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By In Around the Web, Prescription Drugs

How PBM’s Work, or, Why Being an Active Health Care Consumer Is Both Hard and Necessary

I was sitting down to write something and then saw this thread on Twitter and decided, to hell with it, this is a brilliant dissection of how pharmacy benefit managers (PBM’s) work and why and how they’re contributing to high prices in health care.

There are several ways to read this thread. Certainly PBM’s are not practicing fairly and with consumers in mind. But their dance partner, insurance companies, are to blame as well for turning the other cheek to the “kickbacks” that the DJ, pharmaceutical companies, are paying the PBMs for promoting certain brand-named drugs over available (and much cheaper) generics.

This scenario is not an uncommon abstraction. In fact, I’m dealing with two similar scenarios right now:

1) a drug I’ve taken for 15 years isn’t covered through my pharmacy of choice, Walgreens, because my PBM is CVS Caremark.

Price to buy through CVS: $12
Price to buy through Walgreens: $421

2) A drug prescribed for my son that is not yet available in generic form costs $309 after the GoodRx discount. I don’t have any option other than to go without or take my chances on a different drug with different/more side effects.

I wrote about a similar type of phenomenon on my LinkedIn profile last week, with a link to the definition of a “Mexican standoff.” For the uninitiated, that’s when two or more people have guns pointed at each other and the only way out is mutually assured destruction…or working together. It’s a favorite movie trope of Quentin Tarantino, and it usually doesn’t end in cooperation.

Until the lords of health care figure out how to work together, it’s on us to look out for our own interests.

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By In Around the Web, Do the Math, General Benefits Knowledge, Health Insurance Utilization, Health Savings Accounts (HSAs), High-Deductible Health Plan (HDHP), Participating Provider Organization (PPO) Insurance

How to Make the Most of How Much It Sucks to Make the Most of Health Insurance

Tanja Hester at Our Next Life wrote a fantastic, comprehensive piece on the limitations and downsides of health savings accounts (HSAs) and high-deductible health plans (HDHPs). Before you dig deeper into this post, you should head over there and read it, because it’s chock full of awesomely useful information.

OK, see you back here when you’re finished…

Welcome back!

The Bottom Line

Now that you’ve read her post, you know that HSAs aren’t the magical “triple-tax-advantage” savior some might claim. Yes, there are definite benefits to HSAs if your circumstances are right (more on that in just a moment). But as we’ve said many times, HSAs are a contextually good idea attached to a pretty bad one — HDHPs — and you have to really lean in to avoid letting that bad idea drive your future more than the contextually good one.

Here’s the bottom line: Our “best in the world” health care system puts a great deal of pressure on us as individuals to make the right decisions about our health without giving us much to go on. It’s a system wrought with tradeoffs, and no one type of plan or solution it right for everyone. While HDHPs aren’t doing what they were meant to do, which is to make us better healthcare consumers, older plan designs like PPOs and HMOs aren’t doing that at all, and in fact could end up costing you more than an HDHP, with no added tax benefits and without drastically improving your health and longevity.

The TL;DR message is this: if you’re young and invincible or old and rich already, you can get an HDHP without much further consideration. For the other 99%, read on about some of the challenges we face as “consumers” of healthcare, with an HDHP and without one.

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By In Around the Web

Monday Reading: HDHPs, Health Expenses, and Student Loan Debt Paydown

It’s Monday. Yay! Time to take on the world…or maybe just procrastinate until lunch. Here are some quick reads for your FIRE brain while you’re processing the coffee.

First, a super-awesome and informative piece by FIRE pioneer blogger Tanja Hester about how, as we’ve said here on The Benefits of FI, HSAs can be great for planning but the HDHP you’re required to have with your HSA can be lousy. In particular, Hester shows how HDHPs can keep you from getting the medical care you may need. Great advice and I plan to write some additional thoughts later this week because it’s that important!

Second, a follow-up to our piece from last month about how much you might need in retirement to pay for health care expenses. Fidelity’s annual report is out and the new number is $285,000. That’s an even spicier meatball! In addition to saving with an HSA, it provides additional insight on how to be ready for these sizable expenses in retirement. (Spoiler alert: if you retire early, you’ll need more than $285k!

“How to Plan for Rising Healthcare Costs,” Fidelity Investments

Finally, a review of a newish idea — or perhaps just the oldest idea reinvented to sound new — for paying off student loan debt: equitization. The Lambda School doesn’t charge tuition and instead takes a percentage of earnings for the first several years. A big catch is that, if you don’t find work, you don’t pay for tuition. Other educational institutions have tried something similar. Is it a good idea? Maybe while the economy is doing well but maybe not so much when it’s not. What do you think?

“A new wrinkle on student debt: Pay-as-you-earn,” BenefitsPro

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By In Around the Web, Flexible Spending Accounts (FSAs), Health Financial Accounts, Health Savings Accounts (HSAs)

Yep, Amazon Has an HSA Store

Last week, I wrote about the best places to buy things with your HSA/FSA funds if you want/need to use that money rather than just maxing out your account and investing the money — or, alternately, you don’t have access to an HSA but do have an FSA and want to ensure you use all of the funds as wisely as you can. Welp, I found out today that Amazon now has an HSA/FSA store, which means they have a place where you can enter your debit card number and then shop exclusively for items that are account-eligible and still apply your Prime account for free delivery.

Giddyup!

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By In Around the Web, Health Savings Accounts (HSAs), Taxes

Advice on Handling HSAs on your Tax Return

Here’s a thorough article from the New York Times “Your Money Adviser” column on how to handle health financial accounts like HSAs and FSAs on your income tax return. It includes details about annual limits and what you need to claim expenses. My one criticism is the “But Beware the Paperwork” in the headline. If you are paying for medical expenses on your HSA card, your HSA sponsor bank will mail you a ready-to-submit form, just like a W2 or 1099. If you are tracking your expenses yourself, it is more work but not too cumbersome if you create a manila folder and just make sure to save your receipts. Either way, definitely don’t leave money on the table for medical expenses come tax time!

From the New York Times: “Health Saving Accounts Can Reduce Tax Bills. But Beware the Paperwork.”

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By In Around the Web, Do the Math

An Example of Why It’s so Important to Ask What Your Medical Services Cost

Morgan Gleason is a 20-year-old patient advocate living with a rare condition that requires monthly treatments. It’s manageable but also costs a lot, and she relies on health insurance to reduce her and her parents’ costs significantly.

She recently decided to compare both what hospitals were charging her and her insurance companies, and what her insurance companies were paying and telling her to pay. Her post on it, “No Wonder Healthcare Is so Expensive!” is frustrating, revealing and educational — you should go read it right now! She has a clear grasp on both the economics and the insanity of it all.

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By In Around the Web, Money-Saving Tips, Student Loan Debt

Want to Pay Down Student Loan Debt Faster? Consider Moving to the Cleveland Suburbs

Back in the early ’90s, there was a show my mom and I used to love called Northern Exposure. It was about a doctor who, in return for getting his tuition paid, moved to a small town in Alaska to be the town’s general practitioner for a number of years. It’s a practice that still occurs and in fact may be expanded in the coming years as higher-education costs continue to go up up up.

A story from CNBC,”Here are ways to pay off student loans, using other people’s money,” reveals that a similar practice is available in several states, most notably in Maine, where your student loan debt is deductible on your state income taxes, and in Newburgh, Ohio, where you can get up to $50,000 toward paying off your student loan debt by buying a house you plan to live in inside the city limits. I did a Zillow search and it looks like apartments and houses are going for anywhere from $57,800-$250,000+ in this Cleveland suburb. Pretty good deal if you’re cool with Cleveland.

Other helpful tips are volunteer opportunities that will pay you a monthly stipend toward debt paydown and, of course, through your job. Tess wrote about what to look for in those job-based options.

Got your own advice? We’d love to hear it!

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By In Around the Web, Student Loan Debt

If You’re Dealing with Student Loan Debt, You’re Not Alone

There’s not a lot to say about this segment from “Patriot Act” that Hasan Minhaj and his writers don’t say themselves all too well. Student loan debt is a huge issue that impacts our ability to save for the future, whether we’re just getting out of college and staring down our debt or we’re saving for our children’s education. Take 25 minutes when you have a chance and watch.

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By In Around the Web, Money-Saving Tips, Savings and Budgets, Student Loan Debt

How to Graduate from College Debt-Free, or, It’s Never Too Early to Live the FI Life

A lot of you were initially attracted to the FI movement by a need to change your situation, and most frequently that “situation” was student loan debt. As we all know, and as Hasan Minaj so brilliantly covered on his show (linked here), student loan debt is a national crisis and it’s really, really rare for anyone to come out of college and not have at least a little bit of debt.

That’s why when I saw a post on Twitter about a woman who graduated debt-free, and then I saw her tremendously useful recap of how she did it, I just had to share it. The main takeaway is that you CAN avoid debt before you even get it. There are major tradeoffs but I guarantee they’re worth it.

Read on for the tweet and the tips.

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By In Around the Web, Retirement, Student Loan Debt

Best (and Worst) Places to Pay Down Debt and/or Retire

Two studies came out last week, one by LendingTree on the best cities to pay down debt and one by WalletHub on the best and worst states to retire. I found the study on paying down debt particularly interesting for what it cites as the main indicator that you’re in a good place for working on becoming debt-free: the rent-to-income ratio in every city in the top 10 was less than 20 percent, meaning you’re paying less than 20 percent of your income toward your rent or mortgage on a monthly basis. Other cost-of-living factors also have an influence but since housing is the largest component of most budgets, it’s a no-brainer that what you pay to have a roof over your head will impact how much you can pay down student loan debt and pay up on your retirement savings.

How does this relate to the benefits you receive? Well, more companies are offering benefits in lieu of higher salaries. As such, when you look at your “total compensation” that a company is willing to pay you, pay close attention to the value of the benefits. Are they offering student loan paydown? What kind of 401(k) match do they give? If they’re offering you an HDHP, are they also giving you an HSA contribution and, if so, how much? All of these “benefits” amount to added income for you and should be figured into your budgeting and calculations of rent-to-income ratios, which could make even cities that didn’t make the list look even better — or could make cities that are on the list look worse if your income and benefits aren’t on par with cost of living.

On the flip side, this list focuses on cities. If you are able to work from home or otherwise telecommute, and you’re willing to live further from a city center or in the country altogether, you’re likely going to get your ratio way down, which will greatly boost your savings potential, which will in turn compound itself over time.

Regarding where to retire, again, your combination of income and benefits are important, but then you also add in factors like cost of health care, income tax, property tax, etc. All in all, there are some great places on the list where you can live…and there are some places that you may personally love but they’re not going to do you any favors in making your dollars or health go further in retirement.

One more thing to consider above all else: What makes you happy? I live in Charleston, which is not the most expensive city in the country but also not the one with the lowest rent-to-income ratio. But it’s a beautiful place and I love raising my family here, so I’ve done and will continue to do what makes the most of our place in the here and now and in the future. Love the place you choose and be sure you’re not giving away too much in the present for a greater future — but also know that the right sacrifices will lead you to your right path to happiness.

Here are links to the studies:

“10 Best Places to Pay Down Debt,” LendingTree.com

“Best States to Retire,” WalletHub

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