Groups Scrutinize White House Plan to Cut Drug Costs in Medicare
“I deal every day with people fighting for their lives, and i'm extra sympathetic to them, their desire to live and to get the right treatment,” stated Ellen V. Sigal, the founder and chairwoman of buddies of most cancers research, a public training and advocacy group, even as she mentioned her challenge about rising drug expenses.
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health law insurance Plans to be Rated through community SizeMARCH 6, 2016
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U.S. To test approaches to reduce Drug charges in MedicareMARCH eight, 2016
underneath the proposal, introduced Tuesday, Medicare could attempt a half-dozen new approaches of deciding to buy prescription drugs in component B of Medicare, under which $20 billion was spent remaining 12 months on medicinal drugs administered in docs’ workplaces and sanatorium outpatient departments.
The declaration is handiest a suggestion for a test, however it has huge implications for the pharmaceutical enterprise, mainly for the massive, speedy-developing class of strong point tablets referred to as biologics. The inspiration may want to, for the primary time, link Medicare payments to the effectiveness of a drug and the value of comparable medications — elements now not normally considered inside the modern-day repayment system, which is based totally at the common income fee of drugs, with an extra 6 percent allowance for storage and dealing with prices.
For decades, Congress has legislated Medicare charge costs in minute element. But the cheap Care Act legal the secretary of fitness and human offerings to check new “payment and service shipping models” and adopt them national if they keep cash without harming the fine of care.
Sylvia Mathews Burwell, the fitness secretary, has proven she is inclined to make aggressive use of this energy, with the blessing of President Obama.
The Republican chairmen of 3 powerful congressional committees denounced the management’s plan on Wednesday, describing it, in a joint declaration, as “any other troubling example of unelected bureaucrats making decisions behind closed doors.” The concept could limit access to take care of some of the sickest Medicare beneficiaries, stated the assertion, issued via Senator Orrin G. Hatch of Utah, the chairman of the Senate Finance Committee, and Representatives Fred Upton of Michigan, the chairman of the residence strength and trade Committee, and Kevin Brady of Texas, the chairman of the ways and way Committee.
The Obama management said its idea could now not intervene in any way with the “medical judgment” of medical doctors or their “potential to reserve affordable and necessary element B capsules as suitable.” It did say, “We intend to acquire savings,” though officers could not say how a lot. The administration said it predicted to exchange the “prescribing behavior” of docs by means of giving them financial incentives to select much less pricey drugs which are at least as powerful as greater high-priced medications.
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Stacy J. Sanders, the federal policy director at the Medicare Rights center, a patron advocacy institution, welcomed the inspiration, pronouncing it would lessen the motivation for doctors to prescribe tablets which are pricey and in the end unaffordable for low- and center-profits humans who've no supplemental coverage.
Other advocates have been cautious of their initial reactions.
Leslie B. Fried, a health legal professional at the country wide Council on ageing, a provider and advocacy organization, stated: “If that is a manner to take account of the price of treatments and control part B costs, that’s a good issue. However we additionally need to be worried about access to take care of beneficiaries. It’s a balance.”
In a be aware to be published inside the Federal sign in on Friday, the management says it wants to require “mandatory participation” for medical doctors and hospitals that offer component B tablets to Medicare beneficiaries in geographic areas decided on for the take a look at, a massive a part of the us of a. In three-fourths of the country’s 7,000 “primary care service areas,” Medicare could pay for component B drugs the usage of repayment formulas distinctive from the ones inside the Medicare law.
Congress has supplied vast bipartisan guide for Mr. Obama’s plan to gather genetic statistics on 1,000,000 volunteers so scientists can broaden capsules and remedies tailored to the traits of character sufferers. A number of the maximum enthusiastic supporters of this “precision medicine initiative” expressed concern approximately the new Medicare drug price model.
“we're stepping into an era of customized medication,” stated Leslie Ritter, a vice president of the Society for women’s health studies, a nonprofit advocacy group. “The number one attention must be at the patient, now not on costs. In many cases, we don’t recognize what works fine for sufferers due to the fact girls and individuals of minority groups were no longer accurately represented in clinical trials.”
two influential lobbies, the Pharmaceutical research and producers of america and the Biotechnology Innovation business enterprise, strenuously antagonistic the management’s plan, pronouncing it can put Medicare patients at chance. Charges for brand new most cancers pills frequently exceed $a hundred,000 a year, and it isn't unusual to peer tv advertisements and mag commercials promoting such remedies.
Dr. Allen S. Lichter, the leader executive of the american Society of scientific Oncology, which represents most cancers doctors, said the administration had identified a actual hassle, “the skyrocketing fees of drugs.” but he brought, “docs did now not create this trouble, and it will not be solved with the aid of putting stress on physicians.”
I'm Not Sold on Whole Life - and You Shouldn't Be Either
Did you catch that? This whole life enthusiast wants me to wait 35 years until I start seeing my cash value accrue. No thanks.
Still wanting to believe that whole life insurance can make sense, I polled several other certified financial planners. Here's what they had to say.
The Difference Between Term and Whole Life
At its core, life insurance is about replacing a person's income in case of their untimely death. If you're only interested in income replacement, then term life insurance will generally suffice: You are insured for a certain period, generally 10 to 30 years. Whole life insurance (also known as permanent or universal life insurance) doesn't expire like term insurance does, unless you let your policy lapse.
Whole life insurance is a great deal more expensive than term insurance. For that reason alone, individuals who earn less than $200,000 or so per year, according to certified financial planner Joshua Thompson, should stick to low-cost term life.
Benefits of Whole Life Insurance
In addition to the fact that your death benefits from whole life insurance never expire -- meaning your family will see the insurance pay out whether you pass away young or live to a ripe old age -- there are some good reasons for choosing whole life over term.
- Age and price. If you go for a term policy when you are in your 30s, the price difference between it and a whole policy will be enormous. However, as you age, term life insurance becomes more expensive. Eventually, you may find that you are uninsurable with a term policy because of age or health.
- Potential cash value benefits. Basically, as you pay premiums for whole life, your policy's cash value grows. Often, whole life policies will present a minimum cash surrender value, guaranteeing that your policy will grow to a certain level in a certain number of years -- although the cash value amount will be lower than the face value of the policy. For instance, according to Kiplinger, "It's entirely possible that a $250,000 policy bought at age 35 could accumulate a cash surrender value of $100,000 by the time you reach age 65." "Could" is the key word here. The cash value is tax-sheltered, meaning neither the interest nor the earnings are taxable. When you turn in your policy, you can collect whatever the cash value tax-free, provided that the cash value does not exceed what you have paid in premiums. Once you reach a certain level of cash value, the investment will be earning dividends sufficient to pay the policy's premiums -- if you chose to use them that way -- making the policy self-sustaining.
- A source of money. You can borrow against your cash value while leaving the policy in place. If you do so, you are not required to pay back the loan, although you will owe interest on it -- and your beneficiaries will see the amount of interest and debt outstanding deducted from the death benefits.
Whole life insurance is sometimes referred to as the rich man's Roth. That's because once you reach a certain income level (over $191,000 for married couples and over $129,000 for individuals), you can no longer contribute to a Roth IRA, which means you lose out on the tax benefits. But these individuals can still put after-tax money into tax-sheltered whole life insurance.
Whole life will allow high-earners to take advantage of tax-free growth and potentially add a tax-free source of retirement income if they decide to cash out or take a loan from the policy.
Alternatively, whole life insurance can allow high-earners to create a safe legacy for their heirs while being more aggressive with other aspects of their portfolios. Even if your investments are in a downturn at the time of your death, your family will still receive the life insurance payout. This gives you more freedom to invest aggressively elsewhere.
8 Variables for Buying Whole Life Insurance
Joshua Thompson, a certified financial planner, has identified eight variables for determining if whole life is a good addition to a given person's portfolio:
- Are you contributing the maximum to your qualified retirement plan -- e.g., 401(k)?
- Are you contributing the maximum to an IRA? Can that IRA be converted to a Roth?
- Will you truly benefit from tax-free growth? That is, are you in the 28 percent or higher tax bracket?
- Will you potentially be in the same or higher tax bracket in retirement?
- What type of liability do you have due to your work or lifestyle? Does your state of residence protect the cash value of your life insurance and annuities?
- How much are you investing into a normal non-qualified investment account?
- Would you be better served with an annuity?
- Do you have a plan for estate taxes?
Clearly, whole life insurance is not a product that every person will benefit from, and only under very specific circumstances cab even high earners expect to truly profit from it.
Buyer Beware
There is a general consensus among financial gurus like Dave Ramsey that whole life insurance is evil. And to be honest, many of the issues that Ramsey and others point are true. In particular, commissions for whole life policies can start at 55 percent of the first year's premiums and can be as high as 100 percent.
That means that insurance agents can be very motivated to sell you a policy. And since the insurance industry is not required to follow fiduciary standards (which would require agents to put your best interests ahead of theirs), there is a huge potential for conflict of interest.
The other aspect of whole life insurance that makes personal finance experts twitchy is that illustrations of potential cash value offered by agents are so often unrealistic. Signing on the dotted line for a whole life policy that is supposed to make you rich in retirement -- especially when you aren't already -- is a terrible idea. You'll simply be sending good money into the ether and not necessarily seeing the return you could get with other investments.
Insurance Is Not an Investment
Insurance is not an investment. As certified financial planner Susan Quigley puts it, "Insurance is a transference of risk, spread out over many people in a similar category to reduce everyone's risk."
This is why whole life insurance generally has a place only in the portfolios of high-earners who have maxed out their other investment opportunities. According to financial adviser Bill Dix, "whole life insurance is the conservative part of a client's portfolio." If you're putting money into a whole life policy in the hope that it will mean smooth sailing in your retirement years, then you are wasting your money.
How to Safely Increase the Estate You'll Leave to Your Family
Most people mistakenly believe that once they stop working, their net worth will shrink as they draw on assets for living expenses. Many people who are still working into their 60s and 70s also believe that it's too late to add any significant wealth to their estate. Neither of those has to be true -- if you have a well-designed plan.
Whole Life Policy
Let's consider a client who is 64 and plans on working another 10 years. He is reallocating some existing assets and putting some extra cash into life insurance. We are not talking about an end-of-life policy sold by the truckloads by TV personalities with a $10,000 payout to cover funeral expenses. This might be a good call if you have very little in assets and worry about your kids paying for your funeral. This client has some resources, so we could do something a little more creative.
He elected to fund a whole life policy with $25,000 a year for eight years for a total of $200,000. His starting death benefit is $310,000. If he dies in the next eight years, his family would receive $310,000 to $508,000, depending on when that happens. If he reaches 72, he will have the entire $200,000 that he put into the policy over those eight years back in the form of cash value in the policy. He is free to take loans and disbursements, or just let the money sit and grow during the rest of his lifetime.
Should he reach 85, he would have more than $376,000 of cash value in the policy -- even though he has only paid in $200,000 into it. Upon his death, his family will receive more than $470,000 of tax-free cash. He will more than double his estate by simply reallocating assets and letting tax-free compounding and guarantees go to work. Meanwhile, he can access the cash he is funding the policy with. If he does, he will lower the death benefit, but he has no need in the foreseeable future.
Fixed Indexed Annuity
Another client, who is 70, had concerns about leaving money behind to benefit a child with a mental handicap. The first step was finding a rock-solid trustee to make sure any money benefits the child after the death. Since the client was 70, the cost of life insurance was prohibitive.
The client had put away $300,000 for the child. The last market downturn had cost $130,000, but most of those losses have been recouped.
The client was very clear on wanting no market risk and elected to go with a fixed indexed annuity with a death benefit rider. This rider guarantees that the $300,000 will never decrease in value and will increase at a minimum of 4 percent -- plus any indexed market gains. The least average growth rate combined with the 4 percent percent guarantee means that if the client dies in 10 years, the client will leave behind more than $650,000 in cash. If the client lives only five more years, annuity will leave behind $488,000.
Do You Need Life Insurance? How Much Is Enough?
There are different types of life insurance, which pays named beneficiaries money if the insured person dies. The two most common are term life and whole life. Term life policies last 10 to 30 years, have a set monthly premium that can't increase, and must be rebought or in some cases converted to a whole life policy at the end of the term; whole or permanent life insurance policies are good for as long as the premiums are paid.
Do you need life insurance? Life insurance is not for everyone. Someone who doesn't have financial dependents generally doesn't need a policy. Those with a large financial reserve that can take care of expenses and dependents in the event of their death may also see little value in having a policy. Older people, including those with children who are already financially stable, may consider passing on life insurance as well. But a policy could be worthwhile in case someone develops a debilitating or chronic illness, as treatment can drain savings quickly.
People with a significant other or family members who rely on them will likely want insurance. The focus is sometimes on the breadwinner in the family, but the loss of a stay-at-home partner can leave a family with a significant financial burden, too. Single parents or grandparents who take care of a child should also consider a policy. Even couples without children may want a policy if their lifestyle is dependent on both incomes.
In the end, a life insurance policy is not so much for the insured person (although it can provide peace of mind) as it is for those who depend financially on the insured.
How do you calculate coverage needs? A policy can be relatively cheap; even $500,000 policies can cost less than auto insurance in some cases. There are several expected costs to consider.
- Current Debts. The policy should cover the insured person's current debts, such as a mortgage, car loan, student loans or credit card balances.
- Future Contributions. Consider a married couple with two children. They want a policy that will cover them for the next 30 years while their children grow up. One parent stays at home and the other works full time. The policy should cover the future earnings of the partner who works outside the home (salary plus potential raises, multiplied by 30 years). A second policy should cover the stay-at-home parent and cost to replace that person's contribution (the cost of child care, tutoring services, a housekeeper and so on).
- Large Future Expenses. As parents, the couple may want to help their children pay for college, buy a first car, or leave enough money for the surviving spouse to take an unpaid break from work to grieve. Future expenses should also include the cost of the funeral.
Make things simple by letting an online calculator do the work. Try ones fromSmartAsset, Bankrate and Prudential.
How do you save on premiums? It's important to shop around before buying a policy. Be wary, though, of sharing information with a website that asks only for a name and contact information. Often this input is sold to many agents or brokers, which can result in a flooded inbox and unwanted phone solicitations.
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