
Generic/Preferred Multi-Source Drug	$1.20	$1.20
Other	$3.60	$3.60
Above Out-of-Pocket Threshold	$0.00	$0.00
Generic/Preferred Multi-Source Drug	$2.65	$2.55
Other	$6.60	$6.35
Above Out-of-Pocket Threshold	$0.00	$0.00
Part D Full Subsidy – Non Full Benefit Dual Eligible Full Subsidy Parameters:	2015	2014
Deductible	$0.00	$0.00
Generic/Preferred Multi-Source Drug	$2.60	$2.55
Other	$6.60	$6.35
Maximum Copay above Out-of-Pocket Threshold	$0.00	$0.00
Partial Subsidy Parameters:	2015	2014
Deductible	$66.00	$63.00
Coinsurance up to Out-of-Pocket Threshold	15%	15%
Generic/Preferred Multi-Source Drug	$2.65	$2.55
Other	$6.60	$6.35

Posted by Allen Heffler 07/23/2014 Medicare- Risks In Retirement: Don’t Forget About Health Care Costs What’s the biggest risk to your financial security in retirement? Whenever I ask that question, what I hear most often is that people are concerned about whether or not their money will last. Many pre-retirees don’t budget for unexpected medical expenses that can pose a threat to their retirement income plan. The Employee Benefit Research Institute estimates that a 65-year-old couple retiring today with median prescription drug expenses needs $151,000 (in today’s dollars) to have a 50 percent chance of meeting their health care costs in retirement, not including long-term care costs. A couple with $255,000 in savings would have a 90 percent chance of covering those costs. Why the Disconnect? In my experience, many pre-retirees mistakenly believe that Medicare, the federal health insurance program for those aged 65 and older, will cover the vast majority of their health care expenses in retirement. Not so. In reality, Medicare doesn’t cover many of the health care expenses older Americans use most. I’m talking about vision and dental care, hearing aids and eyeglasses. And Medicare Part D plans vary widely when it comes to prescription coverage. I remember feeling sticker shock when I helped my mom and stepdad pay their monthly pharmacy bill. Millions of Americans take blood pressure, diabetes, arthritis and other commonly prescribed medications to stay healthy and out of the hospital. These aren’t health care costs you can dial back on to save money. Perhaps more significantly, Medicare pays only for a limited amount of supportive care services. It covers up to 100 days of care in a nursing home (skilled nursing facility) only after you have spent three days in the hospital and as long as you need skilled nursing care. In some cases, Medicare will cover home health care, but eligibility requirements are strict, and Medicare typically approves coverage of only a limited number of hours per week. As I learned in my own family, those distinctions can be costly. When my stepdad fell and broke his arm, he needed rehabilitation after his hospital stay. Medicare covered a good chunk of his nursing home bill. However, when my mother’s Parkinson’s disease progressed and she required care, Medicare would not even consider covering her nursing home expenses since she did not have a qualifying hospital stay. A Potential Drain on Your Retirement Income Many people also assume that Medicare is free. Part A is; the government provides Medicare hospital insurance at no charge once you reach age 65, assuming you or your spouse paid Medicare taxes during your working years. But you’ll pay a premium for Medicare Part B (medical insurance for doctors’ services, physical therapy, outpatient hospital care and other services), a premium for Part D (prescription drug coverage) and a premium for any supplemental coverage you may choose to get. Even without the threat of serious illness, premiums, deductibles, co-pays and out-of-pocket health care costs are likely to take a significant bite out of your retirement income. And when you also consider that health care costs are rising faster than the rate of inflation, it’s not surprising that health care costs can quickly become the largest single drain on your retirement income, especially later in retirement when you’re likely to consume more medical services. This is why I encourage you to ask yourself the following questions: How prepared am I for the potential health care costs that could impact my retirement savings and income? How will I pay for health care if I live 30 or 40 years or even longer in retirement? And what impact will those expenditures have on the legacy I hope to leave to my children and grandchildren? The best way to manage and protect your retirement income is to plan ahead. That means having a realistic picture of what health care is likely to cost you in the future and incorporating that into your overall retirement plan. Why Expert Help Makes a Difference This is where a financial professional can help. And by financial professional, I mean more than someone who simply buys and sells investments. You want an experienced professional with the retirement income planning experience necessary to help you estimate your potential health care costs and help you plan for them. This includes finding the best way to supplement Medicare as well as protecting your wealth against other retirement risks—such as long-term care expenses in the future. Article Written by Rebekah Barsch, who  is executive officer and vice president of Planning and Sales at Northwestern Mutual.

Posted by Allen Heffler on 07/21/2104 Mysteries of Medicare:  Eligible for Medicare, but have coverage through an employer’s group health plan? http://www.dailylocal.com/lifestyle/20140707/mysteries-of-medicare-eligible-for-medicare-but-have-coverage-through-an-employers-group-health-plan