75% of Medicare beneficiaries worry about affording costs beyond premiums. Here's how high out-of-pocket costs can go

75% of Medicare beneficiaries worry about affording costs beyond premiums. Here's how high out-of-pocket costs can go

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For retirees, health-care costs can be among the most unpredictable expenses they face over the course of their golden years.

While many of them worry about affording their monthly Medicare premiums, their bigger concern is their out-of-pocket costs, according to a recent report from eHealth.

The report says 75% are either “very” or “somewhat” worried about affording those costs, which include deductibles, copays and coinsurance. That compares with 43% who worry about their ability to pay their premiums, according to the report, which is based on a February survey of more than 4,500 Medicare beneficiaries.

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Exactly how much you spend on Medicare depends on both your coverage choices and your use of the health-care system. However, you may be able to pinpoint a worst-case scenario to help you budget.

Beneficiaries have coverage options

Basic, or original, Medicare consists of Part A (hospital coverage) and Part B (outpatient care) and covers 65 million people — 57.3 million are age 65 or older, and the remaining 7.7 million are younger with permanent disabilities.

Many beneficiaries choose to get Parts A and B through an Advantage Plan (Part C), which also typically includes Part D (prescription drug coverage) and often other extras such as dental and vision.

These plans often have no monthly premium or a low one, and they limit how much you pay out of pocket each year for covered services. Deductibles, copays and coinsurance vary from plan to plan.

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Other beneficiaries instead decide to pair Parts A and B with a standalone Part D plan and, often, a Medigap plan, which covers part of the out-of-pocket costs that come with Parts A and B. However, premiums can be pricey, depending on where you live and other factors.

Basic Medicare has no out-of-pocket limit

If you have only basic Medicare, there is no cap on what you might spend in any given year.

“With no secondary coverage, there is no out-of-pocket maximum, which leaves a beneficiary financially exposed,” said Elizabeth Gavino, founder of Lewin & Gavino and an independent broker and general agent for Medicare plans.

How hospital stays are covered

Part A, which comes with no premium for most beneficiaries, has a deductible of $1,600 when you are admitted to the hospital. That covers the first 60 days of inpatient care in a benefit period.

Days 61 through 90 come with coinsurance of $400 per day, and then it’s $800 daily beyond that (so-called lifetime reserve days). And for skilled nursing facilities, a daily coinsurance of $200 kicks in for days 21 through 100.

If you have Medigap, all of those charges are either fully or partially covered under most plans

Out-of-pocket maximums may range up to $8,300

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With Advantage Plans, because the cost-sharing differs from plan to plan, “they will all vary but at least their hospital spending would count toward the plan’s out-of-pocket maximum, meaning it would be capped,” said Danielle Roberts, co-founder of insurance firm Boomer Benefits.

In 2023, those maximums can be as much as $8,300 for in-network coverage, Roberts said. 

“In most urban areas, you can find good plans with considerably lower limits,” she said. “If you can find a plan that has a lower out-of-pocket limit, such as $3,000 or $4,000, that is a benefit to you.”

‘The sky is the limit’ on Part B coinsurance with basic Medicare

Part B — which comes with a standard monthly premium of $164.90 in 2023 — has a deductible of $226. But after that, you pay a 20% coinsurance for covered services with no cap on how high that goes.

“It means the sky is the limit on the 20% coinsurance,” Roberts said. “Imagine trying to cover 20% of eight weeks of chemotherapy or for dialysis for the rest of your life or until you get a transplant.”

“In my opinion, this is the most important thing that you want to get covered,” she added. “Both Medigap and Medicare Advantage Plans do a good job of this, since most Medigap plans cover the 20% [coinsurance] and Advantage Plans have caps on Parts A and B spending.”

Part D currently has no out-of-pocket maximum

Under current law, there is no out-of-pocket limit associated with Part D, regardless of whether you get your coverage as a standalone policy or through an Advantage Plan.

A deductible for Part D, which may come with a premium, can be up to $505 in 2023, also regardless of how you get the coverage. 

Part D does come with catastrophic coverage that kicks in once out-of-pocket expenses reach $7,400 in a given year, Roberts said.

After hitting that threshold, “you pay only a small coinsurance or copayment for covered drugs for the rest of the year,” she said.

In 2025, each beneficiary’s annual out-of-pocket spending for Part D will be capped at $2,000.

Also be aware that Medigap plans do not cover any Part D costs.

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Follow this rule of thumb to avoid taking on too much student debt, college experts say

Follow this rule of thumb to avoid taking on too much student debt, college experts say

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Families will soon find college acceptance letters in their mailboxes. As students weigh where to attend, making sure they won’t borrow too much is key, experts say.

The consequences of taking on too much student debt can be severe.

“If you borrow too much, you will have less money available for other priorities, such as buying a home,” said higher education expert Mark Kantrowitz. “You may also have to take a job that pays better as opposed to the job that matches your career goals.”

Kantrowitz found in his research that under a third of student loan borrowers who took out $20,000 or less were stressed by their debt, compared with over 60% of those who’d taken out $100,000 or more.

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The general rule of thumb is not to borrow more than you expect to earn as a starting salary, said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.

That figure will vary a bit based on what you plan to study. You can look up annual average incomes for different occupations at the U.S. Department of Labor’s website.

Kantrowitz also stands by this metric. “If your total student loan debt at graduation is less than your annual starting salary, you should be able to repay your loans in 10 years or less,” he said.

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Kantrowitz recommends families consider colleges based on the “net price,” which is the amount they’ll have to pay with savings, income and loans to cover the bill, after aid that doesn’t need to be repaid, including grants and scholarships, is accounted for.

When calculating the four-year net cost, Kantrowitz said, keep in mind that different years may cost different amounts because some colleges offer grants or scholarships only for the first year or two.

After estimating the total tab, you can figure out — after any savings or income you plan to direct at the college bill — if what you’d need to borrow is reasonable.

“Often, the least expensive option will be an in-state public college,” Kantrowitz said. “They cost a quarter to a third of the cost of a private college but provide just as good a quality of education.”

If students find that all the colleges they applied to would leave them borrowing too much, they can look at others, as many schools still accept applications after May 1, Kantrowitz said. The National Association for College Admission Counseling usually publishes a list of colleges with space still available.

One more point: Incoming college freshmen should more or less tune out news about the Biden administration’s student loan forgiveness plan, experts say.

Even if the program survives the legal challenges it faces, there’s no guarantee there will be another wave of loan cancellation.

“You should only borrow as much as you can reasonably afford to repay,” Kantrowitz said.

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Exploring the changing risk factors in the technology industry

Exploring the changing risk factors in the technology industry

Exploring the changing risk factors in the technology industry


Technology has become a vital force engrained in our society. While it has enriched our lives for the better, a whole new wave of risks come with the rise of AI and new advancements.  

The idea that technology can now cause bodily injury or property damage is very real, and also very different to how things were ten, even five years ago.  

Whether you’re a broker or insurer, don’t miss the latest episode of IB Talk for a comprehensive guide to the new wave of technological advancements and what potential risks are on the horizon.  

Understand how these risks affect arising technology, like AI and the metaverse, and gain critical insights on how insurers can prepare themselves. Learn how emerging technologies will develop over the next decade, and what precautions insurers can take to combat these risks as well as how they can use new technologies to their advantage. 

Don’t miss this exclusive look into the future of technology, and how brokers and insurers can best position themselves in an ever-changing landscape.

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Op-ed: Here are 4 key things investors should consider during volatile times

Op-ed: Here are 4 key things investors should consider during volatile times

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Recent headlines underscore the fragility of the stock market and, along with it, the ability for many investors to make reasonable decisions about their retirement readiness. Many who recall the violent reaction their portfolios had in the Dot Com Bubble and the Financial Crisis would prefer to avoid the next downturn.

It’s worth noting that crystal balls are in short supply, and we cannot predict the immediate future. What we do have in our arsenal is the ability to review our game plan to avoid making short-term decisions that impact our long-term outcomes.

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Here are more FA Council perspectives on how to navigate this economy while building wealth.

These are four things investors should consider during times of uncertainty.

1. Has your time horizon changed?

Our portfolios should reflect the timing of distributions, and the duration of your portfolio should take this need into account — particularly if there is a need for liquidity within the next three to five years. This should sound familiar because the bank run at Silicon Valley Bank stemmed from the lack of liquidity, as their portfolio of bonds could not accommodate the withdrawal demands of depositors. Your portfolio is akin to a bank balance sheet; you are the depositor, and there should be a viable distribution strategy that mirrors your retirement schedule.

2. Has your risk tolerance changed?

The banks will begin to reassess their penchant for taking risks, which will likely reduce their willingness to take chances. In turn, loan growth may suffer in the months ahead as the credit requirements become more onerous. Investors should follow suit and reconsider the high beta assets that outperform in a less rigorous environment. The question should not be whether to own stocks or bonds, but which securities have the best chance for success in a recessionary high-interest-rate environment.

CNBC FA Council members share their strategies for a volatile market

3. Do you have sufficient reserves?

During times of crisis, it’s always a good idea to have access to readily available resources. One of the problems facing the credit markets is that bonds don’t accurately reflect the true market value, because a sale hasn’t taken place that would establish a price. Your portfolio may have assets that can be sold at a price that is below what it might be worth in the future due to the current set of circumstances. Adequate reserves buy you time while your underperforming holdings have an opportunity to recover.

4. Have you considered the available alternatives?

Our interest rate environment has changed and that has sent shock waves throughout the banking system. For instance, why would depositors remain in a bank that pays 1% when they can receive 5% through another opportunity? The reason we own bonds is because they are less volatile than the stock market, albeit with a lower ceiling. Fortunately for savers, that ceiling just got a few feet higher. Instead of owning defensive stocks or bonds, investors may get 4% to 5% in a money market fund or a Treasury bill with little to no volatility.

We can all learn something from the recent banking crisis and apply these lessons to our own affairs. Soon-to-be retirees would be wise to review their portfolios and determine if they meet the needs of the day when rates are higher, corporate profits are decelerating and volatility doesn’t seem to be going away. This isn’t the time to panic; instead, it’s a chance to reduce your anxiety.

— By Ivory Johnson, certified financial planner and founder of Delancey Wealth Management. Johnson is also a member of the CNBC Financial Advisor Council.

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Deutsche Bank shares slide 13% after sudden spike in the cost of insuring against its default

Deutsche Bank shares slide 13% after sudden spike in the cost of insuring against its default

Deutsche Bank shares slide as cost of insuring against its default rises

Deutsche Bank shares fell by more than 13% on Friday morning following a spike in credit default swaps on Thursday night, as concerns about the stability of European banks persisted.

The German lender’s shares retreated for a third consecutive day and have now lost more than a fifth of their value so far this month. Credit default swaps — a form of insurance for a company’s bondholders against its default — leapt to 173 basis points on Thursday night from 142 basis points the previous day.

The emergency rescue of Credit Suisse by UBS, in the wake of the collapse of U.S.-based Silicon Valley Bank, has triggered contagion concern among investors, which was deepened by further monetary policy tightening from the U.S. Federal Reserve on Wednesday.

A logo stands on display above the headquarters of Deutsche Bank AG at the Aurora Business Park in Moscow, Russia.

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Swiss and global regulators and central banks had hoped that the brokering of Credit Suisse’s sale to its domestic rival would help calm the markets, but investors clearly remain unconvinced that the deal will be enough to contain the stress in the banking sector.

Deutsche Bank’s additional tier one (AT1) bonds — an asset class that hit the headlines this week after the controversial writedown of Credit Suisse’s AT1s as part of its rescue deal — also sold off sharply.

Deutsche led broad declines for major European banking stocks on Friday, with German rival Commerzbank shedding 9%, while Credit Suisse, Societe Generale and UBS each fell by more than 7%. Barclays and BNP Paribas both dropped by more than 6%.

Deutsche Bank has reported 10 straight quarters of profit, after completing a multibillion euro restructure that began in 2019, with the aim of reducing costs and improving profitability. The lender recorded an annual net income of 5 billion euros ($5.4 billion) in 2022, up 159% from the previous year.

Its CET1 ratio — a measure of bank solvency — came in at 13.4% at the end of 2022, while its liquidity coverage ratio was 142% and its net stable funding ratio stood at 119%.

Deutsche Bank declined to comment.

Spillover risk

Financial regulators and governments have taken action in recent weeks to contain the risk of contagion from the problems exposed at individual lenders, and Moody’s said in a note Wednesday that they should “broadly succeed” in doing so.

“However, in an uncertain economic environment and with investor confidence remaining fragile, there is a risk that policymakers will be unable to curtail the current turmoil without longer-lasting and potentially severe repercussions within and beyond the banking sector,” the ratings agency’s credit strategy team said.

“Even before bank stress became evident, we had expected global credit conditions to continue to weaken in 2023 as a result of significantly higher interest rates and lower growth, including recessions in some countries.”

Moody’s suggested that, as central banks continue their efforts to reel in inflation, the longer that financial conditions remain tight, the greater the risk that “stresses spread beyond the banking sector, unleashing greater financial and economic damage.”

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