That’s when his own serious financial troubles began. Realizing that the nursing home job was killing him, Eaker left and began selling long-term care insurance as a gap job. He now needed health coverage, and bought an individual health policy from Illinois Blue Cross Blue Shield. Six weeks later, he had his first heart attack. He thought the policy covered him, but it didn’t. The policy said Carle, the local hospital system, was in the network. It was, but the policy did not make clear that Carle Clinic doctors at the time were not. Eaker had assumed Carle was Carle and was covered. He was wrong, and found himself with $30,000 in medical bills to pay out of pocket. “I couldn’t make the payments the clinic demanded and keep paying for an insurance policy that was worthless,” he told me. So he dropped the coverage.
Two years later, Eaker had another heart attack, and his second wife suffered an aneurysm. Those bills drove them into medical bankruptcy. After the third heart attack three years later, the hospital wrote off the cost of his treatment as a charity case.
Even with health reform, there will still be people like Eaker who are deep in medical bankruptcy. More employers are pushing workers into high-deductible health plans that leave them with high out-of-pocket expenses when serious illness hits. Even with tax subsidies, people are likely to buy skimpy policies from the new state-based shopping services that will be up and running in four years. Medical bankruptcies won’t disappear, and catastrophic health expenses will continue to mess up even the best-laid retirement plans.
Eaker is luckier than most. He had a pension from the church—a rare source of income these days. Last year, when he turned sixty-two, he took that pension—reduced, of course, for early retirement—and he used one-third (a $40,000 lump sum) to pay off doctor bills, much of it incurred from his third heart attack. He is taking the rest as a life annuity, which gives a monthly income of $2112. The pension allows him to defer his full Social Security benefits and still build a small IRA, which now totals some $45,000. Annutizing that money right now would give him an additional $160 of monthly income.
Without that pension he’d be hard-pressed to make it financially even with his job, and would have to take his Social Security benefits early. That would give him around $300 a month less than he would have if he waits until age sxity-six. Eaker lives at the edge, as many do who have had medical problems that eat into their income. He told me that when he was employed by the church, he was considered self-employed and paid both the employee and employer portions of the Social Security payroll tax.
“This is something I have earned,” he said. “It is not welfare. It’s a means where the government can assist citizens in having a semi-secure retirement in older age. I’m not in favor of them messing with the system. If they start messing with it, I know who will get hurt—the poor and the middle class. The rich won’t be hurt at all. I wouldn’t trust where they are going with it.”
Click here for more from Trudy Lieberman on Social Security and entitlement reform.