The New Face of Debt; Scrimp, Save, Survive
Daily Press (Newport News, Virginia)
April 10, 2005 Sunday
Facing high medical costs and daunting expenses, more retirees are filing for personal bankruptcy.
By DAPHNE SASHIN
SECTION: LOCAL NEWS; Pg. C1
WILLIAMSBURG — When Carol and John Haas were running a Christian bookstore in North Carolina, they envisioned retirement as a cross-country road trip. They would test recreational vehicles for camping manufacturers and write up their experiences for travel magazines.
Before they had the chance to sell the store, reality intervened.
John’s chest started to ache on the first night of a square dancing class in 1991.
The next day, he went to the doctor, who told him his heart was blocked in four places. Quadruple bypass surgery was needed to keep blood pumping to his 56-year-old heart.
John hadn’t recovered from open-heart surgery when he was diagnosed later that year with prostate cancer and then Parkinson’s disease. He died Sept. 17, 2001, six days after Sept. 11.
“If you don’t think that’s traumatic, here you are, grieving for these people, and there’s your husband dying in your arms,” Carol said while sitting in the living room of her Williamsburg condominium.
Her home is neatly decorated with collections of family photographs, church bells, flowering plants, stuffed bears and other knickknacks.
The grief over losing her husband was followed by anxiety about her bills. She lives on Social Security and a savings account, which she dips into each month to pay the mounting bills for her own health problems.
Recently, Carol sat down and calculated that she will go through her savings in seven years if her expenses stay the same.
After that, she has few answers for the questions that face her. If she lives as long as her parents did, she could live another 20 years.
“I’m only 69, and my mother is 89. My daddy was 86. I’m not going to have enough for 20 years,” she said. “What am I supposed to do? I don’t know what the future brings. But I do have my faith.”
As retirees are drawn to Hampton Roads and current residents advance into retirement, advocates for the elderly and social services workers are seeing more people like Carol Haas — formerly middle-class people who worked hard, lived frugally and thought they had planned for retirement. Confronted with illness in their last years, they are draining their savings faster than they expected. Now they must scrimp, borrow, sell their homes or go bankrupt to survive.
The number of people age 60 and over on the Peninsula grew from 52,748 in 1990 to 66,152 in 2000. By 2030, baby boomers will swell the local elderly population to 204,229.
Seniors will go from being 14 percent of the Peninsula population to 34 percent, according to predictions by the Virginia Employment Commission.
Some of them won’t have saved enough; others, faced with chronic or catastrophic illness, will run out of what they have. Experts say people who have never been in poverty before could very quickly fall into that situation. “Twenty years ago, you were talking about retirement at 60 to 80. Now it’s 60 to 90 or 60 to 100.
“The issues surrounding that are enormous because you will outlive your money, and everything that you’ve built up for security will be stripped away from you,” said Peter Walentisch, director of Human Services for Williamsburg.
“The circles of support, family and friends, in many cases you will outlive. That’s where loneliness and isolation comes in. Our communities must anticipate those needs down the road in rapidly increasing numbers,” Walentisch said.
Low incomes, diminishing savings and rising housing and out-of-pocket health costs are leading more retirees into debt. The average credit card debt among Americans over age 65 nearly doubled between 1992 and 2001, to more than $4,000, according to a 2004 report by Demos, a public policy group in New York. “As people aged years ago, people talked about planning for retirement, but I don’t know anybody anticipated the cost of living being what it is today,” said Sharon Bryson, head of adult services for James City County. “There are people that come and retire and run out of money and their families aren’t able to help them.”
During the same period, the number of older Americans filing for bankruptcy tripled, making them the fastest growing age group in the bankruptcy courts.
Local attorneys say they’ve seen an increasing number of elderly clients filing for bankruptcy, due to credit-card debt and high medical costs.
“It’s a relatively new situation,” said Steven Dunnigan, a bankruptcy lawyer in Newport News. “The availability of credit is so widespread that more seniors are exposed to it and are actively choosing it as a perceived way out.”
The stress of worrying over how to make ends meet combines with the grief over the loss of a spouse and the life they once had together.
Carol fills her life with activity, taking communion to residents at a local nursing home and participating in the bell ringing and Bible study groups at her Episcopal church. She nurtures the plants in her living room and walks through Colonial Williamsburg with her camera. But in the quiet moments, Carol sometimes finds herself thinking, “How am I going to do it? Lord help me out.”
Carol grew up in Cleveland, the oldest of three girls. Her father traveled the country calibrating large punch presses, while her mother stayed at home. Years later, her mother went to work for Sears, selling products by phone.
Carol met John Haas at a square dance after a church service in 1952, in their senior year of high school. They graduated high school and married the year after that. For their honeymoon he took her to Williamsburg, the nicest place he had ever been. He went to college for several years at night while working as a radio station technician during the day.
After John’s graduation in 1962, they moved to Williamsburg, where he had a job teaching fifth grade at Matthew Whaley School. They bought a small house in the Winston Terrace neighborhood with $500 down and two mortgages.
Carol gave birth to their two children, and they adopted a third. Kimberly, their middle child, was killed in a car accident on Route 143 when she was 17. It makes Carol cry whenever she mentions it.
A WORKING LIFE
Carol always worked. Even when she was home with a toddler and a vomiting baby, she sewed coats and suits for women. Later she taught at a preschool for mentally disabled children, showing the children how to feed themselves and tie their shoes. Then she worked several years at a custom framing shop on Prince George Street.
While John was a teacher, they frequently held two jobs. The couple danced in period dress at Colonial Williamsburg’s holiday dinners, and John worked as a costumed interpreter.
In 1979, when John resigned as principal of Norge Elementary in James City County, they sold their house and moved to Kill Devil Hills, N.C., to open a card and bookstore.
They always lived carefully, using second-hand furniture from family members and friends or buying items at yard sales.
When John got sick, they sold the business so Carol could take care of him. She was in terrible pain herself from fibromyalgia syndrome, a condition that causes her to have frequent muscle spasms and burning pain around her ribs.
“I’ve never been stabbed like a sword into any of my bones, but I feel it would be as if you’re getting constantly speared in the bones,” she said. “I’m just in tears because it hurts so bad.”
After John died, Carol collected $12,000 from his two life insurance plans and used it all to pay the bills for his home healthcare.
Now she gets about $1,100 each month in Social Security, or about $13,000 a year. That pays for her phone, cable, electricity, gas for the car, insurance and food. Each week she sets aside a dollar for FISH, a local food and clothing bank for people worse off than her.
Increasingly expensive medications force her to dip into her savings each month. The pain patches she wears for her fibromyalgia cost her $406.50 a month.
She spends about $100 more for pills to control her blood pressure and acid reflux, pills to strengthen her bones, pills to help her wake up in the morning and pills to get her to sleep at night.
It’s not uncommon for seniors to face $400 to $600 a month in out-of-pocket medical costs for chronic medical problems, said Walentisch. In a 2003 study commissioned by the Williamsburg Community Health Foundation, community health professionals ranked access to affordable healthcare, including prescription drugs, the most pressing health concern in the region. Nationally, the price of prescription drugs increased by 11 percent in 2003.
Seniors resort to cutting pills in half, taking them every other day or letting their prescriptions lapse because they can’t afford to fill them.
Local doctors try to give samples if they know their patients are struggling, but often seniors are embarrassed to confide their financial problems to their doctors, say social services officials.
“The fallout is you’ve got certainly more crisis situations, compromised health, people winding up in a nursing home where they might not have needed to be in a nursing home,” Walentisch said.
Carol would have prescription drug coverage under Medicaid, the federal health insurance plan for low-income and disabled people, but her cash savings disqualify her. She’s been told she can only have $1,500 in the bank.
“You can have a house and a car, but you can’t have any savings,” she said. “I make too much to get help, but I don’t make enough to live on.”
In June, a Medicare drug discount program went into effect that provides additional help to seniors with low incomes — defined as $12,569 for one person or $16,862 for a married couple. Under the program, they can qualify for a $600 credit to help pay prescription drug costs this year. Seniors enrolled in any other prescription program are not eligible for the low-income credit.
Carol’s pharmacist told her the Medicare benefit wasn’t as good as the discount she already gets with her supplemental health insurance plan.
Many other seniors have found the application process too difficult to get through.
“People haven’t even applied for it because the process of figuring out which of the 41 programs to choose from wasn’t worth it,” said Barbara Anderson, a social worker for the city of Williamsburg.
Steps have been taken to make that process simpler, said Sharon Brandau, head of social work for the Peninsula Agency on Aging. Medicare has a toll-free number for people to call for help with the application.
“It’s certainly worth your while to call Medicare,” she said. “The person on the other end will ask questions about the medications they take and the area they live in. They will be sent a printout about the various cards and which drugstores take those cards that are near their home and which medications would be covered.”
Several health foundations are working to expand prescription medication assistance programs on the Peninsula. In 2003, the Virginia Health Care Foundation, with a grant from the Sentara Health Foundation, started a program at Catholic Charities in Newport News. This spring, the Virginia organization is using a grant from the Williamsburg Community Health Foundation to expand access to drug discounts in the Williamsburg area.
Typically, applicants for drug company programs must earn below 200 percent of the poverty level — or about $18,000 for a single person — and, like Carol, receive no insurance coverage for medications.
In the Williamsburg area, seniors who don’t qualify for Medicaid and have no prescription drug coverage can go to Olde Towne Medical Center, which offers low-cost medical care and helps patients apply for discounts from drug companies.
Anderson said some of her clients are amenable to going there; others view it as a clinic where poor people go. Many, like Carol, don’t want to switch doctors after going to the same practitioner for many years.
By June, people should be able to enroll in discount programs at Olde Towne Medical Center and other clinics without switching their doctors, said Deborah Oswalt, director of the Virginia foundation.
Just when Carol thinks she’s getting a break, the bills go up. She received a $19 Social Security increase this year, but then her Williamsburg condominium association raised its monthly fee by $50.
She doesn’t ask her children for anything — they have burdens of their own, she says — but other family members and friends help with hand-me-downs and small gifts. She inherited winter slacks from her 89-year-old mother, who lives in a retirement community in Ohio. She got summer slacks from her 92-year-old mother-in-law in Florida.
“I’m not too proud to take anybody’s used clothing if they are my size — family members or friends,” Carol said. “I’ve gotten nice suits and jackets and even a winter coat from my mom because she got too skinny.”
Everything else is bought on sale, and only if she really needs it. “I would say this blouse is 20 years old,” she said of the pink top she was wearing. “The jeans I bought at Kmart or somewhere for probably $8, and I think that’s not a bad price.”
She shops for groceries at Farm Fresh on Tuesdays, when senior citizens get five percent off. She always took advantage of Eckerd’s 10 percent senior discount, but it was discontinued a few weeks ago.
Her one indulgence is a haircut every seven weeks. She goes to a salon called Hairy Situations near Kingsmill to get her gray bob shampooed and trimmed.
“That’s my treat for myself. I did it myself for years and years. I feel like I’d lose my mind if I had to do it anymore,” she said. “I don’t pay for permanents or any of that kind of stuff because it’s too expensive.”
Carol keeps two credit cards: one for prescriptions and one for other items when she needs something but has run out of cash for the month. She is careful to charge only what she knows she can afford to pay in full when the bill comes.
Seniors are increasingly using credit cards to pay medical expenses, said attorney Susan Jean of Jean & Luscomb, a Newport News firm that specializes in elderly issues. The deregulation of the credit card industry has made it easy for elderly people to get cards, but many of them are not accustomed to using them.
“They believe when this credit card says, ‘you’re pre-approved,’ they must know I have enough money,” said Donna O’Hara, director of client services at Jean & Luscomb. “A lot of the people we see with credit cards are the little widows…If you get a phone call and you’re there by yourself, and this person is telling you, ‘I can help you,’ you’re going to say, ‘Yeah, that’s my way out.’ ”
When her savings run out, Carol has learned from her bank that she could take out a reverse mortgage on her condominium. That would allow her to borrow about 80 percent of the assessed value of her home and get monthly cash payments. She would never have to pay it back as long as she lived there. Based on the most recent assessment, that money could probably last Carol another 15 years.
“I’m more fortunate than many because I do own my home,” she said. “Our parents were Depression people. They were very conscious of how important it was to have property.”
The reverse mortgage has become an attractive option for people 62 and older, as rising property values have increased the amount of equity in their homes and interest rates have stayed low.
Experts say it’s not for everyone. Homeowners must have enough equity in their home to borrow against, and the loan carries significant up-front costs.
The federal Department of Housing and Urban Development requires people to meet with a licensed mortgage counselor before they can qualify.
The hardest people for attorneys to help are those who have incomes that are too high to qualify for federal assistance and who don’t have equity in a home, but who need assisted living or home health care.
One woman racked up $130,000 in credit card debt paying for her husband’s assisted living facility. Jean said their best hope was for a doctor to say the husband needed to be placed in a nursing home. That would allow him to qualify for Medicaid, the federal insurance program for people with low incomes or disabilities.
As a last resort, Carol could go on Medicaid if she outlives the money from her reverse mortgage. But she hopes to avoid it. That’s a “poverty thing,” she says — and she’s worked all her life.
“My mother’s not on it yet, and hopefully she won’t have to go on it. I’m going to hold off as long as I can,” she said. “I think that I can work it out someway.” *
CAROL’S MONTHLY BUDGET
Difference taken from savings: $413.77
She received abiut $1,!00 each month in Social Security, which goes to pay for her phone, cable, electricity, gas for car, insurance and food. Her medications — about $500 every month — put her in the red. She must dip into her savings, which she estimates will last her seven more years.
WHERE TO GET HELP
The Peninsula Agency on Aging acts as a clearinghouse for information of interest to older adults and their caregivers. It keeps lists of home health agencies, day-care and assisted living facilities, including subsidized options. It also runs caregiver support groups and some transportation programs and can provide referrals to other resources in the community. Call 873-0541.
Medicare and most health insurance plans, including Medicare supplemental insurance, do not cover nursing home care or long-term care at home. Long-term- care insurance can be expensive. Financial planners generally recommend it for people who have assets of at least $75,000 (not including a home or car); have annual retirement income of at least $25,000 to $25,000 for an individual; or are able to pay the premiums even if they increase over time.
The U.S. Department of Health and Human Services recommends that people consider long-term-care policies from at least three companies licensed in a particular state. The department offers a free guide to long-term care in Virginia and a list of resources. Call (866) PLAN- LTC.
Reverse Mortgages and Other Legal Issues
Beware of dishonest lenders who call and promise guaranteed low- interest loans or who ask for up-front fees over the phone. These loans might carry high interest rates and unaffordable repayment terms.
The Peninsula Agency on Aging keeps a list of elder-law attorneys or can refer people to the Legal Aid Society of Eastern Virginia. Call (757) 873-0541. Consumer Credit Counseling Services of Hampton Roads offers free counseling on reverse mortgages, credit card debt and other budgeting issues. Call (757) 826-2227.
In June, a Medicare drug discount program went into effect that provides additional help to seniors with low incomes — defined as $12,569 for one person or $16,862 for a married couple. Under the program, they can qualify for a $600 credit to help pay prescription drug costs this year. Seniors enrolled in any other prescription program are not eligible for the low-income credit. Wednesdays, the Peninsula Agency on Aging has a volunteer to explain Medicare discount cards. Call (757) 873-0541.
The Pharmacy Connection Program helps Peninsula residents 55 and older enroll in free and low-cost drug programs. To be eligible, participants must have incomes less than $18,000 ($24,000 for married couples) and not have insurance or Medicaid drug coverage. The program is at Catholic Charities in Newport News. Call (757) 875-0060.
In the Williamsburg area, seniors who don’t qualify for Medicaid and have no prescription drug coverage can go to Olde Towne Medical Center, which offers low-cost medical care and helps patients apply for drug discounts. By June, people who qualify should be able to apply for drug discounts at Olde Towne Medical Center and other clinics without switching their doctors. Call (757) 259-3258 *