MONEY Social Security

How to Choose the Social Security Claiming Age That’s Right for You

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More people are catching on to the benefits of delaying Social Security. But the real issue isn't when everyone else claims—it's finding the strategy that fits your goals.

Retirement experts have been pounding the drums for years about deferring Social Security benefits and allowing them to grow until claimed at age 66 or even as late as 70. Yet average retirement ages have moved little—most people continue to file at or near age 62, the earliest that standard retirement benefits can be claimed, Social Security data show.

Now, thanks to some new research by the Center for Retirement Research at Boston College, this puzzling contradiction has been solved. It turns out that people are aware of the benefits of delayed filing and, in fact, have been claiming later for many years.

Why the discrepancy in these numbers? In its analysis, Social Security looks at when people file for retirement benefits and does a year-by-year calculation of average claiming ages. This approach works fine during periods of stable population growth, but not so much today.

Social Security’s method fails to account for the soaring numbers of Baby Boomers reaching retirement age. For example, nearly 900,000 men turned 62 in the year 1997, while in 2013, roughly 1.4 million men did so. Even so, a smaller percentage of 62-year-old men filed for Social Security in 2013 than in earlier years. But because the number of 62-year-old retirees make up such a big share of all claims, the average age has remained largely unchanged.

To get a better picture of claiming trends, the Center also used a lifecycle analysis. Instead of tracking the ages of everyone who began benefits in a certain year, such as 2013, it calculated the claiming ages of everyone by the year in which they were born. Looking at this so-called “cohort” data, it became clear that average claiming ages actually had increased far more than people thought.

In 2013, for example, 42% of men and nearly 48% who claimed that year were 62 years old. But only 36% of men and nearly 40% of women who turned 62 in 2013 actually filed for Social Security. “The cohort data reveal that the claiming picture has really changed,” the Center said.

I am cheered by these new findings. People should consider deferring their Social Security benefits and see how doing so would affect their retirement plan. But the key word in that sentence is “plan.” You need one, and it should include figuring out the best Social Security strategy for you, not what’s best for other retirees. Here are the steps to get there:

  • Compare the tax benefits. Our hearts tell us that preserving 401(k) dollars in our nest eggs is essential. But when it comes to spending down those assets in order to delay claiming Social Security, the deferral strategy looks very good. Between the ages of 62 and 70, Social Security retirement benefits rise 7% to 8% a year. They are adjusted upward each year to account for inflation. They are guaranteed by Uncle Sam. Federal taxes are never levied on more than 85 cents of each dollar of Social Security benefits, and most states don’t tax them at all. Compare these terms with 401(k) gains and taxation, and then decide which dollars are most worth preserving.
  • Assess the cost of early claiming. Social Security benefits claimed before Full Retirement Age (66 for people now nearing retirement) are hit with early claiming reductions and, if you are still working, subject to at least temporary benefit reductions caused by the Earnings Test.
  • Weigh the Medicare impact. If you have a health savings account (HSA) through employer group insurance and are eligible for Medicare, filing for Social Security will force you to take Part A of Medicare. It’s normally free but the consequences are not: the filing will force you to drop out of your HSA.
  • Consider longevity risk. Review your family health history, complete an online longevity survey, and estimate your probable lifespan. What does this number say about how long your retirement funds need to last and when you should begin taking Social Security?
  • Think about your family. Will you still have school-age children at home when you turn 62? If so, filing early for Social Security may allow your kids to claim benefits based on your earnings record. This is one case when filing early may put more money in your pocket.
  • Plan for your spouse. Survivor’s benefits are keyed to the Social Security benefits received by the deceased spouse. So, the longer a spouse waits to claim, the higher their partner’s survivor benefit will be. This is a real issue for millions of women who survive their husbands and whose own retirement benefits are smaller than their husbands because they have earned less money in their lives.

Philip Moeller is an expert on retirement, aging, and health. He is co-author of The New York Times bestseller, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” and is working on a companion book about Medicare. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: How the Social Security Earnings Test Could Wipe Out Your Income

MONEY Medicare

How to Make Sure Medicare Really Covers Your Hospital Stay

hospital patient in bed
Masterfile—Radius Images

Many Medicare patients are surprised to learn they weren’t officially admitted to the hospital—and they face big bills. Here's how to avoid the problem.

If you’re on Medicare and you have to be admitted to the hospital, don’t make the mistake of assuming your costs are covered. Find out whether your visit is being treated as an inpatient admission or a so-called observational stay. The distinction could cost you a lot of money—and it may even limit your access to a skilled nursing facility if you need follow-up care.

There’s a growing likelihood that you may be given observational status—a kind of Medicare limbo that is akin to being an outpatient. Observational hospital visits soared 90% between 2006 and 2012, according to federal data.

The reasons for the shift are partly driven by Medicare’s efforts to restrain increases in health care spending, which include financial penalties for hospitals and doctors if they readmit too many patients. Classifying patient visits as observational helps to limit those readmission penalties—and in some cases, it may reduce costs. Medicare research in 2013 found savings to both Medicare and patients from observational stays vs inpatient stays lasting fewer than two nights.

Still, whether you see any cost savings will depend on your health care needs. Observational and inpatient stays are paid for by different parts of Medicare, even if the services provided are identical. Out-of-pocket costs for observational stays may be much higher, though patients and their doctors may be unaware of this until the bills are presented. Medicare does not require that patients be informed how their stay is classified, so some consumers have been hit with unexpected charges after being discharged.

Observational status may also limit your coverage for follow-up care in a skilled nursing facility. That’s because Medicare coverage kicks in only after you spend at least three days as an admitted hospital patient. If your stay is classified as observational, it won’t count toward this total. For many seniors, that rule has limited access to skilled nursing care.

A recent AARP report, based on an analysis of Medicare hospital visits in 2009, found that most visitors placed under observation required only outpatient services. But 10% of observational patients wound up with larger health care bills than they would have had if they had been admitted as inpatients. These patients were also likely to face higher costs for follow-up care.

So how do you know which category is really best for your finances? You don’t. As the AARP report noted, inpatient status may mean lower costs if you need nursing care later. But for some short stays, your unreimbursed expenses may be lower with observational status. “Few Medicare patients will be able to anticipate into which group they are likely to fall,” the report said. “If they guess wrong, they are likely to face higher out-of-pocket costs.”

AARP advocates changing the rules for Medicare hospital stays, including capping out-of-pocket costs for observational stays and allowing that time to be credited toward skilled nursing care. Reforms are supported by several Medicare advocacy groups and the Medicare Payment Advisory Commission, which advises Congress on Medicare issues. Legislation to amend hospital stay rules is also pending.

Still, it may be years before any rule changes take place. So if you or your family members are on Medicare now, here are three guidelines for reducing the risks of observational status:

  • Find out your status. Demand that the doctors and hospital clarify how your stay is being classified. If you disagree with the decision, bring it up with your doctor right away. This is especially important if the patient is likely to need follow-up care at a nursing facility after their hospital visit.
  • Understand what’s covered. Check out the differences in Medicare payment rules between inpatient expenses (covered by Medicare Part A) and observational or outpatient expenses (covered by Medicare Part B). You can find some of this information here and here.
  • Ask to use your own meds. Many hospitals do not allow use of medications brought from home. But if yours does, you’ll be able to sidestep the steep costs of hospital dispensaries.

Philip Moeller is an expert on retirement, aging, and health. He is co-author of The New York Times bestseller, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” and is working on a companion book about Medicare. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: Here’s What You’re Really Going to Spend on Health Care in Retirement

MONEY Health Care

How to Cushion the Costs of Long-Term-Care Insurance

box with styrofoam peanuts
Victoria Snowber—Getty Images

Policies that help pay for nursing care can be costly. Here's what you can do to keep down the price.

A lengthy stay in a nursing home could wipe out your savings—the national average for a shared room in a nursing home is $77,380 a year. Long-term-care insurance can protect you and your family, but the policies are increasingly expensive and not always needed.

The decision to buy a policy—something I’m grappling with now—comes down to many factors, including what assets you have to protect, whether or not you want to leave behind an estate, your ability to pay premiums for decades, and your odds of needing care in the first place. But if you end up on the side of buying insurance, you have options to keep down costs.

How to Insure Yourself for Less

Buy just enough coverage to provide a cushion. “We advise insuring for a core amount and planning on using other sources if that runs out,” says Claude Thau, a long-term-care expert at Target Insurance Services in Overland Park, Kans. It’s like the peace of mind you get from having a fixed annuity in retirement. You lock into enough income to cover your housing and utilities, say, and fund travel and entertainment with other savings. Even modest long-term-care insurance will cut down your out-of-pocket costs.

The cushion approach appeals to me. The Department of Health and Human Services projects that the average 65-year-old will need three years of long-term care, but about two-thirds of that time will be spent at home, with the rest in either a nursing home or assisted-living facility.

I’m leaning toward insuring for that level of coverage, knowing that if my wife or I need more care, we have sufficient assets to pay our way. That would come out of our financial legacy. But so would excess premium payments over 30 years for coverage we didn’t need. I’m comfortable with that tradeoff.

Keep long-term affordability in mind. These policies have been around for decades, but only in the past five years have buyers filed claims in big numbers—exposing an underwriting disaster. MetLife, Unum, and Prudential are among dozens of insurers that have quit the long-term-care business. Others, including industry leader Genworth, have absorbed huge losses and won state approval to boost premiums on older policies to stay afloat.

New policies incorporate more realistic assumptions—and prices reflect that. “These policies have gone up so dramatically it makes them hard to recommend,” says Clarissa Hobson, a financial planner in Colorado Springs.

Can you be sure double-digit premium hikes are over? Long-term-care experts say the industry is on firmer actuarial footing. “By far, the worst is behind,” says Michael Kitces, director of research at Pinnacle Advisory Group.

Yet others are skeptical. “The baby boomers aren’t even there yet,” says Jane Gross, author of A Bittersweet Season: Caring for Our Aging Parents—and Ourselves. “What’s going to happen when boomers start making claims?” Gross, 67, bought a policy in her fifties and began to regret it soon after.

Think hard about how much you need. When you shop for a policy, the variables include the daily benefit (often $100 to $200), how much the benefit goes up for inflation (3% or 5%), how long payments last, from a few years to no cap, and the so-called elimination period, or how long before insurance kicks in.

A 90- to 100-day elimination period is virtually standard (92% of policies). You can adjust the daily benefit to save, but since nursing-home costs vary widely, first check local prices to get a sense of what you might face.

Inflation protection is an important lever. For years experts recommended policies with benefits that grow 5% a year to keep pace with medical inflation, and to be safe most still do. But that option costs about two-thirds more than a 3% adjustment.

Going with 3% may be fine, says David Wolf, a long-term-care insurance planner in Spokane. The cost of in-home care and assisted living is rising less than 2% a year, he says. Nursing-home rates are going up 5% a year, but stays are shorter than they once were.

Note that while premiums are tax-deductible, the write-off is capped based on age ($1,430 in 2015 for ages 51 to 60). And they are deductible only to the extent that they, along with other medical expenses, exceed 10% of your income (7.5% if you’re 65 or older).

Money

Buy a little flexibility. Three years is the most popular benefit period. As a couple, odds are only one of you might spend more time in a nursing home. A shared benefit can help you insure against that financial catastrophe.

Rather than five years of coverage each, you buy 10 years to be split as needed—five and five, say, or two and eight. A 60-year-old couple can expect to pay about 15% more for a shared policy with six years of total benefits than for a joint policy with three years of benefits each, says Wolf, but in exchange you have a better shot at covering a single long stay in a facility.

Don’t wait too long to shop. The average age of a buyer is now 57, down from 67 a dozen years ago, and it’s easy to see why. Premiums go up modestly before age 55. The curve steepens after that, with the sharp turn at 65, when prices begin to rise about 8% a year, says Jesse Slome, director of the American Association for Long-Term Care.

What’s more, you are fast approaching an age when your health can lead to higher premiums, if it does not render you ineligible altogether. “By 65, almost everybody has some kind of medical condition,” Slome says. Once you reach your sixties, the average denial rate jumps from 17% to 25%.

Gather multiple quotes. For the same coverage, the highest-cost policies can cost twice as much as the cheapest ones, Slome says. Go with a broker who sells coverage from at least five insurers and specializes in the field. Search for an agent at aaltci.org.

Know what it takes to collect. Stalling and claims denials sometimes command frightful headlines, but just 1% of denials are without merit, the federal government reports. Still, make sure you know exactly when your claim will qualify. One common hang-up is home care. Especially with an old plan, your policy might require a licensed home health aide when all you need is less-skilled (and less costly) help with simple chores.

The Alternatives to Insurance

If you decide against a traditional long-term-care policy—or are turned down—you have other insurance options. None provide as much coverage for care. But they have the advantage of guaranteeing you cash in old age or a legacy for your heirs.

How other policies can help. Hobson likes hybrid life insurance policies, which let you draw on the death benefit to pay for long-term care, or leave it to your heirs if none is needed. But the upfront cost is steep, and the premiums are not tax-deductible.

A deferred annuity is another option. For a single premium now, you lock in guaranteed income for life at age 82 or 85, which can go toward long-term care or anything else. Or if you can afford to self-insure and want to preserve money for your heirs, you can buy a whole life policy with a death benefit equal to your assets.

The bottom line (for one). I’ll probably end up in a shared policy with six or eight years of care. My wife is younger than I am. She may be able to help me if that time comes. So I will need less coverage, leaving her with more, assuming she outlives me. And by then she can sell the house if need be.

But I’m not quite sold on this either. If I invest at 8% the $7,500 a year I would spend on reasonably complete coverage, I could amass $343,214 in 20 years. That would be taxable and amount to less than half the benefit I’d enjoy with a long-term-care policy. But it would be mine no matter what. What I am sure of: I will keep weighing the options until we’re settled on a plan. I won’t leave either our care as we get older or our kids’ inheritance to fate.

Previous: Do I Really Need a Long-Term Insurance Plan?

MONEY Health Care

The Danger Lurking in Your Medical Bills

Claire Benoist

Medical billing errors are more common—and more costly—than you might think. Here's how to give your bills a checkup.

Odds are, there’s a mistake in the medical bill that’s in your mailbox. A recent NerdWallet analysis of 2013 hospital audits by Medicare found that an average 49% of bills contained errors, and that some medical centers messed up on more than 80% of claims to Medicare.

Such errors now matter more than ever to consumers: Greater health insurance cost sharing means that a mistake can take serious money out of your pocket. “If you’re responsible for the first $5,000 or $10,000 of your care, you’re going to want to be more attentive,” says Stephen Parente, a professor at the University of Minnesota’s Carlson School of Management who studies health finance.

But billing errors can be tough to spot, and tougher to remedy. Disputes can go on for months, and if you don’t take the right steps, your account could be put into collections in the meantime—a recent report by the Consumer Financial Protection Bureau found that a whopping 52% of all debt on credit reports is due to medical bills. Follow these steps to ensure a clean bill of health:

Understand your bill

Step one is knowing exactly what you’re being charged for. Can’t tell from the bill? Ask the provider for an itemized statement, says Pat Palmer, CEO of Medical Billing Advocates of America, a professional organization that assists individuals and companies with medical costs and disputes. Doctors use standardized numerical “CPT” codes to categorize treatments, and you can Google the numbers to find out what they stand for.

Question discrepancies

If the price strikes you as high for the services rendered, “follow your gut and investigate,” says Mark Rukavina, principal at Community Health Advisors, a hospital consultancy. Your insurer may offer an online price transparency tool. If not, try Guroo.com, a website that shows the average cost by area for 70 non-emergency diagnoses and procedures. A big discrepancy suggests that you should start asking questions.

Next, compare the bill to the explanation of benefits you get from your insurer. If these differ on the amount you owe, that can be another red flag, says Erin Singleton, chief of mission delivery at the nonprofit Patient Advocate Foundation.

Source: Consumer Financial Protection Bureau

Diagnose errors

Even if you don’t have sticker shock, give your invoice a close read. Some common mistakes can be easy to spot. They include services that weren’t performed, tests that were canceled, and duplicate charges, says Kevin Flynn, president of HealthCare Advocates.

Palmer says one of the more frequent errors she sees is providers charging patients separately for things that are supposed to be under one umbrella, such as a tonsillectomy and adenoid removal. Ask your provider about this if you are billed item by item for something that might be one procedure.

Remedy the problem

When you spot an error, ask the billing department to start a formal dispute. Put your concerns in writing. Include any documentation you have and request that the provider support its claim as well, says Palmer. Also, notify your insurer, which can be a good ally if the company will be on the hook for part of the charge.

Typically you don’t have to pay disputed charges until the investigation is complete, but do pay the rest of the bill. And always respond promptly to billing communications so that charges aren’t sent to collections. That’s a very real risk; one in five credit reports is married by medical debt, with an average of $579 in collections. Fortunately, relief is on the way—the three major credit agencies recently agreed to institute within the next few years a 180-day grace period before adding medical debt to credit reports (now there is no official grace period) and to remove debt from a report if the insurer pays the bill.

Rukavina says that, with persistence, you should be able to resolve most disputes on your own. But if you’ve been fighting to no avail for more than a month or so, consider hiring a medical billing advocate to work on your behalf. Find one via billadvocates.com or claims.org. You’ll likely pay an hourly rate starting at around $50 or a fee of about 30% of what you’ll save. But that could be pocket change compared with what you’d owe otherwise, not to mention what a ding to your credit score could cost you.

Read Next: The Debt You Don’t Know You Have

MONEY Health Care

You Can Now Use a Yelp-Like Star System to Check Out a Hospital

hotel sign with stars
Agencja Fotograficzna Caro—Alamy

The federal government's new ratings show you how satisfied patients have been with their care.

In an effort to make comparing hospitals more like shopping for refrigerators and restaurants, the federal government has awarded its first star ratings to hospitals based on patients’ appraisals.

Many of the nation’s leading hospitals received middling ratings, while comparatively obscure local hospitals and others that specialized in lucrative surgeries frequently received the most stars.

Evaluating hospitals is becoming increasingly important as more insurance plans offer patients limited choices. Medicare already uses stars to rate nursing homes, dialysis centers, and private Medicare Advantage insurance plans. While Medicare publishes more than 100 quality measures about hospitals on its Hospital Compare website, many are hard to decipher, and there is little evidence consumers use the site very much.

Many in the hospital industry fear Medicare’s five-star scale won’t accurately reflect quality and may place too much weight on patient reviews, which are just one measurement of hospital quality. Medicare also reports the results of hospital care, such as how many died or got infections during their stay, but those are not yet assigned stars.

“There’s a risk of oversimplifying the complexity of quality care or misinterpreting what is important to a particular patient, especially since patients seek care for many different reasons,” the American Hospital Association said in a statement.

Medicare’s new summary star rating, posted Thursday on its Hospital Compare website, is based on 11 facets of patient experience, including how well doctors and nurses communicated, how well patients believed their pain was addressed, and whether they would recommend the hospital to others. Hospitals collect the reviews by randomly surveying adult patients–not just those on Medicare—after they leave the facility.

In assigning stars, Medicare compared hospital against each other, essentially grading on a curve. It noted on its Hospital Compare website that “a 1-star rating does not mean that you will receive poor care from a hospital” and that “we suggest that you use the star rating along with other quality information when making decisions about choosing a hospital.”

Nationally, Medicare awarded the top rating of five stars to 251 hospitals, about 7% of all the hospitals Medicare judged, a Kaiser Health News analysis found. Many are small specialty hospitals that focus on lucrative elective operations such as spine, heart or knee surgeries. They have traditionally received more positive patient reviews than have general hospitals, where a diversity of sicknesses and chaotic emergency rooms make it more likely patients will have a bad experience.

A few five-star hospitals are part of well-respected systems, such as the Mayo Clinic’s hospitals in Phoenix, Jacksonville, Fla., and New Prague, Minn. Mayo’s flagship hospital in Rochester, Minn., received four stars.

Medicare awarded three stars to some of the nation’s most esteemed hospitals, including Cedars-Sinai Medical Center in Los Angeles, NewYork-Presbyterian Hospital in Manhattan, and Northwestern Memorial Hospital in Chicago. The government gave its lowest rating of one star to 101 hospitals, or 3%.

On average, hospitals scored highest in Maine, Nebraska, South Dakota, Wisconsin, and Minnesota, KHN found. Thirty-four states had zero one-star hospitals.

Hospitals in Maryland, Nevada, New York, New Jersey, Florida, California, and the District of Columbia scored lowest on average. Thirteen states and the District of Columbia did not have a single five-star hospital.

In total, Medicare assigned star ratings to 3,553 hospitals based on the experiences of patients who were admitted between July 2013 and June 2014. Medicare gave out four stars to 1,205 hospitals, or 34% of those it evaluated. Another 1,414 hospitals—40%— received three stars, and 582 hospitals, or 16%, received two stars. Medicare did not assign stars to 1,102 hospitals, primarily because not enough patients completed surveys during that period.

While the stars are new, the results of the patient satisfaction surveys are not. They are presented on Hospital Compare as percentages, such as the percentage of patients who said their room was always quiet at night. Often, hospitals can differ by just a percentage point or two, and until now Medicare did not indicate what differences it considered significant. The Centers for Medicare & Medicaid Services (CMS) also uses patient reviews in doling out bonuses or penalties to hospitals based on their quality each year.

Some groups that do their own efforts to evaluate hospital quality questioned whether the new star ratings would help consumers. Evan Marks, an executive at Healthgrades, which publishes lists of top hospitals, said it was unlikely consumers would flock to the government’s rating without an aggressive effort to make them aware of it.

“It’s nice they’re going to trying to be more consumer friendly,” he said. “I don’t see that the new star rating itself is going to drive consumer adoption. Ultimately, you can put the best content up on the Web, but consumers aren’t going to just wake up one day and go to it.”

Jean Chenoweth, an executive at Truven Health Analytics, which also publishes its own list of top hospitals, said she feared hospital marketing departments would oversell the meaning of the stars. “It would be very unfortunate and misleading if a hospital marketing department could claim to be a CMS five-star hospital and fail to mention it only reflected a patients’ perception of care,” she said.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

MONEY Medicare

Congress Just Passed a Medicare ‘Doc Fix.’ Here’s What That Means to You

doctor with money in his lab coat pocket
Peter Dazeley—Getty Images

Both houses have approved an overhaul to how Medicare reimburses doctors. Will that mean higher costs for seniors?

Medicare’s troubled physician payment formula will soon be history.

As expected, the Senate Tuesday night easily passed legislation to scrap the formula, accepting a bipartisan plan muscled through the House last month by Speaker John Boehner and Democratic leader Nancy Pelosi. The Senate vote came just hours before doctors faced a 21% Medicare pay cut.

Under the bill, the current reimbursement schedule would be replaced with payment increases for doctors for the next five years as Medicare transitions to a new system focused “on quality, value and accountability.” Existing payment incentive programs would be combined into a new “Merit-Based Incentive Payment System” while other alternative payment models would also be created.

“Passage of this historic legislation finally brings an end to an era of uncertainty for Medicare beneficiaries and their physicians—facilitating the implementation of innovative care models that will improve care quality and lower costs,” said Dr. James L. Madara, chief executive officer of the American Medical Association. “Patients will be able to get the care they need and deserve.”

The Senate voted 92 to 8 to approve the legislation, which the House passed 392-37.

It now moves to President Barack Obama, who—shortly after the Senate vote—said he would sign the bill, calling it “a milestone for physicians, and for the seniors and people with disabilities who rely on Medicare for their health care needs.”

There’s enough in the wide-ranging measure for both sides to love or hate. “Like any large bill it’s a mixed bag in some respects, but I think on the whole it’s a bill well worth supporting,” Senate Majority Leader Mitch McConnell, R-Ky., said Tuesday.

The bill includes two years of funding for an unrelated program, the Children’s Health Insurance Program, or CHIP. GOP conservatives and Democrats are unhappy that the package isn’t fully paid for, with policy changes governing Medicare beneficiaries and providers paying for only about $70 billion of the approximately $210 billion package. The Congressional Budget Office has said the bill would add $141 billion to the federal deficit.

Consumer and aging organizations also have expressed concerns that beneficiaries will face greater out-of-pocket expenses on top of higher Part B premiums to help finance the way Medicare pays physicians.

But lawmakers said they had struck a good balance in their quest to get rid of the old system. “I think tonight is a milestone for the Medicare program, a lifeline for millions of older people,” said Sen. Ron Wyden, D-Ore. “That’s because tonight the Senate is voting to retire the outdated, inefficiency rewarding, common sense-defying Medicare reimbursement system.”

For doctors, the passage is an end to a familiar but frustrating rite. Lawmakers have invariably deferred the cuts prescribed by a 1997 reimbursement formula, which everyone agreed was broken beyond repair. But the deferrals have always been temporary because Congress has not agreed to offsetting cuts to pay for a permanent fix. In 2010, Congress delayed scheduled cuts five times.

Here are some answers to frequently asked questions about the legislation and the congressional ritual known as the doc fix.

Q: How would the bill change the way Medicare pays doctors?

The House package would scrap the old Medicare physician payment rates, which were set through a formula based on economic growth, known as the “sustainable growth rate” (SGR). Instead, it would give doctors an 0.5% bump in each of the next five years as Medicare transitions to a payment system designed to reward physicians based on the quality of care provided, rather than the quantity of procedures performed, as the current payment formula does. That transition follows similar efforts in the federal health law to link Medicare reimbursements to quality metrics.

The measure, which builds upon last year’s legislation from the House Energy and Commerce and Ways and Means committees and the Senate Finance Committee, would encourage better care coordination and chronic care management, ideas that experts have said are needed in the Medicare program. It would reward providers who receive a “significant portion” of their revenue from an “alternative payment model” or patient-centered medical home with a 5% payment bonus. It would also allow broader use of Medicare data for “transparency and quality improvement” purposes.

House Energy and Commerce Committee Chairman Fred Upton, R-Mich., one of the bill’s drafters, has called it a “historic opportunity to finally move to a system that promotes quality over quantity and begins the important work of addressing Medicare’s structural issues.”

A “technical advisory committee” will review and recommend how to develop alternative payment models. Measures will be developed to judge the quality of care provided and how physicians will be rewarded or penalized based on their performance. While the law lays out a structure on how to move to these new payment models, much of their development will be left to future administrations and federal regulators. Expect heavy lobbying from the physician community on every element of implementation.

Q. Will seniors have to help pay for the plan?

Starting in 2018, wealthier Medicare beneficiaries (individuals with incomes above $133,500, with thresholds higher for couples), would pay more for their Medicare coverage, a provision expected to impact 2% of beneficiaries.

In addition, starting in 2020, “first-dollar” supplemental Medicare insurance known as “Medigap” policies would not be able to cover the Part B deductible for new beneficiaries, which is currently $147 per year but has increased in past years. If the policy had been implemented in 2010, it would have affected Medigap coverage for roughly 10% of all 65-year-olds on Medicare, according to an analysis from the Kaiser Family Foundation. Based on declining Medigap enrollment trends among 65-year-olds, expect this policy to impact a smaller share of new Medicare beneficiaries in the future, according to the study. (KHN is an editorially independent program of the foundation.)

Experts contend that the “first-dollar” plans, which cover nearly all deductibles and co-payments, keep beneficiaries from being judicious when making medical decisions because they are not paying anything out-of-pocket and those decisions can help drive up costs for Medicare.

The bill also includes other health measures — known as extenders — that Congress has renewed each year during the SGR debate. The list includes funding for therapy services, ambulance services and rural hospitals, as well as continuing a program that allows low-income people to keep their Medicaid coverage as they transition into employment and earn more money. The deal also would permanently extend the Qualifying Individual, or QI program, which helps low-income seniors pay their Medicare premiums.

AARP, a seniors’ lobby group, sought to repeal a cap on the amount of therapy services Medicare beneficiaries could receive, telling senators that it would be a “key vote” for the organization.

“Similar to the SGR debate, an extension of the therapy cap — rather than full repeal — is short-sighted and puts beneficiaries in a dire situation when the extension expires,” AARP Executive Vice President Nancy LeaMond wrote in a letter to senators. “This amendment is important to the overall success of the Medicare program and the health and well-being of Medicare’s beneficiaries.” The amendment failed.

Q. What about other facilities that provide care to Medicare beneficiaries?

Post-acute providers, such as long-term care and inpatient rehabilitation hospitals, skilled nursing facilities and home health and hospice organizations, would help finance the repeal, receiving base pay increases of 1% in 2018, about half of what was previously expected.

Other changes include phasing in a one-time 3.2 percentage-point boost in the base payment rate for hospitals currently scheduled to take effect in fiscal 2018.

Scheduled reductions in Medicaid “disproportionate share” payments to hospitals that care for large numbers of people who are uninsured or covered by Medicaid would be delayed by one year to fiscal 2018, but extended for an additional year to fiscal 2025.

Q. What is the plan for CHIP?

The bill adds two years of funding for CHIP, a federal-state program that provides insurance for low-income children whose families earned too much money to qualify for Medicaid. While the health law continues CHIP authorization through 2019, funding for the program had not been extended beyond the end of September.

The length of the proposed extension was problematic for Democrats, especially in the Senate. In February, the Senate Democratic caucus signed on to legislation from Sen. Sherrod Brown, D-Ohio, calling for a four-year extension of the current CHIP program. A Senate amendment to extend CHIP funding for four years failed.

Q. What else is in the SGR deal?

The package, which Boehner, R-Ohio, and Pelosi, D-Calif., began negotiating in March, also includes an additional $7.2 billion for community health centers over the next two years. NARAL Pro-Choice America and Planned Parenthood have criticized the provision because the health center funding would be subject to the Hyde Amendment, a common legislative provision that says federal money can be used for abortions only when a pregnancy is the result of rape, incest or to save the life of the mother.

In a letter to Democratic colleagues before the House vote, Pelosi has said that the funding would occur “under the same terms that Members have previously supported and voted on almost every year since 1979.” In a statement, the National Association of Community Health Centers said the proposal “represents no change in current policy for Health Centers, and would not change anything about how Health Centers operate today.”

Q. How did the doctor payment formula become an issue?

Today’s problem is a result of efforts years ago to control federal spending — a 1997 deficit reduction law that set the SGR formula. For the first few years, Medicare expenditures did not exceed the target and doctors received modest pay increases. But in 2002, doctors were furious when their payments were reduced by 4.8%. Every year since, Congress has staved off the scheduled cuts. But each deferral just increased the size of the fix needed the next time.

The Medicare Payment Advisory Commission (MedPAC), which advises Congress, says the SGR is “fundamentally flawed” and has called for its repeal. The SGR provides “no incentive for providers to restrain volume,” the agency said.

Q. Why haven’t lawmakers simply eliminated the formula before?

Money was the biggest problem. An earlier bipartisan, bicameral SGR overhaul plan produced jointly by three key congressional committees would cost $175 billion over the next decade, according to the Congressional Budget Office, and lawmakers could not agree on how to pay for the plan.

This time Congress took a different path. The measure both chambers approved is not fully paid for. That is a major departure from the GOP’s mantra that all legislation must be financed. Tired of the yearly SGR battle, veteran members in both chambers appeared willing to repeal the SGR on the basis that it’s a budget gimmick – the cuts are never made – and therefore financing is unnecessary.

But some senators objected. In remarks on the Senate floor, Sen. Jeff Sessions, R-Ala., said any repeal of the SGR “should be done in a way that should be financially sound.”

Most lawmakers felt full financing for the Medicare extenders, the CHIP extension and any increase in physician payments over the current pay schedule was needed. Those items account for about $70 billion of financing in the approximately $210 billion package.

Conservative groups urged Republicans to fully finance any SGR repeal and said they would be watching senators’ actions closely. For example, the group Heritage Action for America promised to “key vote” an amendment that the measure be fully financed. That amendment failed.

Some members of Congress seemed pleased to have this recurring debate behind them. “Stick a fork in it,” said Rep. Upton. “It’s finally done.”

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

MONEY health

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TIME Chris Christie

Chris Christie to Propose Changes to Social Security, Medicare

Chris Christie
Mel Evans—AP In this April 8, 2015 file photo, New Jersey Gov. Chris Christie addresses a gathering as he announces a $202 million flood control project for Union Beach, N.J.

He'd raise the retirement age and means-test benefits

New Jersey Gov. Chris Christie will unveil a proposal to change Social Security and Medicare Tuesday in a speech in New Hampshire, as he seeks to inject new life into his presidential ambitions.

The outspoken Republican’s political fortunes soured after last year’s controversy over the political closure of approach lanes to the George Washington Bridge and a tough fiscal picture at home. But Christie is hoping that by embracing the third rail of American politics with two hands he can bolster his credentials as a truth-teller.

“Washington is afraid to have an honest conversation about Social Security, Medicare and Medicaid with the people of our country,” Christie will say in a speech at New Hampshire’s St. Anselm College Institute of Politics. “I am not.”

Christie will propose raising the retirement age for Medicare to 67 and for Social Security to 69, arguing that entitlement programs must be fair for all Americans, including the next generation that is paying into the programs while questioning whether they will ever see benefits.

In a controversial move, Christie would means-test Social Security, reducing or cutting payments entirely for those who continue to earn income in retirement. He will argue that he wants to return the program being a social insurance program, where only those who need the outlays will receive them.

“Do we really believe that the wealthiest Americans need to take from younger, hard-working Americans to receive what, for most of them, is a modest monthly Social Security check,” Christie will say. “I propose a modest means test that only affects those with non-Social Security income of over $80,000 per year, and phases out Social Security payments entirely for those that have $200,000 a year of other income.”

To incentivize work as more Americans continue to hold jobs later into life, Christie would eliminate the payroll tax at 62.

Christie’s political identity stems from his willingness to take on powerful interests, such as his home state’s teachers unions, altering the calculus in favor of what for most other politicians would be an undeniably risky move. But Christie’s proposals stop short of radically altering either Medicaid or Social Security as some conservatives have proposed, staying away from the 2000s-era privatization debates.

MONEY Viewpoint

Why the Medicare “Doc Fix” Bill Isn’t a Fix for the Rest of Us

The problem it tries to address is real—but this isn't the right solution.

The “doc fix” bill that passed the House last week on a 392-37 vote is a piece of cheese that could smell really, really bad by the time the Senate comes back from its spring break to consider the measure.

If signed into law, the bill would halt a scheduled 21% cut in the fees that doctors get for treating Medicare patients. The fear is that if their pay is reduced—and especially if reduced this drastically—many doctors would simply choose to stop treating Medicare patients.

So who proposed the 21% cut in the first place? It stems from a 1997 law that automatically trims physician reimbursement rates if and when medical costs rise faster than overall economic growth. That’s happened so often in recent years that cuts were scheduled 17 times—but each time Congress voted to override the cut. So when the latest scheduled cuts came around, lots of folks expected Congress to kick the can down the road yet again.

All of sudden, however, Congressional leaders of both parties decided they’d had enough short-term fixes and the “doc fix” bill was born.

Here’s what everyone should know about it:

It’s got a real shot of passing

Before leaving town, a solid majority of Senators seemed to be in favor of the measure, even if some liberals and fiscal hawks are holding their noses. And the Obama White House has already signaled support.

It’s a fix, but a very expensive one

The stated price tag is more than $200 billion over 10 years, $140 million of which would hit the federal budget with no compensating spending offsets.

The 17 earlier short-term fixes were funded with $165 billion in offsetting savings from other parts of Medicare. But the bill approved by the House does not provide such offsets, which is why it will raise federal deficits so much.

How much? The Committee for a Responsible Federal Budget, a nonprofit Washington watchdog group, estimates that it will lead to more than half a trillion dollars of additional debt by 2035.

On top of that, affluent seniors will pay more for Medicare; everyone with a Medicare Supplement policy will get nicked with a higher price tag; and health care providers—other than doctors, of course—would be dinged with higher costs.

It could change everything about the way health care is delivered

This is where Messrs. Limburger and Roquefort enter the room. The bill could become a powerful enabler to drastically change, if not end, the traditional fee-for-service model of Medicare.

That’s because the law would create—get ready for two more healthcare acronyms—MIPS and APM. MIPS stands for the Merit-Based Incentive Payment System, which would reward or penalize doctors based on patient health outcomes compared with performance thresholds. APM is short for Alternative Payment Model programs, which provide different rates and incentives for doctor payments. These programs could trigger big changes in how Medicare works and in how doctors perform medicine.

There’s a better solution

A better approach would be an 18th year-long fix. It wouldn’t cost much and thus won’t worsen federal deficits. Rethinking the way we deliver healthcare to Medicare beneficiaries absolutely needs to be done, but not in such a hurry. Take the next year to do this very important but complicated piece of work, and then come back with a true fix worthy of the name.

Of course, this won’t happen. It’s hard enough to get one Congressional consensus these days, let alone two. And we pick a new President next year, which also argues against expecting Congress to again be in a cooperative mood.

Philip Moeller is an expert on retirement, aging, and health. He is co-author of The New York Times bestseller, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” and a research fellow at the Center for Aging & Work at Boston College. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

MONEY Health Care

Proposed Medicare ‘Doc Fix’ Comes at a Cost to Seniors

A measure designed to head off big cuts in payments to doctors asks Medicare recipients to foot part of the bill.

Congress is headed toward a bipartisan solution to fix a Medicare formula that threatens to slash payments to doctors every year. The so-called “doc fix” would replace the cuts with a multipronged approach that will be expensive and will have Medicare beneficiaries pay part of the bill.

Congress has repeatedly overridden the payment cuts, which are mandated under a formula called the Sustainable Growth Rate (SGR), which became law in 1997, that is a way of keeping growth in physician payments in line with the economy’s overall growth. This year, unless Congress acts, rates will automatically be slashed 21 percent.

In a rare instance of bipartisan collaboration, House Speaker John Boehner and Minority Leader Nancy Pelosi are pushing a plan to replace the SGR with a new formula that rewards physicians who meet certain government standards for providing high quality, cost-effective care. If they can get the plan through Congress, President Barack Obama has said he will sign it.

The fix will cost an estimated $200 billion over 10 years. Although Congress has not figured out how to pay the full tab, $70 billion will come from the pocketbooks of seniors.

There are better places to go for the money, such as allowing Medicare to negotiate drug prices with pharmaceutical companies and tightening up reimbursements to Medicare Advantage plans. But there’s no political will in Congress for that approach.

And the doc fix needs to be done. Eliminating the SGR will greatly reduce the risk that physicians will get fed up with the ongoing threat of reduced payments and stop accepting Medicare patients. “Access to physicians hasn’t been a big problem, but if doctors received a 21 percent cut in fees, that might change the picture,” says Tricia Neuman, senior vice president and director of the Program on Medicare Policy at the Kaiser Family Foundation.

Here’s what the plan would cost seniors:

Medigap reform

Many Medicare enrollees buy private Medigap policies that supplement their government-funded coverage (average annual cost: $2,166, according to Kaiser). The policies typically cover the deductible in Part B (outpatient services), which is $147 this year, and put a cap on out-of-pocket hospitalization costs.

Under the bipartisan plan, Medigap plans would no longer cover the annual Part B deductible for new enrollees, starting in 2020, so seniors would have to pay it themselves. Current Medigap policyholders and new enrollees up to 2020 would be protected.

The goal would be to make seniors put more “skin in the game,” which conservatives have long argued would lower costs by making patients think twice about using medical services if they know they must pay something for all services they use.

Plenty of research confirms that higher out-of-pocket expense will reduce utilization, but that doesn’t mean the reform will actually save money for Medicare.

Numerous studies show that exposure to higher out-of-pocket costs results in people using fewer services, Neuman says. If seniors forgo care because of the deductible, Medicare would achieve some savings. “The hope is people will be more sensitive to costs and go without unnecessary care,” she says. “But if instead, some forgo medical care that they need, they may require expensive care down the road, potentially raising costs for Medicare over time.”

High-income premium surcharges

Affluent enrollees already pay more for Medicare. Individuals with modified adjusted gross income (MAGI) starting at $85,000 ($170,000 for joint filers) pay a higher share of the government’s full cost of coverage in Medicare Part B and Part D for prescription drug coverage. This year, for example, seniors with incomes at or below $85,0000 pay $104.90 per month in Part B premiums, but higher income seniors pay between $146.90 and $335.70, depending on their income.

The new plan will shift a higher percentage of costs to higher-income seniors starting in 2018 for those with MAGI between $133,500 and $214,000 (twice that for couples). Seniors with income of $133,000 to $160,000 would pay 65 percent of total premium costs, rather than 50 percent today. Seniors with incomes between $160,000 and $214,000 would pay 80 percent rather than 65 percent, as they do today.

Everyone pays more for Part B

Under current law, enrollee premiums are set to cover 25 percent of Medicare Part B spending, so some of the doc fix’s increased costs will be allocated to them automatically. Neuman says a freeze in physician fees is already baked into the monthly Part B premium for this year, so she expects the doc fix to result in a relatively modest increase in premiums for next year, although it’s difficult to say how much because so many other factors drive the numbers.

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