With the “baby boom” generation moving into their retirement years, many in the senior citizen category are wondering what health care will look like in their future. Now topping 39-plus million enrolled, the Medicare program is certainly an important part of American seniors’ lifestyles. What changes have been outlined by the health care reform bill, and how will they affect our seniors? We’ll dive into those questions in this week’s article.
The first point of order, and probably highly significant to most Medicare subscribers (excluding Medicare Advantage plans), is the closure of the “donut-hole” in coverage. Currently, when total yearly expenses on prescription drugs are above $2,830 and below $6,440, some seniors are required to pay out-of-pocket expenses. That will change with the new program this year, as those who are within this gap will receive a $250 rebate in 2010. In 2011 those in the “donut hole” will be eligible for a 50 percent discount on brand-name prescriptions and 7 percent discount on generics, and the generics discount will increase by another 7 percent every year until the gap is officially closed in 2020. Next year, Medicare recipients will also have access to free preventative exams, such as blood-pressure and cancer screenings and annual wellness checkups. All this should be positive news for seniors currently on Medicare.
But the news is not all rosy for those in retirement; premiums for prescription drugs are set to increase, though depending on coverage levels and premiums, only slightly (government estimates have been quoted at around 3 percent as a reference). Medicare Advantage (MA) is a separate issue as well: seniors with MA providers (about 1 in 4) will likely see decreased benefits. Switching between MA programs will no longer be an option either; people may un-enroll from MA into the traditional Medicare program, but not vice versa. Analysts have opined that this is a move by the federal government to cut costs by pushing individuals out of highly subsidized MA plans and into the less costly standard program.
The new legislation may affect soon-to-retirees as well, but through their current businesses: a recent survey of representatives from 72 large companies found that nearly half of their organizations would make efforts to cut their costs by reducing employer contributions, and one-third might eliminate coverage from future retirees altogether. The White House has slated $5 billion to help businesses provide for early retirees, but overall the new bill is positioned to cut $136 billion in government subsidies to private insurers in the next 10 years. This cost may eventually be passed on to the consumer anyway, so on the aggregate individuals will likely see their expenditure on health care increase in the coming years.
The best option for all American, young and old, is to make sure they understand the benefits and coverage of their health care plan, and stay up to date with relevant legislation. Give your financial planner a call and ensure that your insurance, providers and financial situation are capable of adapting to the impact of new legislation.
Joseph “Big Joe” Clark is a Certified Financial Planner and the Managing Partner of the Financial Enhancement Group, LLC.
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Joseph "Big Joe" Clark is a certified financial planner and managing partner of the Financial Enhancement Group, LLC. He can be reached at bigjoe@yourlifeafterwork.com.
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Big Joe Clark: Health care in retirement: A dichotic outlook
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