Author: Mike Holman

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Money

$250 Prescription Drug Rebate Payment For Doughnut Hole Medicaid Gap


One of the immediate changes which will result from the historic 2010 health care bill will be a $250 payment to help with prescriptions.  There are quite a few Americans who have a drug coverage gap known as the “doughnut hole”.   This gap in Medicare D Drug benefit program means that assistance from Medicare for different levels of annual drug costs is not consistent through different levels of annual costs.

Right now the following costs (which include drug costs and Medicare payments)  are covered as shown:

  • $0 to $295 – No coverage – patient pays 100% of the costs.
  • $295 to $896.25 – 75% is covered by Medicare.
  • $896.25 to $4,350.25 – nothing is covered by Medicare – This is known as the “doughnut hole“.
  • $4,325.26 and up – 95% covered by Medicare.

Medicare Part D is a program to help subsidize the prescription costs of Americans and has been in place since January 1, 2006.  It was introduced as part of the Medicare Prescription Drug, Improvement and Modernization Act of 2003.

Is this $250 rebate permanent?

No, but the drug companies will be lowering the prices on their brand-name drugs by 50% starting in 2011 and 75% by 2020 which will completely close the doughnut hole so this rebate won’t be needed anymore.

How do I claim my $250 prescription payment?

If you are eligible for the tax free $250 rebate, then Medicare will automatically send it to you.  You don’t need to do anything.  No forms, no phone calls – nothing!

When will I get the $250 rebate check?

The $250 checks will begin to get mailed starting in mid-June of 2010.  You only get a check if you are in the “doughnut hole” coverage gap.  The checks will be mailed throughout the year, but only to new people who have reached the coverage gap.  You can only get a maximum of $250 and no more.

$250 Drug Rebate Scams

Please be aware that there are people who are trying to scam seniors into handing over their personal information by telling them it’s necessary to get the rebate.  This is not true.  Nobody should call you about the rebate – if they do, then don’t give them any information at all.

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Announcements

Bonus Good Reads From Around The Web

The Financial Blogger wrote a great article about why he wants to be an entrepreneur.  I love #6 “be able to walk my kids to school and pick them up”.  Although I’m sure the novelty would wear off about halfway to school on the first day, I’d still like to be able to try it.  🙂

Tenants from hell is a great warning tale about renting to “nice people” without checking their references.   Mr. Cheap has written many times that if you want to rent out your property you MUST check their credit and references.   Read about finding and selecting good tenants.

This is an older article about not giving unsolicited advice.  It makes a lot of sense since there isn’t much point in giving advice if it is not likely to be followed.   I work with someone who likes to vent every once in a while – she usually disguises her rants in the form of asking for help…but she really just wants to rant.

Apparently the Lexus SC 430 has a cd player for the first time replacing the cassette player.  I find it hard to believe that any car made in the last 5 years actually had a cassette player!

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Announcements

Short LinkStuff For Friday, March 18

Very funny article about why bloggers are male.
Canadian Capitalist discovered that being mortgage free can save you money on house insurance. Hmm…I’ll bet those Money Sense guys made him write that post. 🙂

Categories
Personal Finance

Tight Budget Or Keep Some Extra Cash In Your Account?

Do you know what a zero-based budgeting system is?  Basically it is a budget where you track every single dollar of income and each single expense down to the penny.  This is a great system for someone who is trying to get a good handle on their spending since they will be able to see where every dollar goes and act accordingly.  It also helps with spending decisions since it doesn’t let you spend money you don’t have.  I did a You Need a Budget review recently which is a great example of zero-based budgeting software.

I don’t use this kind of system, in fact I pretty much do the opposite.  I like to keep an extra couple thousand dollars in my checking for two reasons:

  1. I avoid transaction fees if I keep the minimum balance over $1500.
  2. I don’t have to track bills, ATM withdrawals etc since I always know that I have enough to cover them.

I do look at the balance fairly frequency to make sure it is more or less where I’m expecting.  But otherwise the only time I actually do any kind of “budget” is when I want to make a large purchase or debt repayment. In that case I’ll take my account balance, subtract any upcoming expenses, subtract my $2,500 “float” and that tells me how much extra money I have that I can put into my mortgage or continue my plan to buy a big screen tv for every room in my house.  (I’m still working on the first room).

But how do you avoid overspending?

This system might not work for some people because they need some sort of spending restraints in order to not buy things with money they don’t have.  I don’t seem to have this problem although I did in my younger days so it works great for me.

You could put that $2,500 into your mortgage and save 5.2% interest each year.

Yes, that’s true since 5.2% is my mortgage rate.  But 5.2% of $2,500 is $130.  I value my time quite highly and the idea of spending a lot of time and hassle tracking every penny just to save $130/year is not at all appealing to me.  For someone who has a tighter budget, more time and has high interest debt where they can put the $2,500, the payoff return might be different.

What kind of budgeting do you do?  Are you a strict budgeter?  Loose like me?  Somewhere in between?

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Personal Finance

I Sold My RioCan Reit

A few years ago when I was on a big asset allocation kick, I bought some REITs (real estate investment trusts) for my RRSP account.  The amount was only about 5% of the portfolio but according to the experts, having some real estate is a good diversifier.

While I accept the idea that REITs are good for your portfolio in theory, I never liked the whole investment trust structure of REITs and their huge payouts.  I had bought some RioCan (REI.UN.TO) which is a reasonable proxy for the Canadian REIT market but started to get nervous when there was some news reports about the unsustainability of their dividend.

The other problem I had with my REITs was that my original investment was now only about 3% so I needed to buy more to get back up to 5%.  But I didn’t really want to buy any more and even if I did,  5% is not that much.  This was the same sort of thinking I had with my former leveraged investment plan – either go big or go home.

So I decided just to sell it and not worry about it any more which is what I did for $18.60 per unit.  I’m just leaving the proceeds in cash for the moment until I can do a proper asset allocation analysis of our investments.  Once that is done I’ll rebalance according to my desired allocation (roughly 80% equity, 20% bonds).

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Reward Credit Cards

Credit card companies understand that everyone likes to be receive rewards.  They have created hugely popular rewards programs that offer incentives for consumers to remain loyal to one credit card.  This concept is not new and was first introduced to consumers in other industries as early as the late 1800’s.  Today loyalty or reward programs are offered by credit card companies, airline industries and grocery store chains across the nation.

What Are Reward Credit Cards?

The first rewards program offered by a credit card was introduced by AT&T which provided cash back on purchases that could be used toward the account holder’s phone bill.  In the late 1980’s Discover got on board when they rolled out their cash back program which made it possible for card holders to receive money at the end of the year based on the total amount of purchases charged that year.  Today there are hundreds of credit cards offering rewards programs to encourage consumers to use their card exclusively.  The rewards programs are as varied as the consumer who use them.  The rewards can range from cash back, airline miles and credit toward merchandise or meals at restaurants.  In most cases consumers receive rewards based on where they use their card and how much money is charged for purchases.

How To Use Reward Credit Cards.

Before applying for a rewards program, it is important to first find out how the program fits in with your current spending habits.  Choose a card that best reflects your habits as well as one that offers rewards you can actually use.  Consumers benefit most from programs that reward them for purchases they would routinely make regardless of whether or not they had the rewards card.  After you determine which program best suits your current needs, you simply use your card as you would normally and watch your rewards grow.

The Downside Of Reward Credit Cards.

While it is true that rewards programs are extremely popular among consumers who benefit from the programs, they are not for everyone.  In fact, using a rewards credit card can end up costing some people more money in the long run.  Credit cards which offer lucrative rewards programs often come with higher interest rates than credit cards without a rewards program. This make is an unwise choice for consumers who do not routinely pay off their balance each month.  A small percentage of rewards cards charge an annual fee which may reduce the overall “reward” of using that particular card.  In addition to annual fees and higher interest rates, many rewards programs can be confusing at best.  If you are not organized and willing to track your purchases and pay attention to how and when your rewards are available you may find you are unable to claim your rewards before they expire.

Generally speaking, reward credit cards are a great tool when used properly and by those who qualify for the program.  Consumers who lack the ability or discipline to manage their credit cards responsibly will not reap the rewards of most programs regardless of how much money they spend.  To get the most from your rewards card, you must fully understand how the program works, how you build rewards and the proper procedure to claim your rewards.  To find the best reward credit card, shop around and carefully compare each program to find the one that best reflects your needs.

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CPP Contribution Limits For 2011 And How They Are Calculated

Just a heads up that the maximum contribution limits for the Canada pension plan (CPP) have new values for 2011.

CPP maximum pensionable earning and maximum contribution amount

In 2011 the maximum pensionable earnings will be increasing to $48,300 (up from $47,200).  What this amount means is that you will contribute to the CPP based on a percentage of your earnings up to $48,300.  Any money earned over $48,300 will not have any CPP deduction applied to it.

The basic exemption amount is $3500 which means that you only make CPP contributions based as a percentage on any income above $3500.

The percentage charged for CPP contributions will be 4.95% for employees and their employers (they both pay 4.95%).
This 4.95% applies to any income earned above $3500 and below $48,300.

The maximum for the year will be $2,217.60 which will apply to anyone making $48,300 or more.  This amount is 4.95% of ($48,300 –  $3500).

Self-employed persons have to pay both the employee and employer contributions so their CPP rate will be 9.9% and the maximum contribution for someone earning $48,300 or more will be $4,435.20.

Here are the EI premiums for 2011.

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Canadian Employment Insurance (EI) Premiums For 2011

The EI premiums have gone up for 2011 (no surprise) so I thought it would be a good idea to go over the new amounts.  Here are the 2007 EI premiums if you want to compare.

First of all the maximum insurable annual earnings has gone up from $43,200 to $44,200 which means that for someone earning more than $43,200  – a larger part of your income will be covered by employment insurance.

The way it works is that for any income up to $44,200 you are charged a premium which is 1.78% of your applicable earnings up to the maximum insurable amount.

The maximum amount of EI premiums for 2011 is $786.76  ($587.52 for Quebec).

This premium is not pro-rated throughout the year so even if you make $90k a year – the EI calculation will be applied to your entire pay cheque starting in January even though this means you will reach the maximum limit before the year is half over.

If you change jobs then the EI contributions start all over again for that year so you will probably end up over contributing.  You will get this over payment back at tax filing time.

The maximum weekly EI payment will be $468 per week.

Here are the 2011 CPP contribution limits.