Personal Finance

Why disputing a medical bill may help cut your costs

Published

4 weeks ago

September 20, 2024

Consumers may feel their medical bills are unyielding, inflexible, set in stone. But that’s not always true: A new study shows patients can often reap financial benefits by disputing charges that seem erroneous or by negotiating for financial relief.

Of consumers who don’t reach out to question a medical bill, 86% said it’s because they didn’t think it would make a difference — but “the experiences of those who did reach out provide evidence to the contrary,” according to a new University of Southern California study.

About 26% of people who called because they disagreed with a charge or couldn’t afford to pay it got their medical bill corrected after the outreach, according to the study, published in August. Roughly 15% got a price reduction, 8% got financial assistance and 7% saw their bills canceled outright.

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“Of the people who did reach out, most of them got some recourse through self-advocacy,” said report-co-author Erin Duffy, a research scientist at the USC Schaeffer Center for Health Policy and Economics.

Researchers polled 1,135 U.S. adults from Aug. 14 to Oct. 14, 2023.

About 1 out of 5 respondents reported receiving a medical bill with which they disagreed or could not afford within the prior 12 months. About 62% of them contacted the billing office to address the concern.

“If you can’t afford to pay something, or [if a bill] doesn’t seem right or match what your care experience was, you should call and ask questions about that,” Duffy said.

Savings can extend into the hundreds or even thousands of dollars, depending on factors like a patient’s health insurance and the type of medical visit or procedure, said Carolyn McClanahan, a physician and certified financial planner based in Jacksonville, Florida.

Bills ‘go all over the place’

A 2023 Consumer Financial Protection Bureau analysis of medical bills for adults age 65 and older found that patients “face a complex billing system with a high likelihood of errors and inaccurate bills.” Often, inaccurate bills result from erroneous insurance claims and occur more frequently among consumers with multiple sources of insurance, the CFPB said.

Common errors included missing or invalid claim data, authorization and pre-certification issues, missing medical documentation, incorrect billing codes and untimely filing of claims, the report found. Such mistakes contributed to the “rejection of claims that would otherwise be paid,” it said.

“[Bills] go all over the place,” said McClanahan, the founder of Life Planning Partners and a member of CNBC’s Advisor Council. “And there’s no transparency or rhyme or reason for how [providers] decide to charge.”

Doing nothing and avoiding payment of medical bills is likely not a good course of action: It could have negative financial consequences, such as late fees and interest, debt collection, lawsuits, garnishments and lower credit scores, according to a separate CFPB resource.

“If something seems egregious, question it,” McClanahan said.

How to manage medical bills

Consumers should ask up front what a medical visit or procedure will cost, or inquire what the estimated cost will be, she said.

Sometimes, consumers will pay “a heck of a lot less” if they pay in cash rather than via insurance, McClanahan said. However, cutting a check could have other consequences like the sum not counting toward one’s annual deductible, she added.

If you feel you were overcharged, request an itemized bill from the provider or hospital, and look for errors or duplicate charges, according to PatientRightsAdvocate.org. Research the fair market price for a service and use that information to negotiate, the nonprofit group said.

If something seems egregious, question it.

Carolyn McClanahan

physician and certified financial planner based in Jacksonville, Florida

The phone number for your medical provider’s accounting or billing office will be on your billing statement, the CFPB said.

Here are three other questions to consider asking about your itemized bill, according to the regulator:

Do charges reflect the services you received?
If you have insurance, do the bills reflect the payment by your insurance and reflect what the provider understood would be covered?
Do any of the charges indicate a service was “out-of-network” when it wasn’t?

When calling a provider about a medical bill, keep a journal about the communication, McClanahan said. Write people’s names and what was discussed, and get a commitment of when you’ll hear back.

Personal Finance

Maximum Social Security retirement benefit: Here’s who qualifies

Published

6 hours ago

October 17, 2024

Business Finance News

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Millions of Social Security beneficiaries will benefit from the 2.5% cost-of-living adjustment for 2025, set to take effect in January.

With that increase, the maximum Social Security benefit for a worker retiring at full retirement age will jump to $4,018 per month, up from $3,822 per month this year, according to the Social Security Administration.

But while those maximum benefits will see a $196 monthly increase, retirement benefits will go up by about $50 per month on average, according to the agency.

The average monthly benefit for retired workers is expected to increase to $1,976 per month in 2025, a $49 increase from $1,927 per month as of this year, according to the Social Security Administration.

Who gets maximum Social Security benefits?

The highest Social Security benefits generally go to people who have had maximum earnings their entire working career, according to Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities.

That cohort generally includes a “very small number of people,” he said.

Because Social Security retirement benefits are calculated based on the highest 35 years of earnings, workers need to consistently have wages up to that threshold to earn the maximum retirement benefit.

“Very few people start out at age 21 earning the maximum level,” Van de Water said.

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Workers contribute payroll taxes to Social Security up to what is known as a taxable maximum.

In 2024, a 6.2% tax paid by both workers and employers (or 12.4% for self-employed workers) applies to up to $168,600 in earnings. In 2025, that will go up to $176,100.

Notably, that limit applies only to wages that are subject to federal payroll taxes. If a wealthy person has other sources of income, for example from investments that do not require payroll tax contributions, that will not affect the size of their Social Security benefits, said Jim Blair, vice president of Premier Social Security Consulting and a former Social Security administrator.

How can you increase your Social Security benefits?

There are beneficiaries who are receiving Social Security checks amounting to more than $4,000 per month, and they usually have waited to claim until age 70, according to Blair.

“Technically, waiting until 70 gets you the most amount of Social Security benefits,” Blair said.

By claiming retirement benefits at the earliest possible age — 62 — beneficiaries receive permanently reduced benefits.

At full retirement age — either 66 or 67, depending on date of birth — retirees receive 100% of the benefits they’ve earned.

And by waiting from full retirement age up to age 70, beneficiaries stand to receive an 8% benefit boost per year.

By waiting from age 62 to 70, beneficiaries may see a 77% increase in benefits.

However, because everyone’s circumstances are different, it may not always make sense to wait until the highest possible claiming age, Blair said.

Prospective beneficiaries need to evaluate not only how their claiming decision will impact them individually, but also their spouse and any dependents, he said.

“You have to look at your own situation before you apply,” Blair said.

Also, it is important for prospective beneficiaries to create an online My Social Security account to review their benefit statements, he said. That will show estimates of future benefits and the earnings history the agency has on record.

Because that earnings information is used to calculate benefits, individuals should double check that information to make sure it is correct, Blair said. If it is not, they should contact the Social Security Administration to fix it.

Personal Finance

Inherited IRA rules are changing in 2025 — here’s what to know

Published

6 hours ago

October 17, 2024

Business Finance News

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What to know about the 10-year rule

Before the Secure Act of 2019, heirs could “stretch” inherited IRA withdrawals over their lifetime, which helped reduce yearly taxes.

But certain accounts inherited since 2020 are subject to the “10-year rule,” meaning IRAs must be empty by the 10th year following the original account owner’s death. The rule applies to heirs who are not a spouse, minor child, disabled, chronically ill or certain trusts.

Since then, there’s been confusion about whether the heirs subject to the 10-year rule needed to take yearly withdrawals, known as required minimum distributions, or RMDs.

“You have a multi-dimensional matrix of outcomes for different inherited IRAs,” Dickson said. It’s important to understand how these rules impact your distribution strategy, he added.

After years of waived penalties, the IRS in July confirmed certain heirs will need to begin yearly RMDs from inherited accounts starting in 2025. The rule applies if the original account owner had reached their RMD age before death.

If you miss yearly RMDs or don’t take enough, there is a 25% penalty on the amount you should have withdrawn. But it’s possible to reduce the penalty to 10% if the RMD is “timely corrected” within two years, according to the IRS.

Consider ‘strategic distributions’

If you’re subject to the 10-year rule for your inherited IRA, spreading withdrawals evenly over the 10 years reduces taxes for most heirs, according to research released by Vanguard in June.

However, you should also consider “strategic distributions,” according to certified financial planner Judson Meinhart, director of financial planning at Modera Wealth Management in Winston-Salem, North Carolina.

“It starts by understanding what your current marginal tax rate is” and how that could change over the 10-year window, he said.

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For example, it could make sense to make withdrawals during lower-tax years, such as years of unemployment or early retirement before receiving Social Security payments.

However, boosting adjusted gross income can trigger other consequences, such as eligibility for college financial aid, income-driven student loan payments or Medicare Part B and Part D premiums for retirees.

Personal Finance

Nearly 2 in 5 cardholders have maxed out a credit card or come close

Published

10 hours ago

October 17, 2024

Business Finance News

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Between higher prices and high interest rates, some Americans have had a hard time keeping up.

As a result, many are using more of their available credit and now, nearly 2 in 5 credit cardholders — 37% — have maxed out or come close to maxing out a credit card since the Federal Reserve began raising rates in March 2022, according to a new report by Bankrate.

Most borrowers who are over extended blame rising prices and a higher cost of living, Bankrate found.

Other reasons cardholders blame for maxing out a credit card or coming close include a job or income loss, an emergency expense, medical costs and too much discretionary spending.

“With limited options to absorb those higher costs, many low-income Americans have had no choice but to take on debt to afford costlier essentials — at a time when credit card rates are near record highs,” Sarah Foster, an analyst at Bankrate, said in a statement.

As prices crept higher, so did credit card balances.

The average balance per consumer now stands at $6,329, up 4.8% year over year, according to the latest credit industry insights report from TransUnion.

At the same time, the average credit card charges more than 20% interest — near an all-time high — and half of cardholders carry debt from month to month, according to another report by Bankrate.

Carrying a higher balance has a direct impact on your utilization rate, the ratio of debt to total credit, and is one of the factors that can influence your credit score. Higher credit score borrowers typically have both higher limits and lower utilization rates.

Credit experts generally advise borrowers to keep revolving debt below 30% of their available credit to limit the effect that high balances can have.

As of August, the aggregate credit card utilization rate was more than 21%, according to Bankrate’s analysis of Equifax data.

Still, “if you have five credit cards [with utilization rates around] 20%, you have a lot of debt out there,” said Howard Dvorkin, a certified public accountant and the chairman of Debt.com. “People are living a life that they can’t afford right now, and they are putting the balance on credit cards.”

Generation X at risk

Gen X most likely to max out their credit cards, survey finds

More than any other generation, Gen Xers in their 40s and 50s are most likely to have maxed out a credit card or come close in the past two and a half years, according to Bankrate’s report.

Of Gen Xers, 27% have maxed out their credit cards compared to 23% of millennials and 17% of Baby Boomers. Young adults in Gen Z are the least likely to have maxed out a card, according to the survey, which polled more than 3,500 adults, including 3,015 who are credit cardholders and 1,104 who have either maxed out their credit cards or come close.

Gen X, the so-called “sandwich generation,” must contend with supporting the generations ahead of them and their children at a time when the costs of higher education and health care have never been higher, studies also show.

Potential problems ahead

Cardholders who have maxed out or come close to maxing out their credit cards are also more likely to become delinquent.

Credit card delinquency rates are already higher across the board, the Federal Reserve Bank of New York and TransUnion both reported.

“Consumers have been measured in taking on additional revolving debt despite the inflationary environment over the past few years, although there has been an uptick in delinquencies in recent months,” said Tom McGee, CEO of the International Council of Shopping Centers.

A debt is considered delinquent when a borrower misses a full billing cycle without making a payment, or what’s considered 30 days past due. That can damage your credit score and impact the interest rate you’ll pay for credit cards, car loans and mortgages — or whether you’ll get a loan at all.

Some of the best ways to improve your credit standing come down to paying your bills on time every month, and in full, if possible, Dvorkin said. “Understand that if you don’t, then whatever you buy, over time, will end up costing you double.”