Open season on a fixed income

The Thinker by Rodin

It’s open season time and you know what that means. For most of us it means not bothering to take the time to see if there is a better medical, dental or vision plan out there. And by “us” I definitely mean “me”, at least until this year. Although I retired in 2014, I was working for most of it so it was easy to go on autopilot in 2015.

This year though I am fully retired and living on perhaps seventy percent of my previous income. This year although our expenses have gone up, for some reason my fully indexed cost of living pension won’t be, a factor somehow of falling gas prices. I’m not alone. Lots of pensioners and social security recipients feel like they have been cheated. The problem is that the official cost of living index is bogus. While I might spend a couple of hundred dollars less in gasoline this year than I did last year, food prices have gone up and eating is not optional. If prices are holding steady, the word hasn’t gone out to my city. The real estate assessment was $15.80 per thousand dollars of assessed value this year. In 2016 it jumps to $16.16. Moreover I just bought a new house for about $486,000 but it’s been assessed at $500,000. This means we need to pay $401 more just in property taxes yet with no increase in income.

So value is becoming more important. We’ve been on Blue Cross for more than a decade, but Blue Cross too is tightening the screws. With no changes we would pay over $650 a year more in premiums. Copays have been increased as well, up $5 each for primary care and specialists. We (my wife in particular) see lots of doctors. It’s not hard to rack up a hundred visits between the two of us per year. We could easily spend another $1000 a year on health costs next year for no increase in services. We would have to do this with no cost of living raise.

Thus I felt I no longer had the luxury of inertia. As I started to examine my options, I quickly realized why I had punted all these years. It’s because while choice is good in theory when it comes to health insurance it is mind-numbingly exasperating and time consuming. It’s something of a crap shoot as to which plan offers you the best value, since you have no way of knowing how much care you will actually need. About all you can do is use past years as a benchmark, and that means analyzing all your health expenditures. (Note: if you are a federal employee, federal annuitant or survivor of either, Checkbook has a useful guide that costs less than $10 that can help a lot.)

Since I spent a day just analyzing health insurance options, it’s a good thing I am retired. I doubt I would have this sort of leisure if I were still working. I had to sift through the details of all the various plans and see if I could find some magic combination that is not overly expensive, rated reasonably well and with most of our doctors “in network”. I had to analyze premiums, deductibles, copays, limitations on types of services, and which of our doctors were on each plan. I’m still not entirely clear which plan offers the best value, but it’s pretty clear it’s no longer Blue Cross.

I can also change my dental insurance and add vision insurance during open season. I already have a long term care policy, but no insurer would insure my wife so when that time comes we’ll have to depend on savings. Which opens up another can of worms that retirees have to grapple with. If you have some major and unplanned costs, where do you get the money?

Since we recently settled on a house a lot of our reserves have gone to pay lawyers and other busybodies. We’re hardly without savings but if I had to put my hands on $75,000 or so in cash it would be a challenge. A 401-K or IRA is not like a faucet that you turn on and off at whim. You generally get just a one chance a year change to adjust the spigot – during open season.

We supplement my pension with a modest monthly withdrawal from my 401K. On the advice of my financial adviser, I’m limiting withdrawals to 3% of the portfolio. This will in theory keep our nest egg secure, not growing in value (over inflation) but not losing value either. I can up the withdrawals to say 4% and slowly build up cash reserves at the expense of paying more income taxes and a smaller portfolio. I can hope no major expenses like this happen. I can get another home equity loan and use that when needed, but that money certainly won’t be free. The other alternative is to get another job, something I’d prefer to avoid since leisure is the whole point of retirement.

Since when you are retired you can’t easily change your income and expenses are hard to control sober retirees have to look forward a lot. Our new house is nice but like every other house it will move toward decay. We’ll eventually need money to replace the air conditioner, roof and buy cars when the old ones expire. This didn’t used to be a problem. I had enough income where I could pay for most of these expenses out of pocket or from our savings account. Now I have to anticipate them.

Unable to think of a better strategy, I looked at what these expenses cost us before. I made some realistic estimate of when these expenses would hit and what they might cost then with inflation. So I’m setting aside some of our income to draw from for these expenses in the future. It’s not an exact science, but it’s a start. It’s also sobering. I’ve created a car replacement fund assuming we’ll buy two cars for $25,000 each in today’s dollars, one in 2019 and one in 2023. To reach the goal I must place $481 of our income monthly into an escrow account. Similarly for all these future house expenses, I’ve created a capital fund. If my numbers are accurate, $343 a month set aside for these expenses should cover them.

All this is well and good but it leaves less money to actually enjoy your retirement particularly when your expenses go up when the government says they haven’t. Which is why I’m reluctantly becoming value-driven in retirement. Every expense needs a second look, including our health care costs. So I need to shop around.

As for health insurance, since I am an ex-federal employee I’ll probably bid adieu to trusty but expensive Blue Cross and say hello to the National Association of Letter Carrier’s plan instead. Lower premiums, lower deductibles, similar services and a reasonably good choice of doctors will probably go a long way to keeping these expenses unchanged in 2016. We’ll see. If not I’ll be crunching the numbers again in a year at the next open season.

Health insurance in the United States is needlessly complex. If there must be competition then the government should require that all plans offer the same services so we could shop around more easily. Or perhaps we could do what every other first world country does: create a national health care system. Then instead of figuring out how much health you can afford you could simply get the care you need instead. Sign me up for that!

Solving the medical forms hassle

The Thinker by Rodin

Seven years ago, I suggested that the ubiquitous thumb drive should become our electronic wallet. You would simply plug it into the point of sale device, authorize the transaction (a PIN is acceptable, but a thumb scan would be better), and an electronic receipt would get stored on the device. The receipt could later be imported into your personal money management software, such as Quicken, for automatic categorization, giving you better insight into your spending.

Some years of experience using thumb drives regularly shows that it is not the ideal device for an electronic wallet, in part because the USB terminal can wear or tear, rendering the device useless. Today, a smart card might make more sense because it would fit in our wallet right where the credit and debit cards go. My point was that to be useful the device would show you your balance at a glance, and it could receive as well as send data. Today, the device could also be network aware, making secure connections to your bank periodically to get the latest balance. You might call it a smart cash card.

A few weeks back I had an annual physical. As is typical of someone fifty plus, I left with a stack of prescriptions and referrals. As a consequence, I have since been making my way to various specialists. Yesterday I visited an endocrinologist, who was examining some minor cysts in my thyroid. Naturally before I could see him I had to go through a daunting process of filling out four pages of forms, listing for the umpteenth time my long and tedious medical history. I am sure you have had the same experience many times. List all your medications and dosages. List all your surgeries. List current and past conditions that you have had, including hospitalizations. List your family’s medical history, parents and siblings. Provide an emergency contact. Oh, and don’t forget your name, address, phone numbers (home, cell and work), email address, date of birth, social security number, current employer, current employer’s address and phone number not to mention, of course, your almighty health care insurer, their phone number, your policy number and your group number.

As someone who works in information technology, filling out these forms repeatedly is an obvious problem that should just be solved. Yes, as part of the Affordable Care Act, health care providers are being nudged into electronic medical records. I can understand the reluctance of doctors’ offices to go there, given the voluminous information they collect and the chance of clerical errors. Still, much of the information is route and common. It could be provided by the patient in an electronic fashion very easily. All it needs is a law to make it happen.

This is a job for government, not to make such devices, but to set standards for them and to require health care providers to accept them. Such a government standards entity already exists:  the National Institute of Standards and Technology. Other agencies, probably the Department of Health and Human Services, through regulation could require health care providers to accept electronic data provided by the patient in lieu of filling out those awful and painful new patient forms.

Here is how it might work. Next time I visit a new doctor, I would take out my medical smart card. It would be more than an electronic wallet, but also have my medical history. I would wave the smart card over the card reader at the receptionist’s desk and it would ask for permission to transmit certain types of data. Ideally, it would show me on a screen all the information requested. I would be able to change it (in the process changing the data on the card, since it would be inaccurate) or blank out fields I don’t want to share. I would then give my permission to share the data using some sort of authorization mechanism. Ideally I would do this by pressing my thumb on a spot on the card. However, a PIN or retinal scan might be okay as well.

There are devices out there that get part of the way there. For example, MedicTag is one of a number of devices that puts your medical history on a USB drive that you wear at all times. The problem with devices like this is that there is no guarantee that your health care provider will even think to check for the device. Even if they can, there is no standard for encoding the information so that it can be easily read into a provider’s health care database yet stay secure. To make sure that the data can be read in an emergency, it is likely unencrypted. Worst of all, since most health care visits are not for emergencies, then routine trips would likely require you to fill out paper forms anyhow. Certain providers, principally emergency rooms and ambulance companies, would have permission to read your card without your authorization.

I would bet that most health care providers would be glad to install devices that could read structured medical information from these devices. They would quickly pay for themselves in productivity savings and accuracy of these data. Most health care providers already have a records management system, generally Medics Elite. These companies would find plenty of incentive to build software for point of presence terminals to collect the data.

I am sure that a smartphone could be configured to do this. It can already be your electronic wallet. That seems to be the thinking behind Google Wallet, but so far vendors have been lukewarm embracing the technology. Doubtless apps could be created that would comply with any NIST standards for sharing medical information. With cloud services now becoming standard, most of us would be glad to pay a reasonable fee to have our medical and other private information backed up in the cloud, in case we lose the smartphone. The real problem is that there is little in the way of standards for transferring frequent medical information, at least from patient to provider. This is why we need the benevolent hand of government. Once standards are in place and providers create interfaces, any number of vendors could compete to provide devices and apps to make this a reality. Just as many of us now have electronic boarding passes that are scanned off our cell phone, there is no reason why the same data could not be transmitted using an infrared or wireless connection, once authorization is granted.

As an aging human being who doubtless has many hundreds or thousands of doctors’ appointments ahead of him before I die, a device like this cannot come soon enough. After all, as you age you realize time is short, and you can save heaps of it not filling out redundant medical forms.