As Congress tries to hash out health care reform (and wrangle over a public insurance option), many have wondered about the place of long-term care. Most have said including it in reform is too expensive. However, new legislation may help mitigate some of the costs — and provide a savings vehicle for those who expect to need help with long-term care costs in the future. It is called the Community Living Assistance Services and Supports Act (CLASS Act — don’t you love how they name these things?). NPR reports on the main thrust of the act:

That legislation, which is part of the committee’s health bill, would let workers choose to have government deduct money from their paychecks — maybe $65 to $100 a month — and put it in a savings account. When they get old or disabled and need care, they could then use that money.

Anything that encourages automatic savings is generally a good idea. I would be interested to know whether the savings account would offer a high yield, and whether you could direct some of the money to be put into conservative investments. Of course, since it would be a long-term investment, I would favor index funds. I think that something similar to retirement accounts now — complete with tax advantages and the ability to direct some investments — would be in order. But it doesn’t look like that has really been thought out.

In any case, it is fairly obvious that health care reform on all fronts is needed. The private sector has largely dropped the ball, and offering a public option for health insurance (perhaps something similar to what our elected officials have access to) is a good first step. And you wouldn’t be forced to choose it if you could get a better deal elsewhere. A public option would introduce something akin to competition in a market where, quite frankly, there is very little.

Image source: NESRI via Flickr

This is the time of the year that I go on a rampage against the health care industry. Mainly because it’s the time of year that my health insurance is renewed — and my premium usually goes up, in spite of the fact that we rarely use our health insurance. (This year, I was lucky enough to be able to reduce my health insurance premium. But it took a bit of work, and more than 45 minutes on the phone with a representative from my health insurance program.)

So when I saw that 60% of bankruptcies are caused by medical bills, I took immediate interest. But here’s the real kicker, reports Reuters:

More than 75 percent of these bankrupt families had health insurance but still were overwhelmed by their medical debts, the team at Harvard Law School, Harvard Medical School and Ohio University reported in the American Journal of Medicine.

That’s right. Having health insurance probably won’t protect you from bankruptcy in the case of a serious illness. It can help you reduce costs for some things, and can protect you from financial catastrophe on some level (like in the case of my father’s heart attack earlier this year — but it still has taken 6 months for my parents to pay back their portion of the bill), but if you have a serious illness or some other large medical need, your health insurance policy provides flimsy protection. Especially since it will probably be cancelled as soon as the issue is resolved. And, since you have had this illness, getting new coverage may be impossible. Or at the very least, prohibitively expensive.

Recent polls suggest that Americans at least want a public option that they can turn to when the private insurance companies fail them. The Kaiser Health Tracking poll from April showed that 67% of Americans support a public option for health care. This public option is not universal health care by any stretch. Premiums would still have to be paid. But they would be lower than what current insurance companies are charging.

How would it be if insurance companies had to compete with the government? It might mean that $50 - $150 million executive salaries would have to be reduced in order to cut costs so that private companies could be competitive. Or maybe pharma companies would spend less money on marketing (which takes up more than 60% of their profits — research accounts for less than 20%) so that their drugs could be less expensive, also reducing insurance costs. Even better idea: What if health insurance companies, to be more competitive, started offering premium credits to people who were improving their health?

In any case, it is clear that most of our bankruptcies are in actuality caused by health care costs — not by outrageous credit card spending (although that plays its roll, I’m sure). Could reforming health care be a help to our ailing economy? Bottom line: Something needs to be done in order to help alleviate health care costs. It’s one of the major things impeding many people’s personal finances.

image source: Daylife

It’s that time of year again. When the health insurance company sends me a letter telling me what my new premium will be. This year, my plan resulted in a $50 increase. Because costs keep rising. (Or the CEO of the company is finding his hundreds of million dollars in compensation is inadequate.)

At any rate, last year I received a rather long justification of rising rates — even for those of us who live healthy lifestyles and rarely use our insurance. This year’s justification was rather short, and included, once again the fact that, even though I have an individual plan, my costs go up along with the costs of those in my “group”. Basically, I’m subsidizing others’ poor health and, in some cases, bad health decisions. (Who says that we don’t have socialized health care? Society still pays for it, but not through a government apparatus. Of course, subsidizing it through insurance companies is much costlier to individuals, for the most part, than subsidizing it through the government through slightly higher taxes. But that’s another rant.)

This year, the nice, helpful folks at the insurance company sent me a cover telling me that they are here to help, and offering a very few ways that I might be able to reduce my costs.

I called to see what I could come up with. I did end up finding out about a plan that would reduce my health insurance premium to around $400 per month, rather than watching it jack up to $466 per month. The move will save me $792 on premiums in the coming year. I had to change my office visit co-pay, increasing it by $10, and agree to a $200 deductible for my prescriptions, but even with those changes, the new premium will save me $500 this year, over what the new premium would have been. I did have to raise my deductible as well, but that will only kick in if we have a major expense (which we haven’t yet), and the $2,500 deductible is something we can handle with our emergency fund — or the Health Savings Account I am thinking of opening.

I wanted an even higher deductible, but any plan with a higher deductible switches to deductible and then 20% coinsurance, which the lady explained to me means that I pay all of my out of pocket expenses and then 20% of all costs after the deductible is reached. After figuring out the fact that I would not reach the deductible this year, and would have to still pay a premium (only $20 less than the plan I chose), I realized that I would actually be paying more overall. Stupid cleft stick the insurance company catches you in. It sounded good at first, but when considering health insurance costs, it is important to factor in more than just the premium. You need to look at your out of pocket obligations and whether that 20% is more than the office visit co-pay. Hint: It usually is.

I wanted to get rid of maternity, but no plans with my company offer that, unless I go with an even more grotesque deductible/coinsurance plan. I looked for other plans from other health insurance companies (and will probably continue my search today), but none of them are really any better for the (rapidly dwindling, I discovered in my information) coverage I receive. In the end, I figure I’m kind of stuck. Sure, it’s crappy, but for all of my looking, I haven’t found anything much better.

Our health care is costlier than any other in the developed world, and it isn’t even the best. And, as my monthly premium goes up every year, I am continually reminded of the fact that in many cases, one insurance company is much like another. At least this year I’ve actually managed to reduce my premium. But it didn’t just happen. I had to go out there and look for a reduction. If I hadn’t taken the initiative, I would have had to swallow a $50 increase instead.

Has your health insurance premium been going up? How much? What are you doing to try and reduce your health insurance costs?

I read an interesting article by Thomas Kostigen in MarketWatch this week. It mentioned that the Nordic countries (Denmark, Finland, the Netherlands, Sweden and Norway) all had the happiest people in the world. The U.S., according to the survey cited, didn’t even crack the top 10 (but we are #11).

Kostigen speculates that part of the reason Northern Europeans are so happy is that people in these countries don’t have to worry about paying for social services and health care directly, because the government takes care of it with their tax money. After all, if you aren’t fretting about how you will pay for your doctor visit or how much your insurance premiums are going up, or what you are going to do when you retire, or how you will get through maternity leave, you feel a little more secure in your financial situation and you feel happier. (We did beat out France, Great Britain, China and Japan.)

Sure, he points out, the Danes (#1 for happiest) pay close 2/3 of their income in taxes. But they don’t have to buy anything beyond food, housing and consumer goods. They’ve already paid for social services; it’s like an automatic deduction from the paycheck. Here is what Kostigen points out about paying taxes:

Simply, you pay for what you get. Taxes in the U.S. have taken on a pejorative association because, well, we are never really quite sure of what we get in return for paying them, other than the world’s biggest military.

Interestingly, the Nordic countries have lower incidences of corruption and catering to special interests. Perhaps that is where we Americans get our fear of paying high taxes for the government to take care of things. In the Nordic countries, the system has been practically built in as part of development in modern times. And they expect the government to use the money to actually benefit the people. In the U.S., we expect politicians to squander tax money on useless things; we expect it because we have seen it every day, for decades.

On top of that, even though we don’t pay as much in taxes, our individual incomes aren’t as high. Even though those living in Denmark pay more in taxes, per capita the people in the country still earn more on an individual basis (ranking 5th) than we do in the U.S.:

With the highest gross domestic product in the world, we are the richest country. On a per capita basis, though, we don’t even make the top 10. The U.S. ranks 15th in this category, according to the International Monetary Fund.

Obviously, there are problems with taking some of these Nordic countries for a model. They have far fewer people to worry about, and these countries do not have plurality in the same degree that we have here. We have too many voices to adequately come to an agreement as to what should be paid for by society. They are smaller countries, with smaller costs. To institute the all of the same programs in the U.S. would most likely be unweildy and impractical.

But we could do a little bit better, especially in terms of health care — and more and more Americans are beginning to want universal health care. There are ways to provide us with universal health care that wouldn’t break the bank (Mitt Romney figured out how to do it in Massachusetts). We could do better in terms of taking care of our own people. We are the richest country in the world after all. And even though we spend more money per person on health care, we still rank #37 in the world. We don’t even rank #1 (as our leaders would like us to believe). We pour billions upon billions into supporting the military efforts of other countries, but we can’t take care of our own children?

I figured out once that my yearly tax increase for universal health care would be something like $3,500. I’m paying $5,040 in premiums each year right now. While a dramatic increase to my taxes might probably wouldn’t make me happier, a small increase to my income taxes would save me $1,500 a year on health insurance — and that would increase my happiness level. (And think what it could do for the economy — we could all spend the savings as part of economic stimulus.)

No, we don’t need to pay 2/3 of our incomes in taxes to be a little happier and more relaxed. However, we might be a little happier as a nation if our politicians were more interested in what we the people wanted to have happen with our tax dollars. As my husband says: “I wouldn’t mind paying 40% of my income for taxes — if I knew it was going for good things and not being wasted on corporate subsidies, foreign militaries and pork barrel projects.”

What do you think? Would you be willing to pay more taxes if we had better services? Or do you think our government is so wasteful and incompetent that it would just lead to more problems?

image source: Malene Thyssen via Wikimedia Commons

Right now, the so-called “three-legged stool” of retirement income is rapidly losing its legs. Social Security was never a program designed to provide an adequate retirement income — it has always been considered supplemental. By the time I retire, Social Security may not even be a contender. Few companies offer pensions anymore, and if you are close to retirement right now, your tax-advantaged retirement account may be losing value. Which means you need something else to help keep you going. Here are 3 ideas for additional retirement income:

1. Reverse mortgage. If you have equity in your home, especially if you have your home paid off, you can get a reverse mortgage. The bank gives you a chunk of money (or makes payments to you). The loan is usually paid back when the house is sold. No credit or income requirements are imposed for a reverse mortgage. However, you should be careful. Reverse mortgages come with high fees and high interest. They are not for everyone.
2. Part-time employment. Few people like the idea of part-time employment after they “retire”. However, it is not always a bad option. You can find a job that you can do for 20 hours a week. It keeps you busy and it can help supplement your income. It means that you have something coming in. You can even turn your hobby into a part-time job in some cases. It is something you can do while you hold off taking your RMDs and wait for the stock market (and your retirement account) to recover.
3. Lifetime income annuity. This is another option. But watch out! Scams abound, and different annuities come with different hazards. In this scenario, you buy an annuity with a rather large chunk of cash. You are paid an annual income for the rest of your life — no matter how long you live. With the stock market in disarray, many people are taking a second look at lifetime income annuities because they remain steady, while retirement account portfolios lose their value in down times.

There are other options as well. You can rent out real estate or sell your home and downsize to something else. You can purchase long-term care insurance and move into a retirement or assisted living community. If you are younger, though, the best option is to start saving immediately, building a diverse portfolio that is likely to withstand the test of time.

Can you think of other ideas for additional retirement income?

image source: Frizzychick via Flickr

I don’t use Geico to fulfill my insurance needs, but I love the commercials. And sometimes they remind that I could be saving money on any number of things.

Happy Friday!

I received two email questions this morning to this effect:

Do I need be concerned about swine flu? How will it affect my finances?

An interesting question. And probably one prompted by the fact that the financial press is talking about how the swine flu is sending stock markets around the world lower. However, in terms of affects on your personal finances, I’m not sure that this is something to get too panicked about.

As far as your stock market holdings go, you aren’t likely to do much worse than you have been in the last few months, even though the financial markets are in turmoil over swine flu. Besides, if you employ a long-term investing strategy, this will just be a blip on the market in 15 years. So your retirement account is likely safe. If you’re really into day trading, you might be able to make a little money by investing, short-term, in pharma stocks, which are set to spike as flu treatments go out. (I’m not an investment professional, though, nor am I fond of day trading. I’m just sticking with my regular investment plan — low cost funds, which I can buy a little more of now.)

Swine flu and your health insurance

The only real personal finance effects I see happening in the near future as a result of swine flu are likely to be such things as lost income due to missing work and an increase in your health insurance premium. If you end up with swine flu, and you visit the doctor, you will see that reflected next time your health insurance policy is up for renewal.

Right now, the CDC feels as though swine flu is being spread in a manner similar to other flu viruses. There aren’t many cases in the U.S. yet. You can protect yourself from swine flu by washing your hands frequently, and keeping them away from your face.

image source: Daylife

While I don’t use Geico insurance, I do love the new “kash” commercials with the googly eyes.

Happy Friday!

My husband and I are finally breaking down and going to see the dentist. Neither of us has been since just before we were married (and still on our parents’ employers’ plans). So I’ve been trying to figure out what to do. We have our own family plan for health insurance (that I deduct on the taxes since we have it through my home business), but it doesn’t cover dental care. So we started looking into dental insurance.

At first, it seemed rather inexpensive. But then I saw deductibles, co-pays and limitations. And there are waiting periods. So I called around town to some different dentists. Turns out that most dentists in my town offer a 10% discount if you pay in full at the time of service. And the services aren’t that expensive. An entire well check for my teeth (including bitewing x-rays and a thorough cleaning) only costs $70. Take the 10% discount, and it’s only $63. Of course, if I have cavities, the costs go up.

But the 10% discount applies to wisdom tooth extraction as well, and I know I’m going to need that. I got some price quotes on tooth extraction, and then added up all of the conceivable costs (including cavity fillings — although I’ve never had one). Turns out that I can get all of those services for the cost of dental insurance for one year. But if I add in the co-pays I’ll have, it turns out the dental insurance costs more.

Of course, there are some unexpected things that might come up, but my auto insurance covers surgery because of an accident, and I have other coverages that apply, making dental insurance for anything major superfluous. Plus, there are health savings accounts (HSAs) for those sorts of things (they can be used for dental and vision as well as other types of health expenses). And I’m seriously considering one. Health savings accounts are tax advantaged, and, since I am young and healthy, work more in my favor.

At any rate, whether or not I go the HSA route, I’m paying cash for dental care. It costs less for me — both in the short term and over the long haul.

Most of the questions during last night’s presidential debate dealt with the economy. One of the issues that I find a major part of the economy is health care. Personally, I think that we should have universal health care. But that’s just me.

Anyway, the plan laid out by Barack Obama offers the closest thing to universal health care that we are going to get. Contrary to popular belief, Obama does not propose that the government completely take over health care. He does propose that ordinary Americans have access to *gasp* the plan that our elected representatives have access to — effectively lowering premium prices since private insurance companies would have to compete with the rates offered by this other plan.

Obama also proposes that small businesses of a certain size provide health care coverage. If they don’t, a fee would be charged to help cover the cost of health care. However, a very generous tax credit would be offered to small businesses to offset these costs. Besides, most small businesses would not, in fact, be affected by Obama’s proposed changes.

Obama also thinks that it’s a good idea to make sure, if nothing else, that all children get health care.

John McCain’s health care plan

For the most part, John McCain’s health care plan would be pretty much status quo. He would allow shopping across state lines, and he does say that he would offer a tax credit. However, he would tax employer-provided health benefits as income. While Obama exaggerated this effect by calling it a tax increase, the truth is that (initially) it would result in — at worst — effectively maintaining costs. The problem with John McCain’s plan is that if (and it’s likely) health care premiums rise, the benefit values increase, and so does the income tax on the benefit. Then the law would have to be changed to increase the tax credit. Or it really would be like increasing taxes.

John McCain would freeze (or maybe even cut) Medicare spending as part of his health care. Barack Obama just sort of sidestepped the question and tried to avoid entitlement spending altogether. Of course, if we had universal health care, Medicare would be a non-issue and the whole health care system could be overhauled to be more cost efficient.

I also agree with Obama on his plan to use an energy economy makeover to help fuel the economy.