Trump Payroll Tax Deferments Make No Sense, Unless the Goal is to Attack Social Security

President Donald Trump’s executive order to defer Social Security payroll taxes for the last four months of 2020 takes effect tomorrow. I have not read any expert’s take on this that is favorable, so if you know of any positive punditry, please send me links, and I add them to the bottom of this post.

The rationale for the deferments is the inability of Congress to enact further economic relief for people who’ve lost their jobs or seen their incomes cut by the pandemic. Of course, Trump is hardly a casual bystander to this impasse, having done very little to convince Senate Republicans to come to the negotiating table. House Democrats long ago passed a big stimulus package, and the issue will be one of many contentious issues of the 62 days of scorched-earth election rhetoric until November 3.

The primary group of people needing relief are those with no jobs. Even a temporary payroll tax cut makes no sense to them. They’re not paying any such taxes right now, so how can a reduction in what they’re not paying be of any help? Arguing that employers who are freed of payroll tax obligations would decide that lower payroll costs made it sensible to re-employ people is a stretch.

Having to repay any deferred taxes next year further stretches the credulity of Trump’s action. There has been talk of somehow making the cuts permanent, but taxation is a power reserved to Congress, not the White House. That’s why the best Trump can do is impose temporary cuts. And make them voluntary. There is no assurance that very many employers will take him up on this Apprentice-like offer.

Given the poor targeting of this stimulus and its temporary nature, many critics (and, yes, they’re overwhelmingly Democrats) say the true reason for Trump’s order is to reduce revenues flowing into Social Security and weaken its ability to pay future benefits from the Social Security trust fund.

If you are trapped at home and starving for mental activity, you can find out everything you need to know about the trust fund by reading the The 2020 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. These people do seem to get paid by the word, don’t they?

The key take away for today’s discussion is that payroll taxes from current employees fall short of paying the benefits that people are entitled to receive. Trust fund surpluses make up the difference, and will be sufficient to permit the program to pay full benefits until 2035. At that time, the SSA carriage turns into a pumpkin, and current payroll taxes are projected to cover only 79 percent of benefits.

Shortening the funds’ solvency periods (there are separate ones for retirees and beneficiaries with disabilities) makes the program vulnerable to the kinds of emergency changes that often bypass the thoughtful analysis that Social Security merits. Covering shortfalls out of general revenues, for example, would end the program’s historical self-reliance on payroll taxes. Requiring program administrators to come asking for money every year would deny retirees the certainty of knowing and planning for their future benefits.

It’s irresponsible to project such a dire outcome from Trump’s executive action. As in so many other areas of government, however, taking a chisel and hammering out even small chinks from the foundation of key government programs makes no sense. Except if the goal is to weaken or end them.

Social Security Q&A

I periodically post answers to reader questions. Email yours to philsquestions@gmail.com. I will let you know if I answer yours.

Diana – Minnesota: I’m 71 and my ex-spouse is 67. I began drawing Social Security at age 62, and don’t know if my ex-spouse has begun drawing his Social Security or not. How should I proceed in order to apply for and receive ex-spousal benefits? And what benefit should I expect? Would it be based on his FRA (full retirement age) benefit, even though he hasn’t reached that age? It sounds as though accurate information isn’t always given by people who work for Social Security. Thank you for information and your guidance!

Phil Moeller: If you have been divorced for more than two years, you can apply for an ex-spousal benefit even if your ex- has not filed for Social Security.

Your benefit will be tied to his FRA benefit. However, because you filed for your own Social Security at 62, your ex-spousal entitlement will be much less than half of this FRA benefit. And if it turns out to be less than what you’re already receiving, you would get no additional payment.

People often don’t think about the implications of how filing early for Social Security might affect their future entitlements.

People often don’t think about the implications of how filing early for Social Security might affect their future entitlements to other Social Security benefits.

While not wishing any ill will on your former husband, I should also note that the age at which you filed for your own benefits will not reduce your ex-survivor benefits should your former husband die before you.

If this happens, you would be entitled to receive an amount of money equal to the Social Security benefit he was receiving at the time of his death. If he had not yet filed when he died, Social Security would calculate your benefit as if he had filed on the day of his death.

Because you are already drawing your own Social Security, you would receive an additional payment equal to the amount by which his benefit exceeded yours.

Lee – Virginia: I had to file for Social Security at 62. I am 68 now. I was with my ex-husband for 13 years. I’m working full-time at a very good job but have serious medical issues. How do I find out if I can claim spousal benefits? He is about 60 years old or dead.

Phil Moeller: If he is still alive, he is too young for you to claim am ex-spousal benefit. He needs to be at least 62 and have filed for his own benefit or, if he has not filed, you need to have been divorced for at least two years.

If he is dead, however, you can file for an ex-spousal survivor benefit. The Social Security Administration maintains national death records. If you have your ex’s Social Security number, you should be able to call Social Security and explain that you’d like to file for an ex-spousal survivor benefit if your ex- has, in fact, died. You may need to go into an office to actually file for this benefit and bring records of your marriage and divorce.

As with Diana, if it turns out that you are eligible to file for an ex-survivor benefit, your additional benefit would equal the amount by which his benefit exceeded yours.

Rita: I worked at a business owned by my uncle. He deducted Social Security payroll taxes from my paycheck, but I later found out that he didn’t send my deductions to Social Security! (Yes, he pocketed the money.) He is in poor health, not coherent, and in his 90s.

His deceit leaves me four quarters short of eligibility for Social Security. What can I do to claim Social Security benefits? I’m in my 70s and do not want to work more quarters.

Phil Moeller: Wow, this is such a tough situation, and I really don’t have a sure-fire solution for you. Taking legal action against your uncle clearly is not an option, although if someone has power of attorney to make financial decisions for him, I’d call them and see if there’s any chance they would make things right with Social Security.

Were this me, I would look for copies of paystubs showing that payroll taxes were deducted from your pay. I would then take these to your local Social Security office and make a plea for reconsideration of your eligibility.

I am sorry you got such a bad deal. Please let me know how things turn out.

How to See All of Health Spending

The U.S. spends roughly twice as much per person on health care as any other developed country. The total bill in 2018 was $3.6 trillion. There are lots of reasons for this but one of the major drivers is that people who use health care – that’s us – don’t know what it costs and in most cases are prevented from finding out.

This is no accident. Over the past several decades, health care providers – hospitals, doctors, drug companies, and medical equipment providers – have done a terrific job of hiding the true costs of their charges. They have been aided in this effort by health insurance companies, which wind up paying for this stuff.

Here’s a more detailed look:

2018 National Health Spending ($ billions)
Total Out of Private Medicare Medicaid
Pocket Health Ins.
Personal Health Care 3,075.0 375.6 1,078.7 697.2 532.8
Hospital Care 1,191.8 34.8 481.1 297.0 196.6
Physician and Clinical Services 725.6 61.2 311.8 170.2 77.4
Other Professional Services 103.9 26.1 35.1 27.2 7.5
Dental Services 135.6 54.9 62.2 1.2 12.8
Other Health, Residential,
     and Personal Care 191.6 6.8 13.6 4.9 111.1
Home Health Care 102.2 10.2 12.2 40.3 35.9
Nursing Care,
     Retirement Communities 168.5 44.8 17.1 38.1 49.9
Retail Outlet Sales
     Prescription Drugs 335.0 47.1 134.3 107.2 33.4
     Durable Medical Equipment 54.9 25.5 11.3 8.9 8.1
     Other Non-Durable Medical 66.4 64.2       – 2.1     –
Source: Centers for Medicare & Medicaid Services

About half a trillion in health spending is involved in research and other charges that don’t directly affect consumers. Of the nearly $3.1 trillion spent on personal health care, you might notice, only about one in every eight dollars comes directly out of our pockets. The rest is paid by either private or government insurance programs.

Health provider bills often are grossly inflated and bear little relationship to the costs of providing care. Insurers negotiate final payment rates, but have lots of reasons for not driving a very hard bargain. They often have favored business relationships with key providers and, in some cases, may even own the providers’ businesses!

Spend a few minutes with these numbers, and you’ll be able to see where insurance helps and where it doesn’t. For example, consumers spent almost nothing out of pocket for hospital care, which cost nearly $1.2 trillion in 2018, and they directly paid for only about 8 percent of their nearly $700 billion in doctors’ bills.

On the other hand, out-of-pocket spending on dental services is more than 40 percent of total spending. And consumers pay nearly all the costs for non-durable medical supplies, which include over-the-counter medications, health aids and other items generally not covered by insurance. The ability of health providers to hide true medical costs has increased over time. Look at this graphic of research from the Kaiser Family Foundation, a leading provider of solid health care information.

Direct out of pocket health spending has fallen precipitously during the past 50 years. Because we pay for such a small share of their health care, we have not cared much about what that care really costs. Many health care experts have adopted a similar view, saying that providing real price information to consumers may not affect how they consume health care.

These attitudes are changing. The introduction of high-deductible health plans and other health insurance “light” products have made millions of consumers very conscious of health care costs. Surprise medical bills not covered by insurance have also alarmed consumers.

Yet in most cases, when consumers do take the time to try to find out what their care costs, they often hit dead ends. Beyond office co-pays, even many doctors and health care professionals have only a loose idea of the real price tag for their services. In many cases, there is no “real” price. It varies depending on where the care is provided– hospital vs. office—and who is paying for it–commercial insurance vs. Medicare vs. no health insurance.

Slowly, however, transparency is coming to health care prices. The Trump Administration issued rules requiring hospitals to disclose their actual prices. The industry has sued but early court rulings have supported implementation of the new rules.

Most large employers are self-insured and use health insurers to administer their employees’ plans. They wind up paying all the bills and have the potential to see what providers charge and what insurers wind up paying for care. Increasingly, they’re using this information to drive down costs and identify higher-quality care providers.

How Medigap Supplement Plans Work

More than 10 million people buy Medigap policies each year along with basic Medicare (Parts A and B) and, for most, a Part D prescription drug plan. Depending on the kind of plan they purchase, Medigap will pay most or even all the expenses covered by Medicare which are not fully paid by Parts A and B. The biggest gap is that Part B of Medicare pays only 80 percent of covered expenses.

There are 11 different Medigap choices designated by different letters of the alphabet. Coverage of all plans with the same letter are identical  and are set by federal rules. Prices, however, are overseen by state insurance rules, and can vary greatly. Once you’ve determined the best letter plan for you, shopping for the lowest price is the best tactic.

More than 60 percent of Medicare beneficiaries have basic Medicare, and more than 35 percent of enrollees instead choose Medicare Advantage plans. Medicare Advantage enrollees aren’t permitted to buy Medigap plans and, in fact, don’t really need them. This is because MA plans have their own out-of-pocket ceilings that protect people from paying more than $6,700 a year, excluding premiums, for Part A and B expenses that their insurance does not fully pay. Plans are allowed to set ceilings of less than $6,700 and, while some do, more and more plans are employing the maximum ceiling permitted by Medicare.

Most likely, more people would buy Medigap plans if they could afford the monthly premiums, which easily can rival the $144 monthly premium that most people have to lay out for Part B of Medicare before they can buy a Medigap plan. The other key limitation for Medigap plans, explained in helpful and needed detail in a report from the Kaiser Family Foundation, is that these policies often lack the protections afforded to buyers of other types of Medicare coverage.

If someone wants to buy a Part D drug plan or a Medicare Advantage plan, they are guaranteed that insurers selling such plans where they live must sell them a plan without raising rates or penalizing them for their age or pre-existing health conditions (there are exceptions, most notably for smokers).

These guaranteed rights also extend to existing Medicare enrollees who want to change Medicare plans during the annual open enrollment period that runs from Oct. 15 through Dec. 7. Being able to freely switch Part D plans and Medicare Advantage plans — or to switch from basic Medicare to Medicare Advantage or vice versa — is a terrific tool for consumers that helps not only them but, by stimulating competition, all Medicare beneficiaries.

Federal rules do provide guaranteed issue rights for Medigap purchasers when they are new to Medicare and in some circumstances when they switch between Medicare Advantage and basic Medicare. The devil really is in these details, so I will forever be referring people to a table in the Kaiser report (see the link above) that explains the exact conditions under which people have guaranteed issue rights to Medigap plans.

However, once the six-month period of federally mandated rights has passed, state rules take over determining the rights people have if they wish to buy new Medigap plans. Here, the Kaiser table of state-by-state rules is invaluable. It should be a mandatory stop for anyone thinking about the role of Medigap in their Medicare plans.

Only four states – Connecticut, Massachusetts, Maine, and New York – extend guaranteed issue rights to Medigap for everyone age 65 or older. The other 46 states and the District of Columbia all have prohibitions and wrinkles, including three states – Massachusetts, Minnesota, and Wisconsin – that sell only one or two types of Medigap plans and depart from the 11 “letter” plans allowed under federal rules.

In most states, people can face higher Medigap rates or even coverage denials if they try and buy plans once their period of guaranteed issue rights has expired. Insurance brokers regularly tell me that this possibility is seldom the case and that people in their states have no problem switching plans without difficulty and without getting hosed by higher premiums. I have not seen hard data on such conversion experiences, and regularly tell readers to test the market for new policies in their state before they switch into or out of a Medigap plan during open enrollment.

However, I suspect that fear of a possible problem makes many Medigap policyholders resistant to change. This situation cancels out the possible benefits of open enrollment, and likely costs these folks both potentially improved insurance benefits and some money.

Another problem with Medigap access rights is that the federal standards do not apply to more than 9 million disabled Medicare beneficiaries who are younger than 65. About 60 percent of the states do provide limited Medigap rights to this group. However, only 5 percent of Medicare enrollees younger than 65 had Medigap plans in 2015, according to the Kaiser report.

Kaiser’s policy experts mention some possible policy fixes to expand the availability of Medigap, including expanding guaranteed issue rights for younger disabled enrollees and people who want a Medigap plan when they switch out of Medicare Advantage plans into basic Medicare.

They also note that creating an annual open enrollment period with guaranteed issue rights for Medigap plans would put them on an equal footing with other private Medicare insurance plans.

“A different approach altogether,” the report concludes, “would be to minimize the need for supplemental coverage in Medicare by adding an out-of-pocket limit to traditional Medicare.”

 

 

Working after 65? What you need to know about employer insurance and Medicare

With so many people continuing to work once they turn 65, the interaction of employer insurance and Medicare is important and often confusing. It’s at the top of my list of reader questions, with most coming from people who are or soon will be eligible for Medicare. Here’s what they want to know:

  • My employer tells me it will force me to get Medicare. Can they do that?
  • I don’t plan to stop working, and I like my employer health insurance. Do I need to get Medicare?
  • I don’t plan to stop working, and I hate my employer health insurance. Can I get Medicare?
  • My employer says they’ll help pay for my Medicare if I will drop my employer insurance. What’s allowed?

Medicare has different rules for employer health insurance plans depending on whether the plans cover more or fewer than 20 employers. We’ll call them “large” and “small” plans here. Even workplaces with fewer than 20 insured employees may qualify as large plans if they’re linked up with a multi-employer group plan. I’ve reviewed these rules carefully with Medicare.

Large vs. small employers

If you work at a small employer plan, your employer is permitted to require you to get Medicare when you turn 65. At that time, Medicare will become your primary health insurer. Your employer also has the option to cancel your workplace plan or retain it as a secondary payer of covered insurance claims. This distinction is important because it can affect the package of Medicare plans you may need, especially whether you need a Medigap supplement plan.

It can be a smart financial move to get Medicare, in addition to employer coverage or in place of it.

If you work at a large employer plan, your employer cannot treat you differently than younger employees. You and, if applicable, your spouse, must continue to be offered employer health insurance. These rules are very clear. If an employer with a large health plan tells you that you must get Medicare at age 65, it is breaking the law. The single exception is for people turning 65 who have end-stage renal disease; they can be required to get Medicare.

Employees with access to large employer-sponsored plans do not have to get Medicare, but they may do so if they wish. Historically, employee plans were so comprehensive and affordable that it seldom made sense for someone to get Medicare. However, rising health care expenses have led many employers to reduce the percentage of the coverage they pay, with many adopting high-deductible plans.

Some high-deductible plans require people to fork over the gross national product of Whatsupistan before their insurance kicks in. For these folks, it can be a smart financial move to get Medicare, either in addition to their employer coverage or in place of it.

Anyone considering this decision should contact their employer plan. They should ask two primary questions:

  1. Can I drop employer coverage? (If so, please provide me details of any adverse consequences.)
  2. If I keep employer coverage, does it continue as the primary payer of covered insurance claims?

Some plans disallow employees from re-enrolling if they drop coverage. As for which insurance plan pays first, the distinction between whether a plan is the primary or secondary payer of claims can have enormous consequences for your wallet and your peace of mind.

Where a person has more than one health insurance plan, “coordination of benefits” issues can become complicated and important.

Medicare’s basic rules

Here’s a rundown of rules, pulled from the current edition of “Medicare & You”:

  • If you have retiree insurance (insurance from your or your spouse’s former employment), Medicare pays first.
  • If you’re 65 or older, have group health plan coverage based on your or your spouse’s current employment, and the employer has 20 or more employees, your group health plan pays first.
  • If you’re 65 or older, have group health plan coverage based on your or your spouse’s current employment, and the employer has fewer than 20 employees, Medicare pays first.
  • If you’re under 65 and have a disability, have group health plan coverage based on your family member’s current employment, and the employer has 100 or more employees, your group health plan pays first.
  • If you’re under 65 and have a disability, have group health plan coverage based on your or a family member’s current employment, and the employer has fewer than 100 employees, Medicare pays first.
  • If you have Medicare because of End-Stage Renal Disease (ESRD) your group health plan will pay first for the first 30 months after you become eligible to enroll in Medicare. Medicare will pay first after this 30-month period.

An earlier column provides additional details on employee health coverage for those eligible for Medicare. I’ve also written an explanatory piece on the circumstances under which someone with Medicare can be denied continued participation in a health savings account, including the usually unintentional disqualification that occurs when a person claims Social Security benefits.

Can an employer help with Medicare costs?

The issue of whether an employer can provide financial assistance for an employee’s Medicare expenses is very clear for large employer plans but can be fuzzy for small employer plans.

In the case of large employer plans, the answer is an unequivocal “no.”

Here’s the language from Medicare’s official rules. (To avoid confusion, group health plans, GHP, and large group health plans, LGHP, are Medicare terms that both relate to plans with 20 or more covered employees.)

An employer or other entity is prohibited from offering Medicare beneficiaries financial or other benefits as incentives not to enroll in or to terminate enrollment in a GHP or LGHP that is or would be primary to Medicare. This prohibition precludes the offering of benefits to Medicare beneficiaries that are alternatives to the employer’s primary plan (e.g., prescription drugs) unless the beneficiary has primary coverage other than Medicare. An example would be primary plan coverage through his/her own or a spouse’s employer. This rule applies even if the payments or benefits are offered to all other individuals who are eligible for coverage under the plan. It is a violation of the Medicare law every time a prohibited offer is made regardless of whether it is oral or in writing. Any entity that violates the prohibition is subject to a civil money penalty of up to $5,000 for each violation.

If you work at a place with a large employer health plan, it is illegal for your employer to offer you any inducement to get Medicare and drop the employer’s plan. Based on my mailbag, such illegal offers are not uncommon. While you may find the offer attractive, just keep in mind that it’s not allowed.

It is illegal for some employers to offer you any inducement to get Medicare and drop the employer’s plan.

The story with small health plans is not so clear. In some cases, providing employees with financial help for their Medicare expenses is just fine. Given that employees at such firms have to get Medicare anyway, such supportive arrangements are more understandable than for employers with large health plans.

However, employers wishing to provide such subsidy programs have to be careful to make sure their offers are properly constructed. These rules are contained in IRS Notice 2015-17, which is written in language only a lawyer charging high fees could love. Here’s the “simplified” version provided by a Medicare spokesperson:

In order for the small employer with less than 20 employees to reimburse their employees for their Medicare Parts B and D and Medigap premiums, the following conditions must be met:

  • The employer offers a group health plan (other than the Health Reimbursement Account (HRA), Flexible Spending Account (FSA) or Health Savings Account (HSA)) to employees who are not eligible for Medicare;
  • Funding for the employees enrolled in Medicare should be made through an HRA (or FSA or HSA);
  • The employee receiving the payment through the HRA (or FSA or HSA) is enrolled in Medicare Part B or D;
  • The HRA (or FSA or HSA) is available to all employees who are enrolled in Medicare Part B or D; and
  • Under the terms of the HRA (or FSA or HSA), the employee (or former employee) is permitted to permanently opt out of and waive future reimbursements from the HRA (or FSA or HAS) at least annually in which case the right to receive funds is forfeited.

 

Why You Shouldn’t Be Afraid to Talk to Your Health Insurer

Here’s a shocker: Consumers are wary of contacting their health insurers. It’s a good bet they’ve been conditioned by their own experiences, stories from friends, and the seemingly endless news stories about insurers who deny health claims. Whatever the reasons, many of the readers who pose questions to me would do just about anything to solve their health problems – except talk to their health insurers.

This may be understandable, but it can be a big mistake. Your health insurer knows more about your coverage than anyone, including the often inscrutable rules about what’s covered and how much you pay for coverage in premiums, annual deductibles, co-pays and the like.

Such confusion can be multiplied in Medicare, which has different deductibles and copays for hospital stays, doctors’ visits, outpatient expenses, medical equipment and prescriptions that are covered by the four parts of Medicare.

Another shocker? Most health insurers have been improving their customer service skills in their phone centers and on increasingly helpful websites.

Here’s a story I first wrote about last year, but it remains relevant today. It may appear to be a rare “good news” story about a health insurer, but I think it’s only rare because reporters are trained to write about what goes wrong, not what’s working the way we expect. If you want more happy-time reports, you can find plenty of them on insurer websites.

Jim and Melissa live in North Carolina. They had been covered on that state’s insurance exchange, set up under the Affordable Care Act. Their coverage was with BlueCross BlueShield of North Carolina.

Jim had just turned 65 and was told (correctly) that he needed to move off the exchange and get Medicare. So far, so good. Melissa is younger and thus needed to stay on the exchange, but she had to find a new plan that only covered her, not both her and Jim.

This would not have been a big deal except Melissa had been diagnosed with breast cancer and was facing a year of chemotherapy following a recent double mastectomy. She faced a tough road to recovery and the couple faced some big medical bills regardless of how well their insurance coverage protected them.

When Blue Cross switched Melissa to her new exchange plan, Jim says, the insurer determined that the amount she had paid toward her deductible would not roll over to her new plan. The couple had already paid her 2019 individual deductible of $6,750. Faced with the need to start over again, she would have to pay another $6,750 before her insurance coverage kicked in later this year.

Jim was distraught, and wrote me:

“It doesn’t seem right that we have to pay her individual deductible twice this year, for an individual deductible of $13,500, when the insurance is covering the same person with the same risks with the same benefits. Why does Medicare, the Affordable Health Care Act, and BlueCross BlueShield place this burden on sick, elderly couples? What is my recourse to change this sad situation?

I have already talked to Healthcare.gov about this issue. Its representatives tell me, ‘It’s not against the law. The insurance companies do it all the time.’ Is my only recourse to sue the insurer and hope that a jury will see things my way? Isn’t there any other path to contest these actions?”

When I wrote back to Jim, I thought BlueCross BlueShield had acted legally although perhaps not ethically.

Fortunately, Jim didn’t stop there. He picked up the phone and called the insurer. Good move! Here’s what he said happened:

“It turns out that, after everyone else said there was nothing I could do, I spent a couple hours on the phone with BlueCross BlueShield of North Carolina. To my great surprise and satisfaction, the agent put together a request that my wife’s individual deductible be carried over to the new plan.

Today, picking up medications at the pharmacy, I noticed that I paid nothing for my wife’s prescription. When I got home, my wife checked her account online and saw that her deductible was carried over to her new policy! I am very grateful to BCBSNC for doing the right thing. I only wish the folks at HealthCare.gov had suggested that I call BCBSNC right away.”

This happy ending to Jim and Melissa’s insurance nightmare is not a blanket endorsement for all health insurers or even that BlueCross BlueShield will always “do the right thing.”

But it is an endorsement for calling your private health insurer for questions beyond routine care. It’s usually a good thing to do so even before you need care or file a claim because doctors don’t always check to make sure your insurance covers a procedure before ordering it. While this can seem like a hurdle to getting the care you need, that’s not what I’ve seen.

The coverage that insurance plans commit to provide is not going to change all of a sudden. Just the opposite. If the care you need has been prescribed by a doctor or other licensed health professional and is covered by your policy, contacting your insurer and creating a record of your care needs can be a strong point in contesting any subsequent claim denial.

And while getting stuck in an insurer’s phone-tree labyrinth can happen, you should be able to connect with a human being eventually. What they tell you might just be helpful.

 

Do You Know SDOH? You Should

Health insurers are slowly adopting their plans to include coverage of certain non-medical expenses that have been shown to improve their health. A leading example would be installation of bathroom grab bars to prevent falls, a leading cause of serious injury among older Americans.

Another example is delivering healthy meals for a week or two to people who’ve been released from a hospital after a serious injury or health condition. It’s hard for people to cook for themselves, let alone get out to shop for nutritious food. Being well-fed for two weeks can help speed their recoveries.

Paying for people to take a Uber or Lyft to a medical appointment is another popular example of what is broadly known as coverage of social determinants of health – hence the SDOH of today’s headline.

In the real world, the logic of SDOH is obvious. Spending a little bit of money know can save huge amounts in future medical bills while adding greatly to a person’s quality of life. For all the money we spend on health, medical care is responsible for only about 20 percent of our wellbeing. The other 80 percent is tied to income, housing, food scarcity, and other behaviors.

Reflecting this knowledge in an insurance product is seldom obvious and often very difficult. Not that we’re likely to forget, but private health insurers make a lot of money, so expecting them to suddenly provide a grab bag of new benefits is not going to happen.

What is happening, perhaps too slowly, is that health insurers are looking at their most costly customers. In any given year, more than 20 percent of national health spending is generated by 1 percent of those with insurance. The problem, of course, is that a substantially different 1 percent may generate 20 percent of next year’s spending, and so on.

Figuring out ways to reduce spending by the sickest customers is hardly charity; it can translate into huge savings for insurers, higher profits and happy shareholders. Increasingly, these ways include SDOH. Most programs involve low-income Medicaid and Medicare beneficiaries.

Humana launched an effort earlier this year that reimburses hospitals and other health systems for referring Medicare Advantage customers to food banks and housing assistance programs.

United Healthcare is testing a housing support program, according to a story in the Philadelphia Inquirer. The company’s Medicaid plan, UnitedHealthcare Community Plan of Pennsylvania, screens homeless Medicaid patients with high health spending and tries to find housing for them.

“Many of the people we serve,” the plan’s chief executive Allison Davenport told the newspaper, “experienced such instability that their health care becomes intractable. It compounds, it compounds, it compounds and they can’t address that in a completely unstable situation.”

In a 2019 study, researchers found that more than 52 percent of adults between the ages of 50 and 80 experienced what was described as severe food insecurity – “meaning they sacrificed the quality or amount of food they consumed because they lacked sufficient resources.”

Medicare has stepped up its emphasis on SDOH programs through what it’s calling its Accountable Health Communities Model, which partners with community health organizations to identify people with unmet social needs linked to poor health outcomes.

The numbers of people involved in these efforts is very small and there’s no guarantee they will rise enough to make a dent. Thanks to the pandemic, of course, these unmet needs have become even larger this year.

Starting small, however, is what cautious health insurers do. These early efforts will capture spending data and begin identifying benefits linked with the greatest health improvements.

As with other trends that began with government programs, expect SDOH successes to find their way into employee insurance programs over time. The same insurers who manage Medicaid and Medicare plans also oversee employer plans.

Bit by bit, they will add to a snail-like transition that health insurance knows it needs to make, moving to what is truly health insurance from something that, despite its name, is now just really sickness insurance.

 

 

How One Health Hero Fights Back

Many Americans regularly suffer unfavorable decisions that affect their health benefits, but Anna Landre has proven herself to be a formidable opponent to what many see as a dysfunctional health care system.

The 21-year-old, who was valedictorian of her high school, has earned strong grades during her three years at Georgetown University while living with a significant disability — spinal muscular atrophy. I wrote about Anna last year and have kept up with her. Her story is included in my new book due out next January, Get What’s Yours for Health Care – How to Get the Best Care at the Right Price.

Landre has been coping with the genetic disorder since birth and relies on extensive on-site help. She has a health aide with her 16 hours a day — 10 hours each evening and six hours during the day. She needs help with all daily activities and often requires assistance at night to improve her breathing and move her to a more suitable position in bed. She has been able to live on campus and attend classes, aided by a motorized wheelchair.

Even with on-site help for much of the day, trying to lead a semblance of a normal life is challenging. Her course work had to be rearranged because she can only attend classes when an aide is present. “It would be nice to be able to have someone with me all the time,” she said in a phone interview. “God forbid that I could go to the bathroom whenever I want!”

The company that administers Medicaid on behalf of New Jersey, Horizon NJ Health, informed her in 2018 that it would reduce the number of weekly hours of care covered by her insurance from 112 to 70. Cutting the hours of care by more than a third threatened to end Landre’s dreams of getting a college degree and, later, leading an independent life.

The company told Landre the change stemmed from periodic nursing assessments it does to evaluate needed benefits. Using a benefits evaluation tool created by the state, Horizon NJ Health found Landre needed less than 10 hours of help a day.

Landre said neither the insurer nor the state ever explained to her why her hours had previously been approved but then cut without any change in her condition. “I thought we all had agreed upon this amount of help throughout my college career, and that the insurance company and the state and me – all three parties – had agreed that this was going to work,” she said.

“They have these set ideas about what disabled people should and shouldn’t be allowed to do.”

Landre appealed the reduced coverage. A state administrative law judge reversed Horizon’s decision, but the New Jersey Department of Human Services, which oversees the state’s Medicaid program, then reviewed the judge’s decision, as required by law. It agreed with the company and said in late May that Landre’s benefit cuts would take effect.

The New Jersey Department of Human Services, which oversees the state’s Medicaid program, “didn’t care that I couldn’t live independently on the amount of hours that their evaluation tool kind of spit out,” Landre said. “It was really awful trying to fight that fight.”

Landre recalled that during her appeal, the insurance lawyer asked if she brought her aide to parties where she would drink. “And I said, ‘Absolutely not!’ But I was also thinking in the back of my head, what if I couldn’t lift a fork to my mouth to eat, or I couldn’t drive my own wheelchair and I did need someone to go to social events with me?” Landre said. “Would that somehow make me a criminal? They have these set ideas about what disabled people should and shouldn’t be allowed to do.”

A Horizon spokesman declined to discuss Landre’s case beyond saying that the company did not make New Jersey’s rules but simply carried them out in its coverage decisions, noting that the state had agreed with its decision to reduce her covered hours. A spokesman for the state said it did not comment on individual cases.

Once she was informed of that decision, Landre began developing a social-media campaign to fight back against adverse health insurance decisions.

The tweets generated an outpouring of support from the Georgetown community and disability rights groups. They also led to news stories in the Asbury Park Press, NJ.com, Forbes, and other online outlets. The insurer quickly reversed its position.

Landre said the terms of her revised agreement prevented her from discussing specifics. But she will be getting 16 hours of daily help during the rest of her college career.

The downside, Landre said, is that her success is specific to her case and does not change insurance coverage rules for other people with disabilities. Increasingly, knowledge-based jobs can be filled by people with disabilities, she said, but not if outdated insurance rules apply coverage restrictions that no longer reflect technological and workplace realities.

But Landre’s situation could serve as an example to others denied coverage. A government report from 2011 estimated between 39 percent and 59 percent of coverage denials are overturned on appeal.

 

Three Problems Causing Higher Health Costs

Add Dr. Marty Makary’s name to the expansive list of health care experts who are fed up with the system, don’t think we can afford to wait for Congress to enact reforms, and have useful ideas about how people can become healthier and perhaps save a bundle of money in the process.

A surgeon at Johns Hopkins in Baltimore and a widely published writer on health issues, Makary explained his take last fall on how to fix health care in his book, “The Price We Pay: What Broke American Health Care – and How to Fix It.”

His account began with an extended and emotional lament that many of his colleagues have abandoned the Hippocratic Oath in favor of charging inflated prices for surgeries and health procedures that are not in their patients’ best interests — or may not even be needed at all.

“Patients are willing to let me put a knife to their skin within minutes of meeting me, or to divulge secrets they’ve kept for a lifetime – just because I’m a doctor,” he writes. “For centuries, medicine was based on an intimate relationship between doctors and patients. But behind the scenes, a gigantic industry emerged: buying, selling, and trading our medical services. Health care industry stakeholders are playing a game, marking up the price of medical care, then secretly discounting it, depending on who’s paying.”

Makary’s research uncovered no shortage of bad actors in health care, including the Carlsbad Medical Center in New Mexico, which has sued thousands of people for unpaid medical bills in the last several years.

The company’s owner, Community Health Systems, has been repeatedly fined for overcharging patients. In a New York Times story about Makary’s research, a Carlsbad spokesperson defended its collection practices but declined interview requests. The hospital later said it would stop suing certain low-income patients and discount prices to uninsured patients.

While such horror stories make for interesting reading, Makary treats them as a perhaps-necessary prop to interest readers in paying attention to the solutions he and others propose. His goal in writing the book, he said in a phone interview, “has been to create health care literacy by taking a complex topic and making it relatable and understandable.” He does that by telling stories that highlight the tools people and businesses can use “to get a better deal on their health care.”

The book reflects Makary’s largely positive views about the future of health care as he lays out ways to deal with the system’s current shortcomings.

The three main health problems he addresses are health care pricing failures, middlemen who make huge profits on health care while adding little to patient well-being, and the enormous amount of inappropriate care that people receive. For each problem area, he tracked down people and companies doing innovative work to help lower costs and help people gain access to higher-quality care.

In one example, a former pharmacist used medication lists to find out how much money pharmacy benefit managers were pocketing for their services as an intermediary between employers and pharmacies. Once employers knew the difference, they were able to renegotiate their pharmacy benefit manage contracts and save “millions of dollars.”

“People blame doctors, hospitals, payers, pharma, device companies, and even patients for not taking better care,” he writes. “But the money games are so established and the revenue stream they produce is so steady that experts don’t want to discuss altering the business model. But every one of us in health care, every stakeholder, needs to look inward and address the waste in our own backyard.”

In other words, “there’s no diabolical villain,” he said on the phone. “We have, structurally, a broken system.”

Makary said the drivers of health care costs are hospitals, insurance companies, drug companies and other middlemen, such as pharmacy benefit managers.
“There are so many hands taking money out of the system that there’s no silver bullet solution to save money. To lower costs, we must take on the powerful stakeholders,” Makary writes.

Disclosing the actual costs of health care is a powerful start. This includes the often inscrutable prices charged by hospitals and other care providers but also should include the final prices – often negotiated sharply downward — that insurers and providers agree upon. Health care consumers usually only know their own out-of-pocket costs but these mask the inflated costs that insurers have paid for their care.

Makary’s advice: Ask for a price for every medical service you are considering. Doing so can help identify providers who take advantage of consumers by prescribing unnecessary tests and procedures that carry inflated price tags. “Price transparency alone will not solve all the problems of predatory screening and unnecessary medical care, but it could save the health care system hundreds of billions of dollars, Makary writes.

“Health care is perhaps today’s most divisive, territorial political issue,” the book concludes. “But many of the needed solutions are not partisan; they’re American. We are at a pivotal juncture. Spending on health care threatens every aspect of American society. The time for commonsense reform has arrived.”

Despite all the problems he encountered doing research for the book, Makary said, he wound up being optimistic that “good stuff is happening” and that “the innovators can help us dig out of our cost crisis.”

 

Social Security, Medicare Numbers to Know in 2020

Social Security

The Social Security COLA (cost of living adjustment) for 2020 is 1.6 percent. The average monthly benefit as of January was $1,503, up from $1,479 a year earlier.

Here are other key 2020 metrics:

Earnings ceiling for payroll taxes: $137,700, up from $132,900 in 2019.

Earnings test thresholds applied to wage earnings for beneficiaries: $18,240 a year, up from $17,640 in 2019, for those under full retirement age; $48,600, up from 46,920 in 2019, in the year an individual reaches full retirement age.

In 2020, the full retirement age became 67 for anyone born in 1960 or later. It is 66 for those born from 1943 to 1954, and rose by two months a year for those born between 1955 and 1959.

Here is Social Security’s explanation of how the earnings test may affect benefits:

Exempt Amounts for 2020
We determine the exempt amounts using procedures defined in the Social Security Act. For people attaining NRA after 2020, the annual exempt amount in 2020 is $18,240. For people attaining NRA in 2020, the annual exempt amount is $48,600. This higher exempt amount applies only to earnings made in months prior to the month of NRA attainment.

Benefits Withheld When Earnings Exceed Exempt Amounts
We withhold $1 in benefits for every $2 of earnings in excess of the lower exempt amount. We withhold $1 in benefits for every $3 of earnings in excess of the higher exempt amount. Earnings in or after the month you reach NRA do not count toward the retirement test.

Disability thresholds: $1,260 a month, up from $1,220 a month in 2019 for non-blind individuals; $2,110 a month, up from 2,040 a month, for blind individuals.

Supplemental Security Income federal payment standards: $783 a month, up from $771 a month, for individuals; $1,175 a month, up from $1,157 a month, for couples.

By law, Part B premiums must be deducted from Social Security benefits for Medicare-eligible enrollees who also have claimed Social Security.

 

Medicare

The standard monthly Part B premium is $144.60, up from $135.50 in 2019.

The Part B annual deductible is $198, up from $185.

The Part A hospital inpatient deductible, for up to a 60-day stay, is $1,408, up from $1,364.

Part A hospital inpatient coinsurance, for days 61-90, is $352 per day, up from $341.

Part A skilled nursing facility coinsurance, for days 21-100, is $176 per day, up from $170.50.

There are no Part A premiums for about 99 percent of Medicare beneficiaries. Part A does charge monthly premium for those with fewer than 40 quarters of lifetime earnings on which they paid Social Security payroll taxes. For those with 30 or more quarters, the monthly Part A premium is $252 a month, up from $240 a month in 2019. For those with fewer than 30 quarters, the monthly Part A monthly premium is $458, up from $437.