Thursday, July 31, 2008

State income taxes on social security income vary widely

A sensitive issue for some retirees is state income taxation of social security benefits.

Remember, there are seven states with no state income tax at all: Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming. Furthermore, Tennessee and New Hampshire don’t tax wages; only dividend and interest income. A good source on this is Wikipedia, link.

Many states with a regular state income tax don’t tax social security proceeds. But fourteen states do have some taxation: Colorado, Connecticut, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia have some taxation.

Iowa is gradually phasing this out by 2014; Missouri is increasing deductibility of social security income through 2012, and Kansas does not tax social security income for those with AGI’s under $75000.

The story (“Retirement: How states differently tax retirees”) was printed today (July 31, 2008) in DC Examiner on p 14 and is authored by Mary Beth Franklin of Kiplinger Personal Finance. The online version of the story does not appear yet on either the Examiner or Kiplinger.

I found an older table on states income taxes and social security (1996) at “Tax Admn” here.

Another site with this information, apparently more recent information, is “Retirement Living” here Change the last digit to 2 or 3 to see all states.

Update: August 13

Kiplinger has an important "Wallet Pop" essay ("Retiree Tax Heaven -- and Hell") comparison local and state taxes for retirees in various locations. Link is here. California is not a particularly desirable state.

Wednesday, July 30, 2008

Alzheimer's conference in Chicago: Elderspeak is unnecessary and unwelcome

The Alzheimer’s Association is having an International Conference on Alzheimer’s Disease 2008 (acronym ICAD) this week (late July 2008), with a main website here.

ABC News recently reported that caregivers should not talk in a condescending fashion to Alzheimer’s patients, and should not even give in to the idea that by doing so they are behaving in a more “caring” or emotionally appropriate fashion. The story is “Baby Talk Irritates Alzheimer’s Patients: Caregivers for the elderly should avoid certain patterns of speech, new research says,” by Allyson T. Collins of the ABC Medical Unit, link here . The article is particularly critical of the use of “elderspeak” or “baby talk” in talking to persons with Alzheimer’s. It seems better to try to communicate with the person as a real adult.

Yet, one hears tales of caregivers disabling cars so that the elderly can't drive them, and of trying all kinds of manipulations. "Don't correct" someone in talking to them, they say.

The Los Angeles Times also has a story “News from the Alzheimer’s Conference in Chicago,” July 30, link here. There are some interesting observations. Persons who are married during midlife may have a lower rate of progression to Alzheimers. But so do people who have demanding intellectual activity in midlife, especially creative activity, and this may be more common with introverts.

Our culture’s attitude on aging has changed. A couple generations ago, there was a belief that people should live out a natural life span. To extend it with medicine requires a new kind of emotional investment and self-concept not only from caregivers but from the elderly person himself or herself. Much is accomplished with recommended medical screenings throughout life, but these may involve treatments the “emotional” consequences of which earlier generations would not have accepted and many “more independent” people have trouble accepting today.

Tuesday, July 29, 2008

My first day of using Medicare (and three red cards to carry)

So, today for the first time, I became a Medicare patient. I went to a dermatologist, and endured the sting and possible embarrassment of repeated blasts of liquid nitrogen over my face, scalp, and some of my body. I had to ask for restraint. Since the liquid is kept at temperatures simulated in my rogue screenplay "69 Minutes to Titan", the aftereffects stung for some time, like burns.

But the interesting part was “paying for it.” The office took my social security Medicare Card and AARP supplementary card and photographed them. Then they checked and could not find me on Medicare’s computer. I carried a third card, the AARP Part D, which I would need later.

Social Security’s own website produces a page on my account that says, in part:

You receive Medicare Part A (hospital insurance) based on your age.
You became entitled to Part A beginning:
July 2008
Medicare Medical Insurance (Part B) information:
You receive Medicare Part B (medical insurance) based on your age.
You became entitled to Part B beginning:
July 2008
Your current monthly premium for Part B is:
$ 96.40
The effective date for this Part B premium amount is:

It hasn’t added in my Part D premium yet ($33.70 per month) to the website, but I received a US mail letter saying that this amount would be deducted twice from my August social security payment.

However, the actual processing of Medicare for the DC area seems to take place at Pennsylvania Blue Cross and Blue Shield at Camp Hill, PA (Harrisburg), the data center run by EDS I believe.

The clerk said, “is this the first time you’ve used your Medicare?” I said yes, and he indicated that it usually takes one claim for Blue Cross-EDS to get around to adding a new retiree’s record to its own mainframe database. I’m not sure how that comports with HIPAA.

I then went to pick up my prescription for Aldara, which is a cream applying topical chemotherapy for actinic keratosis and early skin cancers (basal and sqamous cell carcinomas). It is sold by the Grace company but manufactured only in Leeds, UK, which makes it more expensive given the fall of the dollar. The dermatologist gave me a $25 mail in rebate coupon. That’s odd for prescription medication. A supply of about 20 packets would sell for about $625 without insurance. With Part D coverage (before the doughnut hole), the out-of-pocket cost is $30, but the $625 goes some way into approaching the coffee cup’s doughnut hole for later medications. However, the $625 may itself get a large discount from United Health Care, under AARP’s contract. It’s all complicated.

As I’ve noted, AARP (because of its enormous size and bargaining power with health insurance companies) seems to offer a much better deal (on part D and on part B supplementary) for just-65 retirees than can employers with their retiree health programs. For retirees of troubled companies like GM, this may be good news. AARP, even though it is mainly for those over 65, is giving a preview of how a single payer health system like Canada’s could be run.

Saturday, July 26, 2008

More statistics on nursing home, assisted living costs

Today I’ve collected a few more references on the costs of nursing homes and assisted living, and how people pay for them.

Medicare itself has a major web page called “Nursing Homes: Paying for Care” link here. “To be covered, you must receive the services from a Medicare certified skilled nursing home after a qualifying hospital stay. A qualifying hospital stay is the amount of time spent in a hospital just prior to entering a nursing home.”

In 2004, Consumer Affairs reported that the average cost of nursing home care had reached $70000 a year, ranging from almost $205000 a year in Alaska to $36000 in Shreveport, LA. (Link).

A site that gives comparative costs of Home Health, Assisted Living, and Nursing Home costs by state is a Long Term Care Insurance Planners site with data as of the end of 2003. It’s probably wise to increase the numbers by 10-15% to get to the numbers today. The website quotes $16.30 for an hourly rate for home health, and now in 2008 it is typically $18. In 2003, a typical nursing home in Alexandria, VA cost $57000 a year, and assisted living about $37000. In Cleveland, Ohio typical rates were $56000 and $29000.

As covered earlier on this blog, long term care insurance is tricky. Often a claim is not payable until the patent demonstrates at least two symptoms of incapacity.

Thursday, July 24, 2008

Could state filial responsibility laws be challenged as unconstitutional?

A friend who has read this blog has raised the question about the constitutionality state filial responsibility laws. If a state tried to enforce them in a non-lookback situation (that is, as a “poor law”), an adult child could sue and try to claim that it is unconstitutional. The arguments here refer to the US constitution and Bill of Rights, but possibly there could be other issues with regard to constitutions of each state.

One argument might be the denial of a 14th Amendment due process right, or a 5th Amendment right to avoid forceable “takings” clause (“nor shall private property be taken for public use without just compensation”). Presumably these rights would be incorporated and apply to the states (all the more so in an interstate case). Here, the “public” purpose seems to be the funding of state Medicaid and welfare programs (and perhaps the federal participation component in some cases, especially the reimbursement rules for nursing homes).

Nevertheless, we can think easily of other situations where life itself has been taken for a public purpose: the military draft of the past. The Supreme Court at one point actually upheld the male-only draft. There has been loose talk of reinstating it during the war in Iraq, if that happened, it’s easy to imagine someone could challenge it under these grounds. It doesn’t sound likely that the current Supreme Court would overturn it, but a future one might.

All of this gets back into the area of “public morality,” a concept whereby the state, through democratic processes, is allowed to force individuals to share the risk of some common responsibilities, in some sort of system believed to make the exposures fairer, particularly given unequal “starting places” for people. This concept contradicts the whole idea of libertarianism, and seems counter to more modern ideas of “classical liberalism” with greater emphasis on the sovereignty of the individual. Courts used to accept this concept, but more recently have turned away from it somewhat. Maybe arguments like this for a constitutional challenge would work today if states tried to move to enforce these laws.

Wednesday, July 23, 2008

Filial responsibility laws: what happens among different states?

On this blog, I’ve created several postings about filial responsibility laws (or “poor laws”) in a number of states. I’ve noted that, except in lookback situations, they have so far been rarely enforced, but they might be used more often as states look for relief from pressure on their Medicaid resources particularly.

One obvious question would be, what happens when the adult child lives in another state? I’ve never seen much discussion on that question. In general, with other civil claims, lawsuits can be filed across state lines and people can be subpoenaed from other states. Some of this has to do with the “full faith and credit” concept. If someone does not appear for civil litigation, often a judgment is entered against the person. It may be quite difficult to collect on the judgment in practice. I suppose collection agencies could be used. I haven’t (yet) heard of this particular situation generating business in the debt collection world (in which I was employed for a while in 2003), but I can imagine that it could develop.

Perhaps the most likely "across state lines" situation would occur with the federally defined "look back" situation, but only when the parent has given away assets to qualify for Medicaid.

In non-giveback situations, it’s obvious that a lot of questions could arise. What if the adult child lives in a state without those laws? What the claim is unusual (like a sibling related claim) that would not be valid in the state of the adult child? Or, perhaps even more important, what if the parent had moved to another state from the one in which the child was raised, and then become impoverished?

In families with more than one adult child, it’s all to easy to imagine disputes over how to allocate the responsibility, and state laws are never specific as to these questions. Should it be based on adult child assets or income? If a particular adult child has no children and others do have children, should that child bear more or all of the responsibility? These raise questions of a moral nature that we don’t know how to deal with. Imagine how it can affect the LGBT community.

I know another gay man in a caregiver situation who paraphrases the “family values” crowd as intending to say “gay people do not contribute to society by raising children, etc.”, Isn’t this a lot of what groups like “Focus on the Family” really mean but are afraid to say bluntly? Then on the notorious soap opera “Days of our Lives” the character “grandma Kate” (“Hurricane Katrina”) says “We take risks for our flesh and blood; that’s how we’re wired.” But maybe some of us aren’t wired that way. I think the writers of these soap operas know have caught on to that.

It’s true, the “me generation” has found other interests beside having children, and this is creating a new demographic problem as people live longer without maintaining independence (and being able to work or having enough saved for retirement and perhaps for long term care). Ask Philip Longman, author of “The Empty Cradle.” It’s true, however, that in the United States the birth rate has increased and actually now there is a bit of a baby boom again, but it may be happening more among minority immigrants and those at economic disadvantage.

We hear that global warming and the energy crisis are an example of a sustainability problem. It seems that family demographics is creating another sustainability problem, the morals and ethics about we don’t even know how to talk about. Certainly, moral values and personal responsibility, the way we usually present these issues (and the way they play out on shows like Dr. Phil) have their flip sides.

The label for this posting (“filial piety”) is a new one (representing the concept as in China, discussed July 14. Blogger seems to be able to display only ten items on a label, so the visitor can navigate the items marked “filial piety” down to the June 30 posting, that carries the label “filial responsibility laws” and then navigate that label to see all the relevant postings on this problem. The detailed information by state appears largely on July 7 and 12, 2007.

Tuesday, July 22, 2008

Social Security launched Retirement Estimator, of future benefits, on its website

The Social Security Administration this morning released a new “Retirements Estimator” calculator of future benefits at its website, link here. The calculator will provide an estimate of social security benefits to begin at a particular age in most cases.

To use the calculator, the visitor should (1) not yet be receiving social security benefits (2) have enough credited work (usually forty quarters of qualified employments) to qualify (3) not qualify for a pension based on non SSA-covered work (now unusual). The application would appear to allow the visitor to experiment with calculations based on early retirement as early as 62, as well as waiting until full retirement age or working to maximum SSA retirement age.

The site allows the user 25 minutes of inactivity and requires that JavaScript be enabled. It should work in most well known browsers. The calculator requires that you allow access to your personal information from your computer, so it should be done from a home computer that you know is secure. It probably should not be done at work or in a public library or Kinkos.

The launching of the application was mentioned this morning (July 22) on the NBC Today show.

It also requires that a visitor click and “accept” agreement for use of online services.

The Social Security Administration also provides an actuarial Life Expectancy Table, here.

Some features should be noted. At any particular age, women have longer expectancies than men. At any particular age, women have a lower probability of death during that year. The expected remaining years slowly goes down, but not as quickly as age rises. A 90 year old man has a remaining life expectancy of 3.80 years. But at 94 the expectancy is still 2.86. Medical advances tend to increase life expectancy more rapidly than they can extend vitality, the ability to live with no assistance, and raise the risk of savings running out if one spends more than one makes on a fixed income.

Monday, July 21, 2008

Charles Schwab reports on attitudes toward filial responsibility

Charles Schwab (an investment bank) has published online the results of a survey on attitudes toward aging that show a surprising awareness (often increasing with younger people, going from baby boomers through Generations Y and X) that individual adults, even singles who have never married or had children, might have to support their parents or even siblings. This item suggests that the public is more aware of filial responsibility as a "moral issue" than the media has generally reported.

Some of the questions are “I worry that I might have to contribute to the finances of my parents”; “I expect my children will help me out financially when I retire”; “I worry that I might have to contribute to the finances of my siblings” (this one is a surprise); “It’s important to pass on a money inheritance to the next generation”. The web page, called “An Aging Population”, is available here.

The media has reported Schwab as saying that 40% of Americans will face having to provide for their parents and should not expect to receive inheritances.

I found a blog on Myspace that talks about retirement security for African Americans and that highlights the expectation of tighter family connections in that community (includes reference to an AP story by Daniel Sorid), link here.

Wednesday, July 16, 2008

GM apparently will ship retirees to Medicare: is this a real hardship?

Recently the major media companies have reported that General Motors is ending health care coverage for previously salaried (exempt, not hourly) retirees. Some reports say that the measure applies only to those over 65. Apparently, many retirees had advantage programs that replaced Medicare (and conventional supplements) with coverage that may have been much better. Now, older retirees say that they are faced with finding adequate insurance, and some fear that they could be excluded for pre-existing conditions. It would appear that these concerns apply largely to Medicare Part B Supplement, to pay the 20% not covered by Medicare (after deductible), as well as some copays for Part A hospitalization (and some limits on Part A).

What I have found, as I have covered in the blogs before, as that if one applies for AARP plans right when turning 65, very adequate supplemental plans seem to be available at reasonable cost. A similar comment appears to apply to Part D prescription drugs. So far, it appears that AARP has been able to get better rates (especially with United Health Care) than have many employers (even with Blue plans). Some employers have admitted this openly (even to me). I don’t know why this is the case, other than those who join at 65 may be healthier than older persons who suddenly must shop around.

Apparently GM’s plans had been very generous, and retirees fear that they will not be able to find physicians or specialists who take Medicare. My own personal experience so far in northern Virginia seems to be that it is not difficult to find physicians, but many physicians who do seem to be from overseas (including India, Pakistan and the Middle East). The same comment applies, however, to some employers’ pre-65 retiree plans (apparently GM’s was better).

The central reference on the web seems to be “Extend Health,” here. A search will find a large number of recent media stories on the matter in most newspapers, broadcast networks and wire services.

GM actually owned information technology giant Electronic Data Systems (“EDS”), founded by Ross Perot, from 1984-1996. How times have changed.

Tuesday, July 15, 2008

Overview of how "seniors only" or "age restricted" housing work; compare to other kinds of housing

Today, I had a conversation about how senior housing works. There are many different kinds of dwellings and businesses, and the public may sometimes confuse them. The most expensive are nursing homes, which must provide round-the-clock custodial care, and even these have different types (like skilled nursing facilities and intermediate care facilities). Custodial care is not covered by Medicare but may be covered by Medicaid for indigent patients. But skilled care (where the patient gets better) is covered by Medicare for limited time, as is hospice care in some cases.

The next level is assisted living, which provides practical assistance in addition to housing (including cooked meals and medication supervision), and usually the ability to facilitate placement in a nursing home if the patient gets worse. Some assisted living facilities have special units for Alzheimers. A major company in this business is Sunrise.

But still more common are senior apartments, limited to people 55 and over, and also senior condominium residences, which also have age minimums. Some senior condominiums offer assisted living services. But generally “senior apartments” are exactly that, without special services (although there are some activities). This arrangement makes it possible to offer some relative luxury, including cable access, and reasonable security and protected access. Typically they cost about 40% of what assisted living would cost. They tend to be located in smaller cities, often 20-50 miles from the centers of major cities.

The senior apartments are an important resource because they often have much more lenient income requirements, designed for seniors on fixed incomes, often including social security. A typical arrangement specifies a minimum and maximum annual income as rental eligibility. The minimum is likely to be on the lower end of typical social security incomes, and the maximum would correspond to a typical hourly job. Investment income is likely to be included, but adding up the applicant’s assets and applying a federal funds rate formula. HUD requirements affect how these apartments work.

“Regular” apartments often have a much higher minimum income. Some may consider total assets (along with requiring an EFT automatic debit arrangement with a bank in advance) but are likely to require a cosigner if minimum income cannot be met. For older seniors living alone and without close relatives or marital partners, the cosigner requirement could be an issue.

Here is a reference on “age restricted” or “Seniors Only” apartments, which explains how the “legal age discrimination” works. Here is a discussion of HUD Section 202 low-income senior apartments.

Another reference that indexes the income limits appears to be this.

Ruling in Minnesota can complicate family liability for Medicaid expenses; federal law seems self-contradictory

The Center of the American Experience is a conservative group in Minneapolis. When I lived there, I did attend some of the luncheons and events and heard (libertarian oriented) John Stossel speak there.

Today the Center published and disseminated an essay by Peter J. Nelson, “Housing assets should help finance long-term care,” link here. Mr. Nelson also has an entry on the State Policy Blog here.

The essay refers to a case where the state Supreme Court of Minnesota held that federal law precludes the state Medicaid program from recovering money from the estate of a deceased husband to pay for a wife’s long term care. The case involves one Frances E. Barg, and the court opinion, issued May 30, 2008, is available (PDF) here. As of now, the ruling would only be binding on Minnesota.

The irony is that look-back provisions in federal law require states to try to recover money that has been “given away” to other relatives. The situation is somewhat confusing.

Because Medicaid is precluded on “asset spend down” sometimes recipients engage in complex strategies to make assets “unavailable” (including masking them as "homestead").

Mr. Nelson is arguing that government should be even stricter about going after existing assets to pay for state Medicaid nursing home expenses, in order to limit the passing of the costs on to needier recipients.

Even so, in many states (I don’t believe Minnesota is one of them), states can require adult children to support (including paying nursing home bills) of indigent parents, even though these laws so far are rarely enforced. Changing demographics, depressed state budgets, and even international attention to filial responsibility in other countries (especially China) could cause this to change.

Monday, July 14, 2008

"Filial piety" important in China, and for Chinese Americans

The AARP Bulletin of July/August 2008 discusses filial responsibility in China. On p 16, and article by Dan Levin, “Tradition Under Stress” discusses the issue as it is in China now, where it is called "filial piety" (or "xiao shun") and has long been established in Chinese culture. Chinese capitalism and the “one child per family” policy may be making this more difficult, as young people move away to the cities for jobs. In China, the ratio of workers to “retirees” will decrease from 20:1 around 1980 to 2.5:1 by 2020.

The article says that China has no equivalent to American social security and Medicare, although limited social security is becoming available. Relatively few older urban citizens have significant citizens. In China, it is often a source of shame to put a parent into a nursing home. But the home health industry is booming.

The culture of filial piety also is common with Chinese Americans. However, descendants of Chinese immigrants have tended to migrate toward the nuclear family rather than extended family. William Poy Lee has an article “Under one roof: Chinese Americans and filial piety.” On the AARP Bulletin website, there is a 5-minute video about Lee (and his mother Poy Jen Lee) directed by Nick Francis, called “Aging in China” at this URL. Lee says that he asked his mother to come live with him but she first declined. In Chinese culture, ancestors are revered and considered valued just for that fact of being elders (who had and raised families), whereas they are not always viewed that way in “me generation” Western culture.

Ted Koppel mentioned filial piety (without mentioning it directly) in the second installment of his Discovery Channel film “The Peoples Republic of Capitalism,” which was “From Maoism to Meism” in discussing the gay community in China, where he said that gay men feel they will have to “go back in the closet” to have a wife and one child and be able to take care of their parents later in life.

The Lee video took the viewpoint that American culture used to value the extended family, at least before World War II. Notions of filial responsibility dwindled as Congress first passed social security in the 1930s and then Medicare in 1965. But Medicare does not cover custodial care, and 28 states in the US have filial responsibility laws (or “poor laws”), even as they are not often enforced, except in Medicaid “look back” situations with regard to pre-viatical distributions to heirs. .

Sunday, July 13, 2008

Accounting firm warns that most retirees will exhaust savings and reach destitution

Ernst & Young will release a study Monday indicating 60% retirees will run out of money before they die. Middle income Americans should reduce their spending by 24% to reduce their chances of winding up in poverty. The study anticipates that many Americans who retire at 60-62, as encouraged to do so by past corporate practice, could be destitute by 80. Particularly disturbing is the trend for corporations to freeze and eliminate defined benefit pensions.

Some seniors continue to work past 62 but in much more intermittent and lower paying jobs. Nevertheless, such jobs do tend to add to the principal that the senior will have to live on. Seniors who are able to enter jobs with higher earnings many find most opportunities are in commissioned sales of some kind and are likely to need good social contacts and skills, often through families.

The story is in The Washington Post on the Business Section front page today (F01), by Nancy Trejos, is titled “Many Retirees Faces Prospect of Outliving Savings, Study Says,” link here.

One disturbing trend is the rapidly increasing long lifespans as medicine can prevent cardiac arrest. At the same time, there are fewer adult children to care for them, and many of these may have moved away and some will not have experience in raising families or maintaining family continuity themselves.

The Ernst & Young website link for the study was not present this morning. I’ll check for it Monday.

The Washington Times today featured a "Voices" front page op-ed by Ed Feulner, "Social Security Deluge?" Besides making the usual "conservative to libertarian" arguments for privatization, it suggested eliminating benefits for the well-off, as well as upping the retirement age and perhaps denying the ability to retire "early" at 62. It's easy to imagine the moralism of such a proposal. I recall being approached to go to work to "make a lot of money" as a retiree selling things, including bad mortgages. I declined. I started the benefits at 62. I might not have the luxury of doing what Feulner thinks is "right" if his recommendations were followed. Link is here.

Wednesday, July 09, 2008

Candidates gear up to debate social security

If social security is a “third rail” (the kind that pedestrians used to have to step over on the Long Island Railroad back in the 1940s), both John McCain and Barack Obama are willing to tap it gingerly, maybe with insulated gloves, the kind that utility employees have to wear.

McCain still favors partial and gradual privatization, with tax-exempt but regulated private accounts that will provide retirement income outside of social security’s labyrinthine POMS rules (like annual earnings tests). To pay for the loss of new income, McCain might raise social security retirement ages even further or lower COLA increases. He will face problems in that corporate America often expects salaried professionals to be ready to retire at 62, or even earlier (look at airlines pilots). Much more would have to be done to make it easier for seniors to continue working at meaty jobs (not just selling things or schmoozing).

Barack Obama is wants to increase social security revenue by increasing the taxable base, but insert a “doughnut hole” between $102000 and $250000. Early in my career, I used to look forward to not having social security tax withdrawn during the last couple of months of the year. Others want to include all income as taxable. At the extreme end of thinking could be means testing of benefits, which would make social security more like a New Deal middle class “welfare” program as it was conceived originally, where some beneficiaries had never paid in (which is one of the actuarial problems). People have started think of social security income as a bit like a life annuity (with survivorship).

The news story appeared on p A1 of the July 8 Washington Post, by Perry Bacon, Jr. “Candidates Diverge on How to Save Social Security,” link here.

Tuesday, July 08, 2008

LTC rider on single premium life insurance policy might be a good way to plan for possible long term care needs

Merrill Lynch today posted a detailed story on how long term care, pensions and life insurance can come into play together.

The story cites a case of a man who left a widow and two sons. It seems that the man’s pension perhaps did not have the proper 5 years certain payments for surviving spouse (which is usually the standard), or it expired. In any case, the widow needed long term care, at a time when the economy was faltering. Instead of inheritance, the sons could have wound up paying for her care and being drained themselves. (The story is specific about this.) I worked for a life insurance company in information technology for twelve years (and through two mergers) but I don’t recall LTC riders, but LTC insurance was starting be offered around 1999.

The article mentioned a new product available at age 65: a single premium life insurance policy with a long-term care rider. For $100000 single premium, the person could buy up to $500000 in long term care, of collect about $166000 if the long term care was never needed. The article also suggests considering first-to-die and second-to-die policies.

The link is here. It may be necessary to have a ML account to see the article; the link will bring up the ML CMA logon screen to sign in.

Monday, July 07, 2008

Pensions may benefit and become more stable because of high oil and commodity prices

Defined benefit pensions may be getting a boost from higher commodity prices, particularly higher oil prices. This could be a silver lining; for retirees who do have pensions and who otherwise must deal with higher prices on fixed or limited incomes, pensions could become more stable and less endangered to termination if commodities provide the returns that make up for the lack of sufficient pre-funding from the normal processes of accounting and measuring corporate profits. That is the view of an article on the front page of The Washington Post this morning, by David Cho, “Pension Funds Boosted by Oil: While Stocks Fall, Commodity Bets Are Paying Off,” link here. Pension funds are more likely to invest in commodity futures long term, rather than treat them as quasi-stocks and engage in short selling.

Some politicians still claim that the need for investors to make financial returns on commodities is creating hardships for businesses (like airlines) and people who really need the items at stable prices. Others point to growing worldwide demand from developing countries, and the economic behavior of commodities or business models when they reach “peaks” or “tipping points” which can become unstable suddenly and cause great hardship. But the leveraging (with small margins) of financial instruments magnifies the speed with which businesses and whole facilities for customers could quickly collapse, leading to arguments by some people about “sustainability.”

Wednesday, July 02, 2008

Medicare to watch Hospice usage more closely

The Washington Post on Tuesday ran a story indicating that Medicare is looking harder for accountability in the use of hospice benefits.

The story is important because many people probably don’t know that Medicare will pay for hospice care in many cases at end of life. The Medicare publication (PDF) that explains this is here.

This is notable because generally Medicare does not pay for nursing home care, beyond brief (21 days) episodes in skilled nursing facilities where the patient is expected to get better, as when recovering from surgery or chemotherapy. Many times supplementary insurance will cover longer periods in nursing homes, but not indefinitely. That is what invokes the need for long term care insurance to protect assets, or even the possibility, even if remote, that filial responsibility laws could apply to adult children in many states before Medicaid could cover the costs.

The Washington Post story is “For Hospice, A Higher Authority: Medicare to Require More Accountability,” by Alicia Ault, p AE01, July 1, link here.

Tuesday, July 01, 2008

Should public policy try to keep people working until SSA full retirement age? Corporate America won't

Last night (June 30), ABC “World News Tonight” reviewed the subject of early retirement. Reporter Betsy Stark presented a woman of 72 still working 8 to 5 as an administrative assistant in Florida, often without a lunch break, unable to retire comfortably.

The show presented some numbers of the increase in social security benefit that accrues if someone waits until full retirement age (for me, 66) instead of a “protective” early retirement at 62. Typically the benefit increases by about one-third. It is supposed to be an actuarial calculation based on life expectancy, but with life spans increasing, many retirees will be better off if they can wait. There is a tendency to suggest that public policy ought to encourage people’s working until the SSA “full retirement age.” But corporate America (especially in today's economy) still encourages early retirement with buyouts, and with social security offsets subtracted from defined benefit pensions (for those who still have them), predicated on the idea that social security payments will start at 62.

The story is called “Financial Hardship Postpones Retirement: Baby Boomers Still Trapped in Daily Grind.” The link is here.