Seniors don’t always manage their finances well. Financial problems may be of their own doing, but can often stem from age or increased forgetfulness. Caring responsible relatives can help seniors avoid some financial problems with frank discussions and periodic review of their regular bill paying. For example, telephone expenses for seniors are often far higher than necessary, with no provision for economical long-distance calling. This occurs over years of increases with no change in telephone plans. Other utilities may add to their financial burdens.
Another key financial related issue is helping loved ones find key documents and lost records, including birth, death and marriage certificates, military records, old tax returns and/or Social Security payment information. These documents are important in order to organize and help manage their financial affairs and to apply for benefits like Medicare or Medicaid. Families may also need to locate property records, especially if the property owner has forgotten or is unable to communicate where property is located or what property actually exists.
Unfortunately, seniors are “ripe” targets for organized fraud so it’s becoming increasingly more important for family members to be aware of current scams being perpetrated and to discuss them with your loved one in order for them to be more savvy in this area. The State Financial Regulators Roundtable (SFRR), a group of State Regulators’ Membership Associations comprised of banking, consumer lending, credit unions, insurance and allied financial services, has developed the following tips and information for seniors on this crucial topic.
The FBI has determined that seniors are are often targeted for financial fraud for several reasons:
1) Older Americans are most likely to have a “nest egg,” own their home and/or have excellent credit all of which the con man will try to tap into. The fraudster will focus his/her efforts on the segment of the population most likely to be in a financial position to buy something.
2) Individuals who grew up in the 1930s, 1940s and 1950s were generally raised to be polite and trusting. Two very important and positive personality traits, except when it comes to dealing with a con man. The con man will exploit these traits knowing that it is difficult or impossible for these individuals to say “no” or just hang up the phone.
3) Older Americans are less likely to report a fraud because they do not know who to report it to, are too ashamed at having been scammed, or do not know they have been scammed. In some cases, an elderly victim may not report the crime because he or she is concerned that relatives may conclude that the victim no longer has the mental capacity to take care of his or her own financial affairs.
4) When an elderly victim does report the crime, they often make poor witnesses. The con man knows the effects of age on memory and he/she is counting on the fact that the elderly victim will not be able to supply enough detailed information to investigators such as: How many times did the fraudster call? What time of day did he/she call? Did he provide a call back number or address? Was it always the same person? Did you meet in person? What did the fraudster look like? Did he/she have any recognizable accent? Where did you send the money? What did you receive if anything and how was it delivered? What promises were made and when? Did you keep any notes of your conversations? The victim’s realization that they have been victimized may take weeks or, more likely, months after contact with the con man. This extended period will test the memory of almost anyone.
5) Lastly, when it comes to products that promise increased cognitive function, virility, physical conditioning, anti-cancer properties and so on, older Americans make up the segment of the population most concerned about these issues. In a country where new cures and vaccinations for old diseases have given every American hope for a long and fruitful life, it is not so unbelievable that the products offered by these con men can do what they say they can do.
Most Common Health Insurance Frauds
Medical Equipment Fraud – Equipment manufacturers offer “free” products to individuals. Insurers are then charged for products that were not needed and/or may not have been delivered.
“Rolling Lab” Schemes – Unnecessary and sometimes fake tests are given to individuals at health clubs, retirement homes, or shopping malls and billed to insurance companies or Medicare.
Services Not Performed – Customers or providers bill insurers for services never rendered by changing bills or submitting fake ones.
Medicare Fraud – Medicare fraud can take the form of any of the health insurance frauds described above. Senior citizens are frequent targets of Medicare schemes, especially by medical equipment manufacturers who offer seniors free medical products in exchange for their Medicare numbers. Because a physician has to sign a form certifying that equipment or testing is needed before Medicare pays for it, con artists fake signatures or bribe corrupt doctors to sign the forms. Once a signature is in place, the manufacturers bill Medicare for merchandise or service that was not needed or was not ordered.
Avoiding Health Insurance Frauds
- Never sign blank insurance claim forms.
- Never give blanket authorization to a medical provider to bill for services rendered.
- Ask your medical providers what they will charge and what you will be expected to pay out-of-pocket.
- Carefully review your insurer‟s explanation of the benefits statement. Call your insurer and provider if you have questions.
- Do not do business with door-to-door or telephone salespeople who tell you that services of medical equipment are free.
- Give your insurance/Medicare identification only to those who have provided you with medical services.
- Keep accurate records of all health care appointments.
- Know if your physician ordered equipment for you.
Counterfeit Prescription Drugs Fraud
- Be mindful of appearance. Closely examine the packaging and lot numbers of prescription drugs and be alert of any changes from one prescription to the next.
- Consult your pharmacist or physician if your prescription drug looks suspicious.
- Alert your pharmacist and physician immediately if your medication causes adverse side effects or if your condition does not improve.
- Use caution when purchasing drugs on the Internet.
- Do not purchase medications from unlicensed online distributors or those who sell medications without a prescription. Reputable online pharmacies will have a seal of approval called the Verified Internet Pharmacy Practice Site (VIPPS), provided by the Association of Boards of Pharmacy in the United States.
- Product promotions or cost reductions and other “special deals” may be associated with counterfeit product promotion.
If you are age 60 or older, you may be a special target for people who sell bogus products and services by phone. Older women living alone are special targets of these scam artists. Telemarketing scams often involve offers of prizes, low-cost vitamins and health care products, and travel offers. There are warning signs to these scams, including promises of “free” or “low cost” vacations and get rich quick schemes. If you hear these – or similar – “lines” from a telephone salesperson, just say “no thank you,” and hang up the phone:
- You must act now or the offer won’t be good.
- You’ve won a “free‟ gift, vacation or prize. But you have to pay for “postage and handling or other charges.
- You must send money, give a credit card or bank account number, or have a check picked up by courier.
- You don’t need to check out the company with anyone.The callers say you do not need to speak to anyone including your family, lawyer, accountant, local Better Business Bureau or consumer protection agency.
- You don’t need any written information about their company or their references.
- You can’t afford to miss this “high-profit, no-risk‟ offer.
Senior citizens, as they plan for retirement, may fall victim to investment schemes. These may include Advance Fee Schemes, Prime Bank Note Schemes, Pyramid Schemes, and Nigerian Letter Fraud schemes. In addition to fraudulent investments, seniors can also be sold investments that are inappropriate based on their risk and maturity structure. Seniors should always ask the following questions before making any investment decision:
1. Do you understand the product? If the product is too complex to be easily and reasonably understood, you probably do not need to be investing in it.
2. Have you been provided with a clearly presented analysis of the risks of this product, including the risk of loss of principal and the liquidity risk (the risk of being able to quickly sell the product preferable on an established market, for a cash value of at least the amount that you invested in the product?
3. Do you understand the maturity of the product and the investment return characteristics of the product? Are the investment returns fixed or are they variable, based on investment or market returns?
4. In the case of an investment product, what are the historic returns of the product over the past twelve months, last five years and last ten years?
5. What are the total fees and commissions that are being received for the sale of the product? If the seller is unwilling or unable to adequate explain the compensation structure of the product, and then you need to question the suitability of the product.
6. Were you exposed to aggressive selling tactics or are you being told that this opportunity will only exist for a short period and that you need to purchase this investment today? If this is a sound decision, you should be able to fully consider your decision, consult with a subject matter expert and otherwise exercise due care and discretion in the consideration of this investment.
Perhaps no recent financial product has been more specifically marketed to senior citizens than reverse mortgage products. Reverse mortgages can be appropriate products for seniors who have accumulated equity in their homes and require funds for home maintenance or to enhance retirement income. It is however important for seniors to recognize the characteristics of this product, including the following:
1. Seniors should carefully review all disclosures related to a reverse mortgage transaction and consider obtaining independent homeowner counseling to assist them in making this important decision.
2. Reverse mortgages are borrowing transactions and the lender will have a lien against the homeowner?s residence. Although the borrower will typically not have to make payments during their lifetime, the residence may ultimately have to be sold in order to liquidate this obligation, unless there is some other source of repayment.
3. Although the characteristics of a reverse mortgage, which may have a lump sum payment, a series of annuitized payments to the homeowner or a combination of the two is different than a traditional mortgage, it is still a borrowing transaction. Many financial advisors recommend to seniors that they avoid debt in retirement rather than borrowing money.
4. Reverse mortgages have relatively high fee structures. Like other financial products it is important for seniors to comparison shop for these products from different companies, in order to obtain the best deal.
5. The reasons for entering into a reverse mortgage are extremely important. Home equity is an important resource and a financial backstop for seniors. It is important for seniors to make certain that they don’t outlive their financial resources and reverse mortgages taken out in order to gift funds to children or grandchildren or used for temporary lifestyle enhancement may not represent a sound financial strategy.
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