There is an excellent article in today’s Wall Street Journal, Monday, March 28, 2016 on the difficulties of sorting out your parents’ financial affairs after they become incapacitated. It includes a number of recommendations on steps you should take with your family while your parents are still healthy to share financial information and avoid the difficulties the author experienced.
As my bio indicates, I spent more than 25 years working in the private sector, primarily in equity research and investment banking for publicly traded securities firms. I, like many with private sector careers and nearly everyone even slightly right of center politically, take as an article of faith that the private sector is more efficient than the government at doing just about anything. However, when it comes to Social Security and Medicare (technically the Centers for Medicare and Medicaid Services or CMS) my experience over the past year indicates these agencies far exceed private sector insurers in quality of service.
In a single week in January 2016, I applied for Social Security, my wife applied for Medicare and my wife interacted over a billing issue with CareFirst, the Maryland Blue Cross / Blue Shield company. These interactions highlighted for me the contrasts between dealing with these two Federal government agencies and dealing with a private sector health insurer. I found the difference in quality in the government’s favor to be so dramatic that I thought it warranted a comment on my blog.
The quality differences with Social Security, Medicare and private insurers start online. The ssa.gov and medicare.gov websites are well designed and easy to negotiate and the online process to apply for Social Security and Medicare are clear, easy to understand and complete. Follow up correspondence from the agencies can be couched in bureaucratic language but is timely, understandable and alerts you and your spouse to possible benefits, like Social Security if one of you signs up for Medicare, help paying for drugs or the availability of spousal benefits.
After I recently filed online for Social Security benefits the agency had some questions. I was contacted via email by an agency employee within 48 hours of filing my application for benefits and asked to set up a time to talk. I received a call back from a claims specialist within the time slot to which we had agreed. She was very pleasant and enthusiastic, was able to resolve the questions she had and indicated she would move my application along with formal notification likely coming closer to the month in which my 66th birthday would occur. She clearly disclosed that the detailed guidelines for staff of Social Security changes included in the recently passed budget bill had not yet been prepared but agreed that May 1 was the deadline, which I had met, for various rules changes. In short, both my online and telephone interaction with a Social Security claims specialist were easy and pleasant and I believe they will prove effective.
My wife’s experience with Medicare and CareFirst involved only online experiences. With Medicare she was able to quickly and easily complete her Medicare application and has already received her notice of eligibility with coverage beginning in the month she will turn 65. She has yet to select Part B and Part D providers, which will be private insurers operating within Medicare requirements. Contrast this with her almost simultaneous online interaction with CareFirst, which has provided one or both of us with individual health insurance coverage for the last five years or so.
In January, our credit charge used to automatically pay my wife’s CareFirst monthly premium had some information change, so the automatic payment of her CareFirst premium had not gone through. This was communicated to her with conflicting emails, one auto-generated indicating the payment had been processed and another saying it had been rejected and she risk losing coverage if payment was not received. This led us to the CareFirst website, where we spent 10 – 15 minutes trying to find the right area to update the payment information and then another frustrating 15 minutes plus because the system would not allow us to update the information on the credit card. We finally realized we had to first delete the exist card on file for automatic payments and then enter the same card with updated information. But nowhere was this explained in instructions or in the repeated message that the system was unable to update the card on file.
We have previously had equally or more frustrating experiences with CareFirst online, over the phone and even going to an office and dealing with a person face to face when we initially tried to sign up for individual policies (pre Affordable Care Act Exchanges) and when I shifted from our joint policy to Medicare and we tried to keep coverage in place for my wife. The letter we received from CareFirst indicating we had first been approved for individual health insurance policies was so badly written that neither of us, despite two sets of graduate degrees, were able to understand it. It was only when we received a bill that we realized coverage had been approved. After going to a CareFirst office in person to remove me from our CareFirst coverage when I switched to Medicare but leave coverage in place for my wife, the company still miss-handled the conversion and my wife had to have a number of phone calls with the company before she was able to get her coverage continued. Lest you think this is only an issue with CareFirst, I have also found Medicare.gov much easier to negotiate than the websites of United Healthcare for Medicare Supplemental Insurance and websites of Medicare Part D drug coverage providers.
So, for seniors and their family members, take heart. Our experience indicates that Social Security and Medicare are much easier to deal with than your current private insurer. Kudos to the dedicated employees working at the Social Security Administration and the Centers for Medicare and Medicaid Services and keep up the good work. America’s seniors need you.
For all of us as citizens, we need to admit there are times when government works and may even work better than the private sector – despite what you will hear during this Presidential election year. And before you say it – the cost to operate Social Security and Medicare is also lower on a percentage basis than the cost to provide private insurance.
Important Changes in New Two-Year Budget Agreement
According to a report in today’s (10/29/15) Wall Street Journal on page C1, the two-year budget agreement, passed by the House of Representatives on October 28th and headed to the Senate will eliminate the ability of social security recipients to elect and suspend benefits at age 66 (described below under Take Advantage Of Spousal Benefits At Age 66) and have their spouse claim spousal benefits while continuing to benefit from delaying their own social security benefits until age 70.
Start of Original Post
I purchased and read the book Get What’s Yours – The Secrets To Maxing Out Your Social Security after seeing a generally favorable book review. The authors are Laurence J. Kotlikoff, Philip Moeller and Paul Solman; respectively an economics professor at Boston University, a journalist who writes about retirement for Money and the PBS website Making Sen$e and a business and economics correspondent for PBS NewsHour.
In an effort to make the details of social security entertaining and approachable, I thought the authors relied on somewhat tortured personal anecdotes and repeated and repeated key points, indicating in my view a condescending attitude toward their readers. The book nevertheless has some very useful information for those trying to assess their best options for Social Security and some helpful cautions.
Key points include:
Know The Basic Facts and Terminology – For most baby boomers (those born between 1946 and 1954) 66, not 65, is now the “Full Retirement Age” and 70 is the “Maximum Retirement Age”. You can elect to begin collecting Social Security for retirement as early as 62, but if you do your monthly distributions are reduced by 25% of your full retirement benefit at age 66. Your benefits will grow by 8% of your full retirement benefit per year if you wait from age 66 to age 70. The book explains a lot of other Social Security terminology, some of which may be critical to you maximizing your benefits, and also presents a lot of information on survivor, spousal and disability and dependent child options under Social Security. The Social Security website ssa.gov is also full of information.
View Social Security An Annuity To Protect Against Exhausting Other Assets – One of the great benefits of Social Security is that the payments last as long as you live and may provide survivor options to your spouse and children. The authors argue, and I agree with them, that assuring yourself a higher annual income from Social Security for as long as you live late in retirement, when there is a chance you might exhaust your other resources, is more important than starting benefits early, unless you have no other retirement income available to you or know for certain that you will die early.
The Financial Incentives To Delay Claiming Benefits Are Compelling – If your full retirement benefit at age 66 were to be $1,500 per month, your benefit if you claim benefits early, beginning at age 62, would be only about $1,125 per month. By starting benefits at age 62, you would get four more years of payments, totaling $54,000, than waiting until age 66. But by waiting for the higher payment you would receive $31,500 more in total benefits before inflationary adjustments if you were to live to age 85. More important, is that by waiting you would have a substantially higher annual income, $18,000 vs. $13,500 before inflationary adjustments, late in life when there is chance your other forms of retirement savings are exhausted and inflationary adjustments will magnify this difference over time.
Wait Until 70 To Take Social Security Benefits If You Can – Using the same example of a $1,500 monthly retirement benefit at age 66, by waiting to age 70, rather than starting retirement benefits at age 66, you would boost your annual retirement income to approximately $1,980 per month, $23,760 annually (by approximately 32% compare to your standard age 66 full retirement benefit). Since these figures would be adjusted for cost of living, the absolute differences between the lower and higher figures would be even greater on a post-inflation basis.
Take Advantage Of Spousal Benefits At Age 66 – One of the key opportunities for maximizing your Social Security benefits concerns the Spousal Benefit. You will want to consult the book or another resource for details but in essence if one spouse is several years older than the other and was the higher wage earner, it is possible for the older, higher wage earner to file for Social Security retirement benefits at age 66 and suspend benefits for up to four years until age 70 in order to create the opportunity for the lower wage earning spouse to claim restricted spousal benefits (50% of the higher wage earners full retirement benefit) without triggering retirement benefits for the higher wage earner and without reducing the growth in the higher wage earner’s social security benefit between age 66 and 70. There are penalties, if this maneuver is started before the younger spouse reaches age 66.
Evaluating Your Options – There are a multitude of potential Social Security benefits and options for getting them. To help you understand the specific Social Security options available to you, the lead author, Laurent Kotlikoff , also offers an online Social Security software planning tool at maximizemysocialsecurity.com, which gets good press reviews but which I have not tried. At times the book is only a promotional tool for the software playing up the risks of making an error in claiming Social Security and warning against relying on the Social Security Administration for advice. Anecdotal feedback I have gotten from other Social Security recipients seems much more favorable about the advice available from Social Security offices than the impression you get from reading Get What’s Yours – The Secrets To Maxing Out Your Social Security but the book is a useful resource.
