Personal Finance

How Trump’s win could change your health care

Published

1 month ago

November 18, 2024

Business Finance News

U.S. President-elect Donald Trump arrives on November 13, 2024 at Joint Base Andrews, Maryland.

Andrew Harnik | Getty Images

President-elect Donald Trump‘s return to the White House is poised to have big impacts on consumer health care.

Republicans may face few legislative roadblocks with their goals of reshaping health insurance in the U.S., experts said, after the party retained its slim majority in the House of Representatives and flipped the Senate, giving it control of both Congress and the presidency.

Households that get health insurance from Medicaid or an Affordable Care Act marketplace plan may see some of the biggest disruptions, due to reforms sought by Trump and Republican lawmakers, according to health policy experts.

Such reforms would free up federal funds that could be used to help pay for other Republican policy priorities like tax cuts, they said.

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Just under 8% of the U.S. population is uninsured right now — the lowest rate in American history, said Michael Sparer, a professor at Columbia University and chair of its Department of Health Policy and Management. That figure was 17% when the Affordable Care Act was enacted over a decade ago, he said.

“That rate will start going up again,” Sparer said.

Trump announced on Nov. 14 that he wants to tap Robert F. Kennedy Jr. to run the Department of Health and Human Services, which includes the Centers for Medicare and Medicaid Services. CMS, in turn, administers the Affordable Care Act marketplace and the Children’s Health Insurance Program (CHIP), among other endeavors.

Robert F. Kennedy Jr. speaks with Republican presidential nominee former President Donald Trump at a Turning Point Action Rally in Duluth, GA on Wednesday, Oct. 23, 2024.

The Washington Post | The Washington Post | Getty Images

Kennedy, a vaccine skeptic who’s been accused of spreading conspiracy theories, has vowed to make big changes to the U.S. health care system.

A spokesperson for Trump’s transition team did not respond to a request from CNBC for comment about the President-elect’s health policy plans.

Here’s how health care could change for consumers during the incoming Trump administration, according to experts.

Affordable Care Act marketplace

A lab technician cares for a patient at Providence St. Mary Medical Center on March 11, 2022 in Apple Valley, California.

Mario Tama | Getty Images News | Getty Images

‘Betting’ premium subsidies will expire

Based on how the election went, the enhanced subsidies on the Affordable Care Act will likely not be renewed once they expire at the end of 2025, said Cynthia Cox, vice president and director of the ACA program at KFF, a health policy research organization.

“If I was going to place a bet on this, I’d be much more comfortable betting that they are going to expire,” Cox said.

That government-backed aid, originally passed during the pandemic under the American Rescue Plan in 2021, has significantly lowered the costs of coverage for people buying health insurance plans on the ACA marketplace. Those customers include anyone who doesn’t have access to a workplace plan, such as students, self-employed consumers and unemployed people, among others.

An individual earning $60,000 a year now has a monthly premium of $425, compared to $539 before the enhanced subsidies, according to a rough estimate provided by Cox. Meanwhile, a family of four making about $120,000 currently pays $850 a month instead of $1,649.

Permanently extending the enhanced ACA subsidies could cost around $335 billion over the next 10 years, according to an estimate by the Congressional Budget Office.

“They’re concerned about the cost, and they’re going to be cutting taxes next year likely,” Cox said, of Republicans.

Still, it’s a ‘big’ gamble to forgo health insurance

Around 3.8 million people will lose their health insurance if the subsidies expire, the Congressional Budget Office estimates. Those who maintain their coverage are likely to pay higher premiums.

“The bottom line is uncertainty,” said Sabrina Corlette, co-director of the Center on Health Insurance Reforms at Georgetown University’s McCourt School of Public Policy.

“The good news for marketplace consumers is that the enhanced [subsidies] will be available through 2025, so there should be no immediate changes,” Corlette added.

How medical debt became normal in the U.S.

Even if the subsidies disappear, experts say it’s important to stay enrolled if you can, even if you have to make tradeoffs on coverage to keep the costs within budget.

Enrolling in a plan, even a cheaper plan with a big annual deductible, can provide an important hedge against huge costs from unforeseen medical needs like surgery, said Carolyn McClanahan, a physician and certified financial planner based in Jacksonville, Florida.

“I can’t emphasize how big a gamble it is to go without health insurance,” said McClanahan, founder of Life Planning Partners and a member of the CNBC Financial Advisor Council.

“One heart attack easily costs $100,000” out of pocket for someone without insurance, she said. “Do you have that to pay?”

Medicaid

A ‘pretty big target’ for lawmakers

Medicaid is the third-largest program in the federal budget, accounting for $616 billion of spending in 2023, according to the Congressional Budget Office. Trump campaigned on a promise not to make cuts to the two largest programs: Social Security and Medicare.

That makes Medicaid the “obvious place” for Republicans to raise revenue to finance their agenda, said Larry Levitt, executive vice president for health policy at KFF.

“Medicaid will have a pretty big target on its back,” Levitt said.

The bottom line is uncertainty.

Sabrina Corlette

co-director of the Center on Health Insurance Reforms at Georgetown University’s McCourt School of Public Policy

Cuts would “inevitably mean” fewer households would get benefits, Levitt said. Medicaid recipients tend to be lower-income households, people with disabilities and seniors in nursing homes, he said.

Medicaid cuts were a big part of the push among Trump and other Republican lawmakers to repeal and replace the Affordable Care Act (also known as Obamacare) in 2017, Levitt said.

Those efforts were ultimately unsuccessful.

How Medicaid might be curtailed

Maskot | Maskot | Getty Images

The new Medicaid cuts may take many forms, according to experts, who cite past proposals and remarks from the Trump administration, Republican lawmakers and the Project 2025 conservative policy blueprint.

For example, the Trump administration may try to add work requirements for Medicaid recipients, as it did during his first term, said Sparer of Columbia University.

Additionally, Republicans may try to cap federal Medicaid spending allocated to states, experts said.

The federal government matches a portion — generally 50% or more — of states’ Medicaid spending. That dollar sum is uncapped.

Republicans may try to covert Medicaid to a block grant, whereby a fixed amount of money is provided annually to each state, or institute a per-capita cap, whereby benefits are limited for each Medicaid enrollee, Levitt said.

Lawmakers may also try to roll back the Medicaid expansion under the Affordable Care Act, which broadened the pool of people who qualify for coverage, experts said.

They could do this by cutting federal financing to the 40 states (plus the District of Columbia) that have expanded Medicaid eligibility. That would shift “an enormous financial risk to states, and many states as a result would drop the Medicaid expansion,” Levitt said.

Short-term health insurance plans

Under the previous Trump administration, consumers saw an increase in the availability of non-ACA compliant health insurance options, including short-term plans, experts say. The same is likely to happen over the next four years.

Short-term health insurance plans offer coverage for limited amounts of time, and typically on fewer medical services than comprehensive coverage.

Proponents of these plans say they allow insurers to offer consumers lower monthly premiums because they’re not required to cover as many services. At the same time, the plans are able to reject people with pre-existing conditions or charge them more. While Trump was in office, enrollment in short-term plans spiked.

The U.S. Capitol building in Washington, D.C., Oct. 4, 2023.

Yasin Ozturk | Anadolu Agency | Getty Images

“The previous Trump administration and many in the GOP have called for expanding the marketing and sale of short-term plans and other insurance products that do not have to satisfy the ACA’s pre-existing condition standards and other consumer protections,” said Georgetown University’s Corlette.

She said that consumers can be attracted to the plans for their low costs, but often learn too late how thin the coverage is.

Drug prices

The Trump administration’s stance on drug pricing is murkier, health experts said.

The Inflation Reduction Act, which President Biden signed into law in 2022, introduced many drug price reforms.

Trump has vowed to roll back parts of the law, which also contains many climate-related provisions and tax breaks toward which he is hostile.

CMS Administrator on Medicare price negotiations: People will see benefits starting next year

It’s unclear if lawmakers would keep the drug policies intact, experts said. Trump signed executive orders in 2020 aimed at lowering costs for prescription medications, for example.

“It’s not at all clear Trump will be a friend of the pharma industry,” Sparer said.

For example, the Inflation Reduction Act gave the federal government — for the first time — the authority to negotiate prices with pharmaceutical companies over some drugs covered by Medicare.

That provision is slated to kick in for 10 drugs — some of Medicare’s “most costly and most used” medications, treating a variety of ailments like heart disease, diabetes, arthritis and cancer — in 2026, according to the Centers for Medicare and Medicaid Services.

The measure will save patients $1.5 billion in out-of-pocket costs in 2026, CMS estimates. The federal government would expand the list of medications in ensuing years.

The Inflation Reduction Act also capped Medicare co-pays for insulin at $35 a month. They were previously uncapped. The average Medicare Part D insulin user had paid $54 out-of-pocket a month per insulin prescription in 2020, according to KFF.

The law also capped out-of-pocket costs at $2,000 a year for prescription drugs covered by Medicare, starting in 2025. There was previously no cap.

About 1.4 million Medicare Part D enrollees paid more than $2,000 out-of-pocket for medications in 2020, KFF found. Those costs averaged $3,355 a person.

Personal Finance

What’s next for the Social Security Fairness Act

Published

40 minutes ago

December 20, 2024

Business Finance News

Richard Stephen | Istock | Getty Images

As Congress scrambles to avoid a government shutdown, the Senate is also poised to consider another bill that would increase Social Security benefits for some public workers.

But the bill, the Social Security Fairness Act, may undergo changes if some Senators’ efforts to add amendments are successful.

Per the original proposal, the Social Security Fairness Act calls for eliminating Social Security provisions known as the Windfall Elimination Provision, or WEP, and Government Pension Offset, or GPO, that have been in place for decades.

The WEP reduces Social Security benefits for individuals who receive pension or disability benefits from employment where they did not pay Social Security payroll taxes. The GPO reduces Social Security for spouses, widows and widowers who also receive their own government pension income. Together, the provisions affect an estimated 3 million individuals.

The bill has enthusiastic support from organizations representing teachers, firefighters, police and other government workers who are affected by the benefit reductions.

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“You shouldn’t penalize people for income outside of a system when you’ve paid into it and earn that benefit,” said John Hatton, vice president of policy and programs at the National Active and Retired Federal Employees Association. “It’s been 40 years trying to get this repealed.”

The bill has received overwhelming bipartisan support. The Social Security Fairness Act was passed by the House with a 327 majority in November.

Preliminary Senate votes this week have also shown a strong bipartisan support for moving the proposal forward. On Wednesday, the chamber voted with a 73 majority on a cloture for the motion to proceed. That was followed by a Thursday vote on a motion to proceed that also drew a 73-vote majority.

Experts say the Senate may soon hold a final vote. It could proceed in one of two ways — with amendments that alter the terms of the original bill or with a final vote without any changes.

Amendments may include raising the retirement age

The Social Security Fairness Act would cost an estimated $196 billion over 10 years, according to the Congressional Budget Office.

Those additional costs come as the trust funds Social Security relies on to help pay benefits already face looming depletion dates. Social Security’s trustees have projected the program’s trust fund used to pay retirement benefits may be depleted in nine years, when just 79% of benefits may be payable.

Some senators who oppose the Social Security Fairness Act have expressed concerns about the pressures the additional costs would put on the program.

Sen. Rand Paul, R-Kentucky, who this week voted against moving the current version of the bill forward in the Senate, said this week he plans to propose an amendment to offset those costs by gradually raising the retirement age to 70 while also adjusting for life expectancy. Social Security’s full retirement age — when beneficiaries receive 100% of the benefits they’ve earned — is currently age 67 for individuals born in 1960 or later.

“It is absurd to entertain a proposal that would make Social Security both less fair and financially weaker,” Paul said in a statement. “To undo the damage made by this legislation, my amendment to gradually raise the retirement age to reflect current life expectancies will strengthen Social Security by providing almost $400 billion in savings.”

As of Friday morning, a total of six amendments to the bill had been introduced, according to Emerson Sprick, associate director of economic policy at the Bipartisan Policy Center.

Some amendments call for replacing the full repeal of the WEP and GPO provisions with other changes.

One amendment from Sens. Ted Cruz, R-Texas, and Joe Manchin, I-West Virginia, would instead put in place a more proportional formula to calculate benefits for affected individuals. That change, inspired by Texas Republican Rep. Jodey Arrington’s Equal Treatment of Public Servants Act, has a lot of support from policy experts and the Bipartisan Policy Center, Sprick said.

Social Security advocacy groups have pushed for larger comprehensive Social Security reform that would use tax increases to pay for making benefits more generous.

“We want to help in making this happen, but our preference was for it to be part of a much larger Social Security reform,” said Dan Adcock, director of government relations and policy at the National Committee to Preserve Social Security and Medicare.

To be sure, if amendments are successfully added to the bill, it would have to go back to the House.

“We’re hoping that that doesn’t come to that, because that could complicate matters, depending on the timing of how what’s going on with the [continuing resolution]” to avoid a government shutdown, Adcock said.

Senate may proceed to final vote on original bill

Much of what happens next rests on Senate Majority Leader Chuck Schumer, D-New York, who could decide unilaterally not to allow amendments to be considered, according to Sprick.

Alternatively, Schumer could decide to allow for amendments in exchange for limiting the length of time spent on consideration of the bill, he said.

However, Sprick said he doubts Schumer will allow amendments at this point.

“The most likely scenario at this point is that Senator Schumer just runs out the clock, doesn’t allow consideration of any amendments, and they take a final vote either very late tonight or early tomorrow,” Sprick said.

While opponents of the bill may delay a vote, they won’t be able to stop a vote, Hatton said. Moreover, there’s reason to believe the leaders who have voted to advance the bill this week will also vote for it if and when it is put up for a final vote, he said.

“I’m still optimistic that this passes, and it’s more just a matter of when, not if,” Hatton said.

Personal Finance

Number of millennial 401(k) millionaires jumps 400%: How they did it

Published

2 hours ago

December 20, 2024

Business Finance News

CNBC Retirement Survey: 44% of workers are 'cautiously optimistic' about reaching retirement goals

A few years ago, Wes Bellamy, 38, took stock of his investment accounts in preparation to buy a home in Charlottesville, Virginia. It was then that he noticed significant gains in his 401(k).

Although Bellamy, who is the chair of the political science department at Virginia State University, had been saving diligently for nearly a decade and making the most of his employer’s matching program, he said seeing his retirement account balance was “a pleasant surprise and a nice nest egg.”

Since then, his 401(k) balance has continued to grow. “I’m at $980,000 — I’m not at a million yet but I’m close.”

More millennials are 401(k) millionaires

Saving $1 million for retirement used to be considered the gold standard, although these days financial advisors may recommend putting away even more.

Millennial workers are still the most common generation to say they’ll need at least $1 million to retire comfortably, according to a recent report by Bankrate, and, for the first time, a larger share of younger retirement savers are reaching that key savings threshold.

The number of millennials with seven-figure balances has jumped 400% from one year ago, according to the data from Fidelity Investments prepared for CNBC.

Among this group, the number of 401(k) accounts with a balance of $1 million or more rose to about 10,000 as of Sept. 30, up from around 2,000 in the third quarter of 2023, according to Fidelity, the nation’s largest provider of 401(k) plans. The financial services firm handles more than 49 million retirement accounts altogether.

Generally, reaching 401(k) millionaire status only comes after decades of consistent contributions, making it a harder milestone for younger workers to achieve.

This year, positive market conditions helped boost those account balances to new highs. The Nasdaq is up 29% year to date, as of Dec. 19, while the S&P 500 notched a 23% gain and the Dow Jones Industrial Average rose more than 12%.

“Even shorter-term savers have done well because of significant market gains,” said Mike Shamrell, Fidelity’s vice president of thought leadership.

“If we continue to see positive market conditions, we could see not only the overall number of millionaires overall bump up over that threshold but also more millennials,” Shamrell said.

Whether savers benefit more from long-term savings efforts or a favorable investment environment, “the reality is, it’s a blend of both,” financial advisor Jordan Awoye, managing partner of Awoye Capital in New York, said.

Further, millennials — the oldest of whom will be 44 in 2025 — are nearing their peak earning years, he said, “which is making it more enticing to save for retirement.”

Still, reaching the million-dollar mark “is not everything,” Awoye said.

Heading into a year of potential volatility, those balances will fluctuate, perhaps even dramatically. However, there is still plenty of time before millennial savers will need to access those funds in retirement. “You are likely not touching that money for 20 years. Even if [the market] goes up and down, stick to the script,” Awoye said.

“When you are retirement planning, you have to remember to tie it back to your North Star, which is your goal.”

How to become a 401(k) millionaire

Certified financial planner Chelsea Ransom-Cooper, chief financial planning officer of Zenith Wealth Partners in New Jersey, works with mostly millennial clients. She says she often encourages them to contribute more than what’s necessary to get the full employer match — even up to the maximum annual contribution limits for a 401(k) or IRA.

In 2023, only 14% of employees deferred the maximum annual amount into 401(k) plans, according to Vanguard’s 2024 How America Saves report. But that’s a missed opportunity, Ransom-Cooper said.

In 2025, employees can defer $23,500 into workplace plans, up from $23,000 in 2024. (The IRA contribution limit is $7,000 for 2025, unchanged from 2024.)

At the same time, employer contributions are climbing. Together, the average 401(k) savings rate, including employee deferrals and company contributions, rose to 12.7% in 2023, up from 12.1% the year before, according to the Plan Sponsor Council of America’s annual survey of 401(k) plans.

That’s made a big difference, Ransom-Cooper said. “There’s more money that can go into these accounts outside of the employee contribution, that can be really helpful to push these accounts higher and help people reach their retirement goals.”

While there is always the chance that a market downturn will take a toll on these balances in the year to come, the markets are up more than they are down, Ransom-Cooper said. “They can weather those tougher days in the shorter term.”

“Staying the course and keeping that longer term vision is really helpful,” she said.

Bellamy says his goal is to retire in another 20 years, before reaching 60. “Then, I’ll have another 15, 20 years to live my life freely as I want to.”

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Personal Finance

Here’s the average 401(k) savings rate as investors boost deferrals

Published

6 hours ago

December 20, 2024

Business Finance News

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The average 401(k) savings rate, including employee deferrals and company contributions, continued to climb in 2023, a new industry survey reported.

In 2023, the average combined savings rate was 12.7%, up from 12.1% in 2022, with employees deferring 7.8% of pay and companies adding 4.9%, according to the Plan Sponsor Council of America’s yearly survey of more than 700 company 401(k) and profit-sharing plans.

“The deferral rate has been trending up over time,” with dips during economic downturns, said Hattie Greenan, director of research and communications for the Plan Sponsor Council of America.

Meanwhile, Vanguard reported the average combined savings rate was an estimated 11.7% in 2023, which matched the figures from 2022, according to the company’s yearly analysis of more than 1,500 qualified plans and nearly 5 million participants.

Fidelity Investments, which reports retirement savings rates quarterly, estimated the combined savings rate was 14.1%, as of Sept. 30, 2024, based on an analysis of 26,000 corporate retirement plans.

How much to save in your 401(k)

Vanguard recommends saving 12% to 15% of your earnings every year, including employer contributions, to meet your retirement needs. The combined savings benchmark for Fidelity is 15%.

Typically, companies match employee deferrals up to a specified limit — and you should aim to contribute at least enough to get the full match, said Greenan from the Plan Sponsor Council of America.

“That’s really going to add up over time,” she said.

More than 80% of plans included a matching contribution in 2023, according to the Plan Sponsor Council of America report.

After hitting the match, some experts suggest boosting your deferrals every year, but “you’re going to see growth from whatever you can afford to contribute,” Greenan said.

Starting in 2025, the 401(k) maximum employee deferral will jump to $23,500, up from $23,000 in 2024. The 401(k) catch-up contribution will remain $7,500 for workers 50 and older, but increases to $11,250 for investors aged 60 to 63.

If you’re planning to save more in 2025, right now is “an important time of the year” to boost deferrals, said certified financial planner and enrolled agent Catherine Valega, founder of Boston-area Green Bee Advisory.

Typically, it takes a few paychecks until your 401(k) deferral updates go into effect, so it’s better to make changes in December to be ready for January, she said.

Only 14% of employees maxed out 401(k) plans in 2023, according to Vanguard’s annual report. On top of maxed-out contributions, an estimated 15% of workers made catch-up contributions in plans with the feature, the same report found.