Even with SSDI increase, people with disabilities will struggle financially

From BusinessWire:

For the more than 8.5 million individuals relying on Social Security Disability Insurance (SSDI) or awaiting a decision on their application for benefits, the 5.8 percent cost of living adjustment (COLA) increase in Social Security payments for 2009 will certainly ease concerns, according to Allsup, a leading provider of Social Security disability, financial and health care-related services to people with disabilities. While the COLA has not been this high in more than 25 years, Allsup believes beneficiaries will not be overly optimistic about the increase.

"The Social Security COLA is tied to the annual increase in the Consumer Price Index, which takes into account the rate of inflation for the goods and services people buy. The 5.8 percent COLA increase simply reflects that the costs of these items have increased by that amount," said Paul Gada, Allsup's personal financial planning director.

Starting in 1975, automatic benefit increases, or COLAs, have been applied to Social Security benefits. The Bureau of Labor Statistics' Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the previous year is used to set the following year COLA. For the quarter ending Sept. 30, 2008, the CPI-W was 5.8 percent.

"The Social Security cost of living adjustment isn't about getting ahead. At best, it's about keeping up. Even that is going to be tough, as people have already experienced higher living expenses this year with no sign of that letting up near-term," said Gada.
However, Gada notes there are steps that people relying on SSDI can take to help better control escalating costs.

"It's very difficult when your income is fixed, but your expenses are not fixed and generally just seem to be increasing," said Gada. "But the first step is to honestly assess your financial situation."

According to Gada, this involves creating a budget to track what you spend monthly and your monthly income. The next step is identifying ways to increase the money that comes in and decrease the money that goes out. For many individuals this means getting a handle on major sources of debt.

About 19 million Americans now spend at least 30 percent of their income on housing, a figure that the government considers to be financially burdened, based on an Associated Press analysis of the U.S. Census Bureau's 2007 American Housing Survey (AHS) released in September. People who have high interest rate mortgages or are having difficulty paying their mortgage should investigate refinancing to get lower monthly payments.

"The current housing climate combined with the credit crisis has many people fearful that they won't be able to qualify for refinancing. However, it's more important to recognize that if you are having difficulty paying your mortgage, you need to get help as soon as possible," said Gada. "Banks do not want to own homes, so contact your lender; the sooner you do this, the more likely it is you will have alternatives."

The U.S. Department of Housing and Urban Development (HUD) provides many resources to help homeowners with refinancing and avoiding foreclosure as well as provides a list of HUD-Approved Housing Counseling Agencies. Allsup also offers a free Refinance Interest Savings calculator to help people see the potential savings.

Another significant source of expense for individuals with disabilities is health care costs. According to a study released last month by the Center for Studying Health System Change, nearly one in five Americans had problems paying medical bills in 2007. The share of people with low income facing medical bill problems was significantly higher at 32 percent.

Because many individuals with severe long-term disabilities are unable to work, they are more likely to be low income, Gada noted. However, people with long-term disabilities cannot afford to be without some plan to cover health-related costs on an ongoing basis.

COBRA coverage through their former employer is one option for initial coverage. Medicare is available to most individuals with disabilities only 24 months after qualifying for SSDI benefits. People with disabilities who are eligible should examine all their Medicare options, including traditional Medicare (Parts A and B) with supplemental insurance (Medigap) and prescription drug (Part D) coverage, as well as Medicare Advantage plans. This should include looking at the costs and available health care coverage under the various scenarios, Gada said. For example, due to pre-existing conditions, people with disabilities often are not able to get supplemental coverage. This means that if they are enrolled in traditional Medicare only, they are likely to have high out-of-pocket expenses.

Medicare Advantage plans, on the other hand, combine basic traditional Medicare coverage with the added security of having supplemental insurance. Many of the available plans also provide prescription drug coverage and offer other services, such as vision and dental care, which are not part of traditional Medicare. At the same time, a participant's overall out-of-pocket costs tend to be much lower under a Medicare Advantage plan. Meanwhile, pre-existing conditions are generally not an issue when enrolling in a Medicare Advantage plan, so almost anyone eligible for Medicare can benefit from such plans.

"When you are on a fixed income, one of the most important things is minimizing unexpected costs," said Gada. "So it's important to look for health insurance that can provide the coverage you need while minimizing surprises."