A Quick Guide to the Difference Between Medicaid & Medicare

Medicare and Medicaid may sound alike, but the health insurance programs are wildly different. Here's a quick primer.

Medicare and Medicaid may sound alike, but these government health insurance programs are dramatically different from one another. Here’s a brief overview.

What Is Medicare?

Administered by the federal government, Medicare is a health insurance program primarily for adults who are 65 years of age or older and have paid into the Social Security system for at least 40 quarters (about 10 years). An individual who lacks the necessary work credits can also benefit from the program through their spouse, as can individuals who are younger than 65 but have received Social Security Disability Insurance payments for at least two years.

What Medicare Covers

There are different parts to Medicare that make it a veritable “alphabet soup.” For example, Medicare Part A covers mostly in-patient hospital care and provides a minimal benefit for skilled nursing care and hospice care. Medicare Part B covers the costs of outpatient care, such as doctors’ visits, lab tests and preventative care. Medicare Part C is the Medicare Advantage program and an alternative to Medicare parts A and B.

Like most types of insurance, Medicare parts A, B and C include co-pays and deductibles. Generally, the amount of income you earn and the amount of assets you own are irrelevant for participation, so paupers, billionaires and everyone in between can be eligible.

Surprisingly, given that Medicare is primarily a program for individuals 65 and older, the program covers just a small portion of the cost of a nursing home stay. At most, it fully covers the costs associated with the initial 20 days of a stay and provides only partial coverage for the next 80 days. In addition, for a stay to be covered, a patient must meet certain requirements.

For example, the patient must have been hospitalized for at least three consecutive days directly prior to receiving care at a nursing home and that care must be considered medically necessary. Because of these requirements, patients or their families are often forced to pay out of pocket for nursing home care or seek relief from Medicaid.

What Is Medicaid?

Medicaid (known as Medi-Cal in California) is a federal-state program. It primarily acts as a safety net for those who can’t pay for healthcare.

Seniors can participate in Medicaid if they pass three tests: a medical necessity test, an asset test and an income test.

The medical necessity test requires that skilled nursing care is necessary to address the patient’s medical needs. The asset test places strict limits on how much property a patient and the patient’s spouse can own while benefiting from Medicaid. The income test limits how much individuals and couples may earn to be eligible for Medicaid.

There are ways to get around these eligibility tests if you or a loved one can’t pass them but want Medicaid to help pay for the cost of a nursing home stay. However, doing so may require the help of an attorney who practices elder law. A relatively new kind of law, elder law can help individuals preserve their assets and qualify for Medicaid. (Disclosure: The Wiewel Law firm, in Austin, Texas, specializes in estate planning.)

Remember, Medicaid planning is a complicated process and even a small error can mean the program will refuse to help pay for the cost of a nursing home stay. Be sure to speak with an expert if you have concerns.

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22 Questions to Ask When Setting Up Benefits at Your New Job

We know, your new job keeps you busy enough, but make sure you get all your benefits questions answered.

Congratulations! You’ve landed a new job, one that actually gives you benefits like health insurance and a retirement plan.

But benefits are complicated. My younger brother recently called me to ask which health plan he should pick at his job. While it’s always nice to hear from him, those questions might have been better directed at his company’s human resources department. The problem is, when people are signing up for benefits, they are also learning the ins and outs of their new company, which can be complicated and time-consuming enough on its own.

To help make it easier, we’ve compiled a list of questions you should ask of your employer, yourself and your family while you’re signing up for benefits.

1. Can I See a Rate Sheet?

Vicki Salemi, a career expert for Monster, an employment website, said it’s a good idea to ask for a form with all of the costs that come out of each paycheck and where they go. This is good to ask for even in the interview process so you can see how much you’ll actually make once benefits and taxes come out of your salary. The rate sheets should include how much you’ll pay in premiums for each health and dental plan you can select, along with any other benefits you’ll chip in for.

2. When Do I Need to Sign Up?

Signing up for benefits involves a lot of paperwork and you don’t unlimited time to complete it. Make sure you know the due date for all those forms, Salemi said. Companies will often default you to a less generous set of benefits if you don’t sign up on time.

“It’s best to do it right away,” Salemi said, as you’ll likely be saddled with other new responsibilities.

3. Where Are My Documents?

If you’ve got a new job, you’ll need to fill out an I-9 form. The federal government uses this form to make sure you can actually work in the U.S. You’ll need track down your U.S. Passport, or a mix of other documents that could include your driver’s license, Social Security card or birth certificate.

4. Do I Actually Need Coverage?

If you’re married to someone with health insurance or young enough to stay on a parent’s plan, see whether your new company’s coverage measures up. “In a two wage-earner situation, one of the wage earners may have a superior plan and so it would make sense to choose that as the primary plan and look into a buyout of the secondary plan,” said Michael P. Griffin, an accounting and finance lecturer at the University Massachusetts Dartmouth Charlton School of Business. “A buyout option gives you a check for a portion of the cost of the health insurance plan if you opt out.”

5. How Much Health Coverage Do I Need?

As high-deductible plans proliferate, more workers are paying for healthcare with Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA). If you have such a plan, you’ll need to figure out how much to set aside in your FSA or HSA. This is especially important with an FSA because you need to spend what you set aside at the end of each year or you’ll lose it. Read up on these accounts here. To budget for your health expenses, you’ll need to compare what you spent last year against what you’ll pay for doctor’s visits, teeth cleanings, medications, glasses and anything else under your new plan, Griffin said.

6. Which Doctors Can I Visit?

If you like your doctor, you may not be able to keep seeing your doctor under a new health plan. Your health insurer’s website should have a list of doctors they work with, and you should call your doctor’s office to let them know your insurance is changing and to check if they’ll accept your new insurance.

7. Who Are My Beneficiaries?

It’s heavy to think about, but when you’re signing up for life insurance and retirement benefits, you have to decide who gets those benefits when you die. Once you pick your beneficiaries, you’ll need their Social Security numbers. Plan ahead of time to get that information in a secure way, ideally not via text or email. This is true any time you’re dealing with sensitive information so you aren’t putting yourself or others at risk for identity theft. (Think your identity has been stolen? You’ll want to keep an eye on your credit reports, as a sudden drop in your scores or accounts you don’t recognize could be signs of identity theft. You can keep tabs of yours by taking a look at your free credit report snapshot on Credit.com.)

8. Is There a Vision Care Plan?

Eye care plans are generally much cheaper than the hundreds you’d shell out for your own eye exams and glasses, said Peter Macia, CEO of YouDecide, an employee benefits company.

9. Is There a 401K Match?

Your work retirement plan will likely be your main vehicle for saving up for retirement, so you need to know how much you’ll need to set aside from each paycheck. It’ll help your retirement planning and your personal budgeting if you know whether your company matches your contributions, how much they match and when the match kicks in.

10. How Do I Set Up My 401K?

Your benefits department can help you with this question, but you may also want to talk to a financial adviser about how much you should set aside and how you should invest, Salemi said.

11. What’s the Personal Day Policy?

Salemi said new hires should ask when they can start using personal days and how personal time is accrued. Do you get all your days at once or do they build up as you work? How do you ask for time off? Do you have to arrange for someone to cover for you or will your boss handle it?

12. How Do I Report a Change of Address?

This is especially relevant for new graduates who may have been waiting to land a job before moving out of mom and dad’s. Make sure to ask how your move will affect your benefits and taxes as well, especially if you’re crossing state lines.

13. Will I Get Help With Commuting Costs?

Commuting is one of the most costly and stressful parts of the workday (but here are 50 ways you can save on that commute). Ask if your company offers any commuter benefits to workers. This could just be a discount on a nearby parking garage or showers for bicycle commuters, but the IRS allows employers to offer transportation benefits to workers, allowing each to use up to $255 in pre-tax dollars on their commuting expenses.

14. Will I Get Help With Tuition?

Some employers may offer tuition reimbursement to employees attending classes or even full graduate programs, especially if they’re relevant to their jobs. For those seeking help with student loans, certain careers qualify for loan forgiveness.

15. When Is Annual Enrollment?

Just when you thought you were out, they pull you back in. Once you finish signing up for benefits, you only have to look forward to doing it every single year. Human resources should tell you when the annual enrollment period comes up, but if you don’t know, be sure to ask. “Be aware that rates may change,” Marcia said.

16. Can I Change My Selections?

Usually you can only do this once a year, but many companies allow you to update your benefits if you have a change in “status” like getting married or having a kid. Find out exactly what qualifies.

17. How Do I Get Paid?

Money: the biggest benefit of all. Find out how often you get paid and how you’ll get paid. You’ll probably need to bring a blank check along with your I-9 documents to set up direct deposit. And when you get that first paycheck, Salemi suggested taking a close look at the stub to make sure what’s being taken out matches up with what you agreed to when you signed up for benefits. Here’s a guide on how to read your paystub. 

18. How Do I Get Reimbursed for Expenses?

Some jobs, like sales, require you to travel or wine and dine clients. If you have one of those jobs, be sure to ask how you’ll be reimbursed for those expenses and when, Salemi said. Some companies will give you a corporate credit card, some will ask you to submit receipts. Make sure you know how you’re allowed to spend company money.

19. Will the Company Help Pay For…

A gym membership? Child care? Charity donations? It never hurts to ask.

“I have been working for the same organization for 30 years but it wasn’t until recently that I knew that I could receive a $100 annual reimbursement for my gym membership,” Griffin said. Check over your benefits guide, and ask about any optional benefits.

20. Who Do I Call For…

Chances are, you won’t get all your questions answered right away (or you won’t remember the answers). Find out who you can ask down the line. Salemi said the point person may be different depending on the question. A single HR rep or your supervisor may have all the answers at some companies, but bigger operations might direct certain questions to payroll or benefits or IT.

21. What Happens If I Leave?

Health benefits like medical and dental are subject to the federal COBRA law, which says you’ll pay no more than 102% of the cost of the plan for continuing coverage after you leave your job. Find out what happens to your other benefits. “Ask if the benefit coverage will stay the same and if the premium will adjust,” he said.

22. Any Other Common Questions?

If you’re not sure what else to ask, see what other people ask. Ask human resources. Ask your co-workers.

“Don’t be overwhelmed,” Salemi said. “It’s a lot of information. Everyone who joined the company has been in your shoes and knows what you’re going through.”

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5 Health Apps That Can Save You Time & Money

Need to vet a doctor? Schedule an appointment? Monitor your diet? These health apps can help.

For many, healthcare costs are higher today than ever before, leaving many savvy people seeking out resources for saving money and time while addressing their health and wellness. Fortunately, with so many free and cheap health management apps available for download on your smartphone or tablet, the information and resources you need are now more accessible than ever before.

Remember, these apps aren’t meant to take the place of medical care, but they can provide supplemental assistance when it comes to vetting doctors, making appointments and managing your diet and exercise regiment. 

With that in mind, here are five money- and time-saving health management apps you can consider using.

1. ZocDoc

Cost: Free

How much time have you wasted trying to find a medical professional who is within your insurance network and has great reviews? Now, you can make finding a new healthcare specialist easier and faster with ZocDoc. This innovative app allows you to search a desired area for doctors and specialists — and you can filter based on reviews, location, insurance network, and more. Plus, once you find the right specialist for your needs, you can even book your appointment through the app and access any necessary paperwork you’ll need to fill out before your appointment.

2. iTriage

Cost: Free

iTriage was created by two emergency room physicians, and aims to help users get a better idea of what their symptoms may be caused by. Essentially, users can enter the specific symptoms they’ve been experiencing and receive a list of potential ailments or other medical issues that could be the cause. Again, this app is not meant to be used in lieu of seeing a doctor for an official diagnosis or treatment. Instead, the app will help you find a doctor or facility in your area who can treat you. Plus, it can tell you the nearest local urgent care or ER facility if needed.

3. LoseIt!

Cost: Free

LoseIt! is a great app for tracking your daily calorie intake, as well as your energy expenditures through exercise and other activities. It even features a handy scanner that allows you to simply scan a food label barcode with your phone and then automatically enters nutritional facts to your daily log. There are also some fun user challenges and contests to help you stay accountable and continue pursuing your health and fitness goals.

4. Doctor on Demand

Cost: Free, but you’ll pay $49 for any video doctor visits you opt for

Have you ever had a question for your doctor but had to wait until your next physical or other appointment to bring it up? With Doctor on Demand, you’re never more than a few taps away from speaking one-on-one with a licensed doctor, pediatrician, or even a psychologist. These specialists can talk with you about your symptoms and even write prescriptions over the phone without you having to leave your home for an appointment. The app itself is free, but be aware that you will be charged for each “visit” with a licensed specialist.

5. Fooducate

Cost: Free

Want to make smarter choices when it comes to your diet and food intake? If so, and if you’re not sure where to start, Fooducate is a great resource. This app can provide you with everything from the calorie content of a particular food to a breakdown of the macro- and micro-nutrients. It also has a handy feature that assigns each food a “grade” from A to D, so you can get a better idea of the nutrition of the food you eat and make smarter decisions.

Health & Money

These are just a few of the health management apps out there that can save you precious time and money. Remember, of course, to read the fine print of any app you’re considering closely so you know, among other things, whether the app collects any data, how it might be stored and what actions in the app may have charges associated with them.

Keep in mind, apps are just one way to potentially improve your wellness and lower healthcare costs. You can find tips for improving your eating habits, for example, on the Centers for Disease Control and Prevention website.

If you already have medical bills, there are some steps you can consider taking to address them more readily. For instance, you could ask the provider for an itemized bill so you can confirm the charges. You can also try negotiating with a doctor’s office for a lower payment (here’s some tips for how to do so.)

Remember, unpaid medical bills can go to collections and do some big damage to your credit. You can see how any medical debts may be affecting you by viewing two of your free credit scores, updated every 14 days, on Credit.com. 

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How to Pick the Right Healthcare Plan for You

Choosing medical coverage can be daunting. Here's how to select a healthcare plan.

Selecting a health insurance plan that works for your family can be an overwhelming task. However, there are four critical steps you can take to make certain that the plan is right for you and your family.

1. Network

Ever since managed care took over the health insurance industry in the 90s, insurance plan networks have become a critical part of selecting the “right” plan for you and your family. All of the major insurance companies offer online directories for finding medical providers. Those directories, however, can be very confusing. While you may find your physicians are contracted through your insurance company, you might be terribly disappointed when you schedule an appointment only to find that they are not on the sub-network that your plan utilizes.

Insurance companies normally have several different networks and your doctors may not belong to all of them. I have found that the simplest way to find out if your providers are on the network is to call their offices directly and provide the name of the insurance company and the name of the network you will be using. The other piece of information you will be able to glean is if your doctors will be participating in that network in the upcoming year. This will not usually be indicated on the insurance company’s website. Contracts between insurance companies and medical providers change constantly, and a network that includes your physicians this year may not include them next year.

2. Benefits

Many benefits that used to be optional are required to be included by the Affordable Care Act (a.k.a. the ACA, or Obamacare). For example, mental health benefits, maternity coverage and guaranteed coverage without pre-existing condition limitations are currently all mandated by law. These standardized benefits may not last if the ACA is partially or fully repealed.

While many benefits are standardized, benefit levels are not. There are typically three types of policy benefits you will need to consider when selecting a plan. It is very important to read the Summary of Benefits and Coverage for your selected plan before you make this important decision.

  • A deductible is the amount of money you must pay before any expenses will be covered by your insurance company. The deductible typically resets on January 1st of each year. So, if you have a $1,000 deductible, you will have to pay the first $1,000 of eligible expenses, and the insurance company will start paying a portion of the next expenses incurred in that calendar year (see co-insurance, below). Generally, the higher the deductible, the lower the premium. So if you want to save money on your monthly premiums, you can select a higher deductible. There may also be a separate per-stay deductible if you need hospitalization or go to the emergency room. Sometimes, the deductible will be waived and a smaller copay will be required upon each visit to the doctor. The amount of the co-pay will vary by plan. Typical co-pays range from $25 to $100 per visit.
  • Co-insurance is the split between what the insurance company pays and the expenses for which you are responsible after the deductible has been paid. You might select a plan that pays 80% of approved medical expenses after your deductible has been satisfied. You would then be responsible for the other 20% of expenses. A plan that only pays 50% of expenses (with you paying the other 50%) would generally cost less than the aforementioned 80%/20% plan. This sharing stops and the insurance company pays 100% of the remaining charges when you have reached the out-of-pocket maximum. This limit is expressed in a dollar amount and includes all of your deductible and co-insurance payments. A typical out-of-pocket maximum might be $4,000 per person, with an $8,000 family limit. So if you have a family of four and each had expenses of $2,000, the family limit would be reached even though no one person reached their individual limit.
  • The final benefit selection you will need to make is for prescription drug coverage. Some plans cover prescription drugs just like any other medical expense, subject to the deductible and co-insurance described above. Other plans might waive the deductible and co-insurance but require a separate co-pay each time you refill a prescription. Since name-brand drugs are more expensive, the co-pay is usually higher. Generic drugs, however, cost less so they enjoy a lower co-pay. Finally, there may be a separate prescription drug deductible, which must be satisfied before any co-pay applies.

3. Insurance Company

The strength of the insurance company backing the policy you choose is just as important as the network or benefits selected. There is a misconception that Obamacare is an insurance policy backed by the government. Each policy is still underwritten by an insurance company, not the federal government. Since claims are paid by the insurance companies, you should check out the financial strength of the company. Several rating agencies evaluate the financial strength of insurers, including Moody’s, A. M. Best and Fitch Ratings. Look for companies with an “A” or better rating from all three rating agencies. (You can check your own credit rating for free by viewing your free credit report snapshot, updated every 14 days, on Credit.com.)

4. Premiums

The premium is the monthly amount paid to the insurance company in return for the policy benefits purchased. All of the factors discussed above will work together to determine the premium required for your insurance coverage. And while your health, medical history or gender can’t affect your premium, a few other factors can. Premiums increase with age and as family members are added to the plan. Premiums can also vary widely based upon where you live in the country or even within your own state. Rates are determined, in part, by the medical expenses in your particular zip code. The insurance company can also charge more if you use tobacco.

While deciding on the correct medical insurance plan can be tedious, balancing these four critical details can help you make an informed and appropriate selection.

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Open Enrollment Season: How to Choose the Right Health Plan

Smiling senior man having measured blood pressure

It’s that time of the year again — health care open enrollment. Open enrollment season is the time of the year when you enroll, re-enroll, or change your 2017 health insurance plan. These fall months are pretty crucial. Unless you have a qualifying life event (getting married, starting a new job, etc.), you won’t get another chance to change your benefits for another year.

Most Americans get their health care through three main options — Medicare, their employer, or the federal health care exchange.

  1. Medicare

Open enrollment for Medicare is between Oct. 15 and Dec. 7 each year. You can get a jump start on the enrollment period by reading up on the plans and options ahead of time in Medicare & You, which is updated each year.

  1. Your job

Enrollment for employer-provided health care plans varies since these plans are set by the employer. Enrollment is typically in the fall, and any changes will go into effect on Jan. 1 of the following year. Ask your employer’s human resources department when your deadline is to enroll.

  1. Obamacare

Open enrollment through the state and federal Health Insurance Marketplace begins Nov. 1, and closes Jan. 31. Keep up on important deadlines here. If you need help signing up on the exchange, seek advice from a designated health care navigator.

Here are some tips to keep in mind as you review your health coverage this year:

Don’t get complacent

You might love the benefits you have at the moment, but that doesn’t mean you should blindly sign up for the same plan next year. Insurers are constantly tweaking existing coverage areas and creating new plans. Check to see if your existing plan has changed and see if there are new plans. With the rapid increase in pharmaceutical and health care prices, it’s important to look beyond the premium alone. Lower-cost plans may have higher out-of-pocket costs like deductibles, co-pays, and co-insurance. Certain covered drugs and treatments or the qualifying doctors or hospitals in your network could have changed as well.

Lower your out-of-pocket expenses with a Flexible Spending Account

Americans are paying the highest out-of-pocket health care expenses in history, due to a shift toward high-deductible plans. You can lower your out-of-pocket expenses by setting aside pretax dollars in a Flexible Spending Account. FSAs are only available to workers whose employer provides them.

FSAs can be used only for certain medical expenses, such as co-pays, prescriptions, and some over-the-counter medications. The maximum contribution is $2,550 for 2016. You can only sign up for one during the open enrollment period. When you do, you’ll decide how much of your pretax salary you want to contribute to cover qualified health care expenses throughout the year. Be careful not to contribute too much, however. The downside of an FSA is that you have to use the money in the account by December 31, or it is returned to your employer. However, some employers offer grace periods.

Take advantage of a Health Savings Account if you have a high-deductible health plan

Health Savings Accounts (HSAs) go with high-deductible plans like salmon and white wine. Like an FSA, you contribute pretax dollars to an HSA to cover your medical expenses. However, since HSAs are not tied to any one employer, they are portable. Your money will come with you from one job to the next, and you won’t be limited on where you can use it. You also don’t have a certain time period to make or change your contribution amount, so you can make changes anytime throughout the year. In order to qualify for an HSA in 2017, your health plan deductible must be higher than $1,300 for an individual and $2,600 for a family.

Learn from last year’s mistakes

This is your chance to find a plan that fits your budget and your needs. Insurance companies change coverage rates and options frequently, so take the opportunity to do your research and flesh out all of your options this enrollment season. If you went for a low-premium, high-deductible plan this year, you might have realized you don’t really like paying higher out-of-pocket expenses all that much. Similarly, if you’ve paid for a high-premium, low-deductible plan but don’t use your health insurance that much, you may join the ranks of the growing number of Americans who have switched over to high-deductible health care plans over the past few years.

Check to see if you qualify for a tax credit

Like 80% of Obamacare applicants, you might be eligible for a tax credit that would lower your monthly premium. The average subsidy granted in 2016 was $3480 ($290/month), according to the U.S. Department of Health and Human Services. If your estimated household income is up to four times the federal poverty level, then you’d qualify for the credit. You can check here to see if you qualify for a subsidy.

If you decide to forego insurance, know what to expect

Under the Affordable Care Act, every American has to have qualifying health insurance coverage, or pay a tax penalty. For 2016, the penalty is $695 for each uninsured adult in the household. However, there are a few exceptions. You might qualify for an exemption from the penalties under certain circumstances. For example, you won’t face a penalty if you suddenly lose a job or you are in between jobs for 1 or 2 months and have a gap in coverage. You should check to see if any exemptions apply to you before skipping out on signing up this enrollment season.

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Report: 600,000 Veterans Could Go Without Health Insurance Next Year

changes-to-Medicaid

A new Urban Institute report predicts that more than 600,000 veterans will go without health insurance in 2017 unless there are policy changes to the Medicaid program. They point out that more than half of those veterans live in the 19 states that have not expanded Medicaid.

“If Medicaid expansion decisions do not change between now and 2017, we project that approximately 604,000 veterans will be uninsured in 2017 and that 54% will be living in states that have yet to expand Medicaid,” according to the report.

In May 2011, the Urban Institute, supported by the Robert Wood Johnson Foundation, began studying the effects the Patient Protection and Affordable Care Act of 2010 had on citizens. The findings in the September 2016 report are based off analysis of data from the 2011 – 2015 National Health Interview Survey (NHIS), 2013 – 2014 American Community Survey (ACS) and U.S. Census Bureau.

The report notes that, even with Medicaid expansion, thousands of veterans are going to be left without a way to pay for medical care, as they all aren’t eligible for care provided by the Department of Veterans Affairs. It estimates that 38% of veterans would become part of the “assistance gap,” meaning they are not in the low-income category that qualifies them for Medicaid, but are making too much money to qualify for federal Obamacare health insurance subsidies. (It’s important to note that Medicaid expansion doesn’t come without costs — states have to figure out a way to pay for it.)

The researchers predict that, while fewer than 1 in 10 uninsured veterans in certain states would qualify for Medicaid in 2017 based on current expansion plans, “a projected 47% would qualify if all 19 states chose to expand.”

How Medical Debt Can Affect You

Medical debt can become a major burden and may even damage your credit, no matter if you’re a veteran, on active duty or a civilian. This can complicate things when it comes time to get a mortgage, take out a loan for a car or even apply for a job (many employers look at a version of your credit report as part of the application process).

If you’re currently laden with medical debt, it’s a good idea to review your bills for any errors, like double charges or other incorrect entries, that may help that number come down. And, while it may be challenging, it’s important to remember that you need to make your bill payments on time to maintain good credit. (You can see how your medical debts are affecting your credit by taking a look at two of your free credit scores, updated every 14 days, on Credit.com and by getting copies of your free annual credit reports through AnnualCreditReport.com.) If you need assistance with paying these bills, consider talking with a professional to see what your options are.

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The Average 65-Year-Old Retired Couple Needs $260,000 to Cover Health Care

health-care-costs-in-retirement

Paying for health care is hard on many Americans, but costs are especially high in retirement.

That’s according to recent analysis by Fidelity Investments, released this week, which found a 65-year-old couple retiring this year will need about $260,000 to cover their health care.

“The estimate applies to retirees with traditional Medicare insurance coverage,” Fidelity said in a press release, “and provides a general idea of monthly expenses associated with Medicare premiums, Medicare co-payments and deductibles, and prescription drug out-of-pocket expenses.”

It assumes the average life expectancies of 85 for a man and 87 for a woman.

The cost of covering healthcare in retirement is up 6% over last year’s estimate of $245,000, Fidelity said. It’s also their highest estimate since they began running the numbers in 2012.

“In recent years, the health care industry has experienced a period of historically low spending levels, due to a range of factors including a period of slow economic growth,” said Adam Stavisky, senior vice president of Fidelity Benefits Consulting.

However, long-term care expenses, which are based on a number of factors, could also throw a monkey wrench in retirees’ finances. As Fidelity noted, these costs are only covered by Medicare in certain circumstances, and a 65-year-old couple would need $130,000, plus savings for medical expenses, to insure against long-term care costs. (Keep in mind, this is assuming the couple is in good health and purchased a policy with an $8,000 monthly maximum benefit, with three years of benefits, and an inflation adjuster of 3% per year.)

Saving on Medicare 

According to one report by the Kaiser Foundation, Medicare beneficiaries spent $4,734 out-of-pocket on average in 2010; when hospitalized two or more times, those costs soared to $6,216. So how is a retiree to save on Medicare? Fortunately, there are ways to get around the problem. Credit.com asked Nate Purpura, vice president of Consumer Affairs with eHealth, a health insurance provider in San Francisco, how it’s done.

  1. Do your research. “The important thing to know is that Medicare you get from the government only covers about 80% of medical costs on average, and that doesn’t include prescription drugs,” Purpura said. “The other thing is that the government doesn’t cap your out-of-pocket expenses.” So if you get sick and visit the hospital twice in a year, you’ll incur out-of-pocket costs despite holding insurance. “If you just kind of glide into retirement and stick with the original government Medicare, you miss a lot of opportunities to save money,” Purpura added. Spend some time doing research to figure out your Medicare coverage options.
  2. Comparison shop for plans. “There’s a bunch of different insurance you can buy to supplement Medicare,” Purpura said. “Our research shows that, on average, a person can save 20% when they compare monthly premiums for Medicare Supplement Plan F — the most popular supplement plan.”
  3. Review your prescription drug coverage annually. Yes, the plans are “massively complicated,” Purpura said. However, different types of drugs (think generic versus brand name) are covered at different levels, so it pays to comparison shop for drug coverage. “And the good news is the rules change ever year,” Purpura added. “You have a time once a year to compare and update and make sure you’re getting the best price.” Using online portals offered by private insurers or the government, type in your prescription and dosage amount to see which plan works best for you.
  4. Consider Medicare Advantage for dental and vision. “On average, seniors spend 6% of that $4,700 on out-of-pocket dental care,” Purpura said. Medicare Advantage plans typically roll dental, vision and prescription drug coverage all into one, plus, they’ll cap your out-of-pocket spending on deductibles, co-pays, co-insurance and more.

Remember, combining the tips above with a rock-solid financial plan will keep you ahead of the game when it’s time to retire. To see how any debt is affecting your finances, you can view two of your free credit scores, updated monthly, on Credit.com. Carrying debt? See how long it will take to pay it off with our lifetime cost of debt calculator.

Image: Susan Chiang

The post The Average 65-Year-Old Retired Couple Needs $260,000 to Cover Health Care appeared first on Credit.com.

What Is the 1095-B & Why Did I Get It?

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This year, you may have received a tax form you haven’t seen before: the 1095-B. It’s a form sent by your health insurer or employer that shows you had the minimum health insurance needed to avoid a tax penalty during the tax year. (In short, it’s an Obamacare thing.) You could also receive a similar form, the 1095-C, if you work for a company with more than 50 employees. You might actually receive both or multiple forms, depending on your insurance setup and employment situation throughout the tax year.

If that seems confusing, relax. You don’t even need these forms to file your taxes.

“You just need to check a box that says you had health coverage,” said Debra Hammer, a senior communications manager with TurboTax. “You most likely will receive a form, but it’s not required.”

If you didn’t have health coverage for the full year and don’t qualify for an exemption, like financial hardship or gaps in coverage for less than 3 months, you may need to pay a penalty. Tax software should help you calculate that penalty, and if you’re going the pen-and-paper route for tax preparation, you can find information about the penalties on HealthCare.gov.

“The only real problem with the 1095-B is that people are afraid that if they don’t have one that they cannot file their tax returns until that get the form when in reality, most of the time the information about health insurance is on their W-2 coded DD in box 12,” wrote Bill Farmer, an Enrolled Agent with HTI Tax Service, in an email. “Another dead giveaway that a person has had health insurance is that they have a code W in box 12 which indicates that they have a Health Savings Account.”

Even if you get a 1095-B or 1095-C, it’s quite likely you won’t need to do anything with them other than file them away with the rest of your tax paperwork. The extent of your Obamacare-related tax activities may be limited to checking that single box indicating you had health insurance for the year.

But not everyone has it so easy. There’s the 1095-A, which has been around for two years and goes to people who had coverage through the health insurance marketplace. It’s required to reconcile the insurance premium credits you may have received and what you really qualify for, based on the difference in your actual income and the estimated income you used when applying for health coverage — it determines if you received too little or too much of a health care subsidy and will affect your tax refund or tax bill.

“Where the whole thing starts getting hairy is when you have an A-B or an A-C combination — the person got a credit part of the year and had company-provided insurance part of the year,” Farmer said. It’s common for such taxpayers to have to repay the credits they received, he added.

It can be understandably stressful to end up owing taxes you didn’t expect to have to pay, but figuring out a way to cover that bill is important. You could pay your taxes with a credit card, though there are fees associated with that option, or you could take out a personal loan if you need help. You could also work out a payment plan with the IRS. Not paying isn’t a great option, because it can eventually get more expensive with fees and interest, not to mention the potential impact on your credit score.

Whether or not you’re fretting over 1095s, it’s probably a good idea to started filing those tax returns, if you haven’t already. Either you’ll get your refund sooner or have more time to ask questions and figure out how to tackle the tax bill you need to pay by April 15.

More on Income Tax:

Image: dolgachov

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FSA vs. HSA: Which Is Right for You?

Couple Reading Letter In Respect Of Husband's Neck Injury

If you’re in the position of having both a Flexible Spending Account (FSA) and a Health Savings Account (HSA) available to you, you might be wondering which way you should go.

Most consumers don’t totally understand account-based health plans, including HSAs and FSAs, according to a survey by health care and benefit payment firm Alegeus Technologies. Case in point: Only half of FSA holders passed an FSA proficiency quiz, and just 30% of HSA holders passed an HSA proficiency quiz.

If you aren’t sure which account is the best pick — or even what they can do for you — here’s a breakdown of your options.

What’s a Health FSA?

A health Flexible Spending Account is an employer-sponsored medical savings account into which you can contribute pre-tax dollars that you can use toward qualified health care expenses. This generally includes deductibles, copayments and qualified medical expenses that your insurance doesn’t cover, such as prescription medication, contraceptives and orthodontia.

In 2016, you can contribute as much as $2,550 to an FSA.

FSA Pros:

If your employer offers an FSA — and a majority do — signing up during open enrollment (usually in the fall) is easy, and setting aside funds pre-tax lowers your taxable income, which means you pay less in taxes overall.

FSA Cons:

The money you contribute to an FSA must be used by December 31 of the contribution year, unless your employer offers either a grace period (in which case you must use all funds by March 15 of the following year) or a $500 carryover option, in which you can roll over up to $500 in unused funds to the next FSA year. Otherwise, the unused funds are forfeited to your employer.

This means you must be fairly accurate at guessing what your healthcare expenses will be in the future, which isn’t always so easy. And you can only change how much you contribute to your FSA during open enrollment, or after a life change (such as a marriage or birth of a baby) or change in employment.

FSAs are employer-specific. If you change jobs, you’ll generally lose your FSA.

What’s an HSA?

A Health Savings Account is a medical savings account into which you can deposit pre-tax money, available to consumers enrolled in an HSA-qualified high-deductible health plan. Like an FSA, the funds can be put toward out-of-pocket health care expenses.

In 2016, the contribution limits for HSAs are $3,350 for individuals and $6,750 for families.

HSA Pros:

The money you put into an HSA can stay there until you use it — no end-of-year deadline. You can save now and pay for medical costs in 20 years if you wish. To make high-deductible health plans (and accompanying HSAs) more enticing to employees, many employers sweeten the deal by contributing some amount to the HSA annually — an average of $515 per employee in 2014, according to United Benefit Advisors.

You also have the ability to invest the funds in your HSA, ostensibly giving you another way to grow your savings. You won’t be taxed on any earnings or distributions from the account.

You can change your HSA contribution amount at any point during the calendar year. Had an unexpected medical expense? Put pre-tax money into your HSA to cover it.

HSAs are not employer-specific, so you can take your HSA with you even if you change jobs.

HSA Cons:

Not everyone is eligible for an HSA. You must be enrolled in a qualified high-deductible health plan (HDHP), so if you aren’t, an HSA isn’t an option for you.

For 2016, an HDHP would be self-only health insurance with a deductible of $1,300 or more or family health insurance with a deductible of $2,600 or more. To have an HSA, your HDHP would have to be your only plan, you shouldn’t be Medicare-eligible, and you can’t be claimed as a dependent on anyone else’s taxes.

The Bottom Line

So which should you choose? That depends on your circumstances. If you’re eligible for both, an HSA has more advantages in terms of flexibility, the ability to roll it over year after year, and the chance to invest the funds.

If you’re not eligible for an HSA, and your employer offers an FSA, the choice is easy: Sign up for the FSA.

You can’t have both accounts at once unless your employer offers a limited purpose FSA that could be used to pay for out-of-pocket dental and vision expenses. Your benefits department should be able to tell you whether that’s the case.

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