Long term care: pay and pay and pay again

Posted on December 10, 2015December 10, 2015 by Danielle

Think you’ve been prudent and taken care of any long term care needs by buying long term care insurance? Okay, good, but now you can start worrying again. As usual, American capitalism has found new ways to extract more bucks out of us hapless suckers, oops I mean frugal, hard working citizens.

The Wall Street Journal last week had an article describing how Medicare tracks and audits hospitals for frequent re-admissions. The idea is supposed to be that if you give correct and adequate care followed up by adequate home care, you shouldn’t be readmitting people for the same thing. Ha-ha. The reality is that home follow up is just about non-existent except for being handed an information sheet as they wheel you out (don’t want the discharged folks to trip on their way out). Hospitals will do everything they can to get you out in two days because after three days of warming a bed you might actually be eligible for some nursing home/rehab care. Their rate of referring to that is tracked, also—and penalized for MORE referrals, rather than being rewarded, as you might reasonably expect.

But now, some hospitals have found a way to obliterate records of readmits by classifying these stays as “observation” stays, which are technically outpatient visits. Which means some patients will foot a far higher percentage of the bill, depending on insurance. And Medicare won’t count it as a readmission, even if you are “observed” for three days, so you won’t be eligible for any nursing home care provided by Medicare. Getting Medicare to pay for nursing home care was tough already, but this makes it impossible.

You could theoretically have several “outpatient observations”, then be referred to nursing care, and end up paying over and over again for multiple short stays, and your LTCI wouldn’t cover any of it, since the deductible period is usually either three months or six months. Many people select this because theoretically Medicare can cover up to 100 days, although getting that full term is harder than juggling watermelons.

This hasn’t become prevalent enough to raise a hew and cry yet, but if you or a loved one are being admitted to a hospital, be sure you know under what label the stay is being characterized for your insurance or Medicare coverage. And hope you find a pile of cash under that mattress.

Social Security “Reform”—They Pulled a Fast One

Posted on November 18, 2015November 18, 2015 by Danielle

They really put one over on us. With all the horrible news events lately, the pressure in Washington to produce an approved budget, and the joy that the government won’t be shut down once again, lawmakers slipped in major changes to Social Security without soliciting any comment or feedback (so far as the planning industry can determine).

It’s probably not going to surprise you that these changes are not to your benefit. Many of the Social Security claiming strategies that could be used to maximize your benefit have been eliminated. If you were born after 1954, you will not be able to use the “file and suspend” strategy, where the usually higher earning spouse, upon reaching full retirement age, was able to file for benefits, then suspend them. The spouse could then claim spousal benefits, while letting benefits on your own work record continue to grow until you claim them at the higher level reached by 70. Now, if you apply you will get whatever is the higher benefit to which you’re entitled, but you won’t have the option to restrict that application to “spousal only”, so you won’t get the bump up at 70. Also, if one person files and suspends, benefits for both spouses are suspended. It is unclear yet how this will affect divorced spouses, since it’s possible that a vindictive ex-spouse could refuse to collect benefits to postpone the ability to claim spousal benefits. Hopefully, this will be clarified by regulations or rectified by an amendment.

If you will be 62 by 2016, you can still take advantage of restricting your claim to spousal benefits, then switching at 70. Widows and widowers benefits are not affected, and anyone who is currently claiming should be grandfathered in.

This is being justified by saying it closes “loopholes”, as if people were doing something wrong by trying to get a decent level of retirement. I have to ask again, why do we not have a national commitment to guaranteeing a decent retirement to all citizens, as does EVERY OTHER Western Democracy? Instead of trying to prevent people from getting the pittance that is Social Security, and trying to cut the pensions of government workers who have them, we should be moving toward a solvent system that provides a decent retirement for all workers.

Confusing? Yup. If you do have questions, I’d be happy to analyze your situation and discuss alternatives and possibilities with you.

The Right Design for Your Financial Plans

Posted on August 19, 2015August 19, 2015 by Danielle

Cover of "The Spirit Catches You and You ...

Cover via Amazon

One of the real delights of having a kid in college is the terrific books they bring home. Much as I lament the lack of survey courses, and the fact that students can get out of college almost completely ignorant of the Western Canon (don’t stone me), some profs manage to force them to read haunting, thoughtful pieces that will follow them through life.

Recently, dearest daughter brought home The Spirit Catches You and You Fall Down. a study of the terrible collision between Western medicine and a Hmong refugee family over the treatment of their severely epileptic child. Anne Fadiman, the author, knows a thing or two about writing—she won a National Book Critics Circle Award for the book, and she probably imbibed literature with her pablum, her father being Clifton Fadiman, the famous editor and author of the Lifetime Reading Plan. (Footnote: we used his wonderful book as a guide while homeschooling, so DD did get some smidgen of aforesaid Canon).

Spirit is so thought provoking and spellbinding that not only did it keep me up nights but two weeks after finishing it I’m still thinking about it every day. I’m not giving away anything to say that it’s all a horrific train wreck. If you’ve ever had experience with serious illness, you will find yourself identifying mightily with the Hmong family, and if you’ve ever dealt with annoying clients or even a recalcitrant child, you’ll feel for the doctors, too.

One of the most interesting questions the book raises is oh-so-relevant for financial planning—is perfect compliance with a plan necessary? or is there some lesser change that would work nearly as well? Is the correct answer always the one justified by numbers (and science) or are our beliefs and feelings (aka behavioral finance) just as compelling and important? Is there any middle way?

No, yes, no, yes, yes. We financial planners like the certainty and precision of numbers, so much so that we even believe them ourselves. If our projections say your money will last your lifetime, and you can spend exactly $84,237 per year (pick a number), we breathe a sigh of relief, print out the report, have a reassuring client meeting, and off you go. But change the assumptions, the conditions, or the faith of the people involved, and maybe the medicine doesn’t work quite so precisely. It’s critically important to recognize that the best prescription is dependent on certain conditions, but must be tweaked for individual circumstances, personality, and life situation.

Of course, the best plan won’t work if you don’t carry it out. But as Lia’s doctors found out, the plan won’t work if your beliefs, abilities, and commitment disrupt it. I see this so often when people come to me with some robo-advice that proves they can never retire or afford college for their children. Faced with the model that says they must save umpteen thousand dollars, they get terrified and give up (and don’t take the medicine). But even less than perfect action can be life-saving. If you have only managed to save $20,000, or $10,000, or $5,000 (instead of $250,000) for college, more power to you! Believe me, you won’t be sorry to have it.

Other perennial questions—should I pay off the house or invest the money? Should I take the lump sum or the pension?—depend as much on what will bring you peace of mind as on what the numbers might indicate. These are questions that must be sorted through with an advisor who tries to get to know you, not just someone who will crunch numbers.

If you leave an advisor’s office (including mine) with a plan for investments and it turns out to require changes that you put off, and put off, and put off…then maybe the plan, while excellent, is simply not the right design for you. Moving in the right direction is better than doing nothing at all, and revisions should be made until you feel confident that you can proceed.

One of the horrible truths the book demonstrates is that not speaking the language can result in devastating and costly consequences. In financial planning, too, advisors and the industry can speak a foreign and fatally confusing language. Witness the firestorm over fiduciary, which is a difficult word meaning only that the advisor must act in the client’s best interest. Why on earth would this be controversial, and why would the brokerage industry be conducting a bombing campaign to scare the individual investor into believing that this is somehow an evil requirement cooked up by the Obama administration? Because their bull (er, ox) might be gored and they might not be able to make usurious profits on the backs of people whose lack of industry comprehension they exploit. Or the confusion over fee-based (brokerage jargon that means we’ll collect a commission and charge you) vs. fee-only (which means we’ll charge you by the hour or based on assets managed). Fee-based is a subterfuge to confuse you and make you think you’re getting a better, and honest, deal. The brokerage industry is counting on the fact that most people won’t understand the difference, and that they’ll look like they’re wearing the white hats, too. They’re not.

If you don’t understand what an advisor is saying, how that advisor is being paid, why they are recommending what they are, and how they arrived at those conclusions, don’t stop until you do. Even the best doctors make mistakes, and learn from them, but patient, and client, input can have better outcomes if the plan fits well. And sometimes the questioning can produce a thoughtful change in tactics, one which might save the future.