Thursday, April 30, 2009

Life insurance flipping is a controversial and disturbing practice

David S. Hilzenrath has a couple of stories in the Washington Post Wednesday and Thursday about viatical life insurance settlements (SEC link here), the second of which, “Senators Decry Flipping of Life Insurance Policies” appeared today on p A17, with this link. Apparently, the Chicago Tribune recently hosted an advertising event, “WHY WALL STREET WANTS TO BUY YOUR LIFE INSURANCE POLICY.” Life insurance settlement companies approach people with short life expectancies and get them to surrender their policies for cash. Then the companies make more money that would have been paid to the beneficiaries.

One possible use of this device could be to pay more nursing home or eldercare bills, without going to Medicaid. Possibly states could require people to do this. That also means that heirs (usually adult children) will not receive proceeds upon death, but in the case where money is needed to pay for care, this would sound right, and in line with the likelihood that many states will clamp down in the way they implement filial responsibility laws.

A related practice is “stranger-originated life insurance” where companies encourage the elderly to take out policies just for companies to buy and flip. Ohio, for example, recently prohibited the practice.

Viatical settlements became somewhat popular and controversial in the 1980s when people with AIDS settled their policies during the last months of their lives, before medications that could greatly increase life spans were available.

Wednesday, April 29, 2009

Married couple in Hawaii had not been able to live together in same nursing home until new law passed

A (heterosexual) couple married for 60 years will finally be allowed to receive care in the same Hawaii nursing home. Amazingly, they had been kept apart by a rule that allows only one private-pay or privately insured (for long term care) person to be in a home that has Medicaid patients. Rules were recently changed to married couples, reciprocal beneficiaries, siblings, and apparently domestic partners to live in the same home. It is not necessary to be legally “married” (relative to the same-sex marriage debate).

The AP story by Mark Niesse is here.

The new measure was signed into Hawaii law by governor Laura Lingle.

I had never heard of this restriction in any state before, even when I worked on a Medicaid MMIS system with nursing home reporting. The old rules had been constructed to save more beds for low income patients.

Friday, April 24, 2009

GM, Chrysler retirees seem to have questionable coverage from PBGC in case of bankruptcy

Peter Whoriskey has an alarming story in The Washington Post today (Friday, April 24, 2009), “Auto Retirees Brace for Hardship: Pension and Health Benefits May Suffer Under Bankruptcy”, link here. The rumored "orderly bankruptcies" of the two big auto manufacturers may not be very orderly after all.

The pension plans of both General Motors and Chrysler are significantly underfunded, but what is alarming about the Post story is that the PBGC (Pension Benefit Guaranty Corproation) insurance seems to cover only a portion of the underfunding. Previous reports have suggested that most workers were “safe” with insurance of pensions to over $40000 a year. Now that seems much less so. And furthermore, it looks like a bankruptcy of both companies, at least, could lead to a need for a bailout of PGBC. At least, there will be significant political pressure to make the people to took “early retirement” and who are often in their 50s or early 60s now whole.

This is turning into a moral dilemma to be sure.

There are also serious questions about retiree health insurance.

I have owned a GM car only once, a Chevette bought (new) in 1979 and it fell apart. I owned a (new) Dodge Colt from 1983 to 1986.

GM is set for a nine-week furlough this summer. What happens to PGBC if a lot of suppliers go under?

Picture: My Colt, winter 1985; old snapshots of condo. It does snow in Dallas.

Thursday, April 23, 2009

Walletpop says biggest "retirement" deadly sin is not starting early enough

AOL offers a walletpop article this morning “10 Deadly Sins of Retirement” here. You have to navigate through some panels and see each “sin”.

The most important point is the first: not starting soon enough, light right when you start working. Another is passing up free money in 401K matches (not all companies offer them any more). But the most interesting appears toward the end: retiring too early. True, social security retirement payments are less if you start them at 62 (the break even point seems to be living to about age 77), and so may be some pensions. The article offers the direct link to Social Security. But companies have forced older, higher-paid employees out and into make-shift second careers for years.

Of course, how many recent grads with heavy student loan debts feel like disciplining themselves further with retirement planning at 22. But they need to.

Monday, April 20, 2009

CBS 60 Minutes covers the 401K meltdown

CBS 60 Minutes last night offered a grim report on the decline of retirement dreams with the loss of 401K’s. The show, hosted by Steve Kroft, focused on a career fair in Manhattan.

The most endangered workers seem to be those in their 50s and 60s who often lost over half their life savings. Younger workers will have to time to recover their losses with dollar-cost averages.

One problem is that conventional financial planning didn’t do people approaching retirement any good. There was a herd mentality, and conventional “professional” advice turned out to be wrong. Even mutual funds turned out to be untrustworthy. The one thing that held value was FDIC-insured stocks, and very conservative “bread and butter” type stocks. People who made their own investment decisions on conservative grounds often did better than those with financial planners.

The report called the 401K system as the wobbly gam of a “three-legged stool” for financial security. It was created in the late 1970s as a tempting strategy to deal with tightening pensions.

The report covered the high fees of various kinds associated with many plans, which could eat up half the income of the plans even in good times.

The CBS link is here.

Watch CBS Videos Online

The Newark Star-Ledger has an interesting op-ed by John Bury, “401K Recession – Beyond 60 Minutes”, where he gets into the fees and pseudo-scams, here.

Thursday, April 16, 2009

Social Security "bonus" of $250 for economic recovery announcement letters are starting to arrive

The Social Security administration has started to mail “good news!” (or “gospel”) letters to Social Security recipients.

The economic recovery law signed by President Obama in February 2009 will provide a $250 one-time payment to each social security and SSI recipient, per number holder account. Spouses with separate accounts will each get their own payment. A one time payment kept for nine months or more will count toward an SSI resource limit. Children under 18 (or 19 if in high school) who receive payments from social security will not receive separate payments.

The letters apparently are being mailed in staged fashion, according to the date that the normal benefit is paid. They may arrive in staggered fashion. The payments should be made by late May 2009, by direct deposit when it has been set up.

The official announcement came from Vice President Biden and is here (dated March 26, 2009, along with links to details for the rules).

The stimulus is more favorable to wage earners than to non-working retirees, this time around.

Wednesday, April 15, 2009

Myths about retirement and marital status

Kimberly Palmer has an important article today (April 15) in Yahoo! Finance, that credits US News, although I could not find the article there yet. The title is “7 Myths About Marriage and Retirement.”

The biggest myth is that single people need less money. That’s a myth because single people tend to accumulate less wealth and spend more of it sooner. Capability for stable marriage can be an economic asset, like it or not (go back to George Gilder in the 1980s). After age 65, single people’s income dwindles by 3% a year until it is down to 20% by age 95.

But she says that retirees don’t need to plan to maintain their wealth until age 100. People should be sensible about their actuarial probabilities – but lifespans may be very rapidly increasing now (compared to vigor and well being) because of the way medicine is being practiced and financed (Medicare) relative to lifestyle habits. She warns that people at age 65 tend to underestimate their life expectancies, and then overestimate it at some point after age 75.

She also thinks that people draw on pensions too quickly and don’t provide enough for surviving spouses (she prefers full survivorship rather than years certain).

Monday, April 13, 2009

Coronary bypass surgeon tells Sunday school that the surgery brings patients back to life

Easter Sunday morning, a Sunday School teacher who happens to be a cardiac surgeon who regular performs coronary bypass surgery taught the lesson. He may have been appropriate in bringing up the subject of raising the dead (in “miracles”) as a metaphor for eventual resurrection, because, as he explained, that is what happens in bypass surgery.

The patient’s body is cooled to about 18 degrees C (about 64 F) for two hours or so while the heart is stopped so that replacement coronary arteries can be grafted, usually from the legs, although it is likely in the future that they will be grown from stem cells. In this amount of time, when the heart is restarted and the patient warmed, his brain comes back up pretty much like a computer with a cold boot (think of waking from REM sleep as a warm boot).

However, he said, with waits of over three hours the possibility of permanent damage becomes very real.

He also indicated that some people relate to the typical "near death experiences" and then come back, despite drugs that destroy memory of the surgery.

He said that the oldest known bypass patient was 92, but it started to become more common to do them above age 80 about 15 years ago. But even in the early 1980s they had become common for people in their 60s and 70s. By father had an aorta aneurysm resection at age 74 in 1977, and even then the surgery was quite advanced.

There is a danger of stroke, especially with advanced age bypass, and quality of life in the long run, for the patient and family members, is still a big issue for medicine to deal with. More effort and money, especially when it comes from the expanding public sector like Medicare, needs to be spent on quality of years than just quantity, whatever the sentiments of people.

Thursday, April 09, 2009

HIPAA may call for updated power of attorney for caregivers or relatives

Some legal experts are suggesting that persons in eldercare situations consider whether their “Power of Attorney” documents and Medical Directives (if created and signed before 2003) are current enough to meet new requirements of HIPAA, the Health Insurance Portability and Accountability Act (text of law; Centers for Medicare and Medicaid Services site).

An entry in Feb. 2005 in the “Wills, Trusts & Estates Prof Blog” (here) discusses both sides of the controversy.

Some experts believe that a “named agent” does not have authority until a patient is declared incompetent, but the agent or representative (usually a relative) cannot get the information to get the determination of incompetence because of HIPAA privacy rules. So some attorneys believe that a separate document (or extended POA document) should give explicit consent to obtain the information.

In some cases, relatives (especially adult children) might not be able to get parents moved into nursing homes after medical catastrophes (such as strokes). Prior to HIPAA, doctors or hospital case managers could move patients into nursing homes after discharge without relative involvement; the new law could make this harder to manage and in some cases adult children could wind up having to move to provide care themselves, according to some references.

One possibility, absent a sufficient and “modern” post-HIPAA power of attorney, would be to go to court and seek legal guardianship, in some cases in some states.

An article by Steven Allen on “Ezine” explains this here.

In some states, however, legal experts say that these measures are unnecessary (despite the fact that HIPAA is federal, not just state, law).

I recall a telephone job interview for a systems development job regarding HIPAA in 2002 (for an April 1, 2003 implementation) and believe these requirements might have been at issue in the particular job position (with a PPO).

I would also be concerned about the legal status of childless relatives and caregivers in the future if the political climate were to move toward evidence of “generativity” as proof that the relative is trustworthy for guardianship. I discussed this on my main blog Sunday April 5.

Updated power of attorney documents can be more easily melded into trusts, that protect the elder’s assets from creditors of the children in cases where the children’s names are on bank accounts for “convenience”. Adult children should also know (by checking with financial institutions) whether they are (often without their knowledge) co-owners, accommodators, or have pay-on-death or transfer-on-death arrangements. Adult children living away from parents may not be aware of the need to do this.

Surprisingly the POA and trust issues have been little covered by the major media and don’t attract a lot of attention from politicians, even though lawyers know them well. Suze Orman, instead of doing another smackdown, why don’t you talk about this your next time on Oprah?

Friday, April 03, 2009

PGBC had invested too much in stocks before Crash of 2008: what if GM goes under? Another bailout?

The Street” has a major story (“Today’s Outrage” April 3) claiming that the Pension Benefit Guaranty Corporation (PGBC) had shifted more of its investments into the stock market ahead of last fall’s market meltdown.

Now there are serious questions as to whether the PGBC would be solvent if GM and Chrysler went into (Chapter 11) bankruptcy, and the PGBC had to pick up the union and white collar pensions of retirees.

The PGBC is supposed to be self-financed by premiums charged to employers (somewhat analogous to premiums for unemployment insurance) but in the end, guess what, it looks like we face a Congressional debate on – guess what – another bailout.

The link for the story is here.

Thursday, April 02, 2009

Persons over 75 may be the fast growing segment of workforce, in a severe recession!

There are mixed messages about the employment of older workers.

The AARP offers an analysis by Sara E. Rix, Ph.D., AARP Public Policy Institute, “Little to Cheer About: Unemployment and the Older Worker: 2008” link here. In December 2008 the overall official unemployment rate was 7.2%, but was 4.9% for those 55 and older.

That sounds like a paradox. Yes, many employers discriminate against older workers, who may have higher salaries and use more health benefits. Older workers are not eligible for some jobs. On the other hand, many are stable and well-educated and may be in demand in niche areas. Further, some are fully retired and are not looking for work.

However, today (April 2), ABC station WJLA in Washington reported that the US Labor Department (presumably the Bureau of Labor Statistics) is reporting that employment is growing in those age 75 and older than in any other group. I could not find this report online yet. However, many seniors are finding employment assisting other seniors, as in nursing homes or assisted living facilities, day facilities, and the like.

Wednesday, April 01, 2009

SSA explains how Annual Earnings Test stops at full retirement age

My 66th birthday occurs in July, 2009, and I got a nice letter from the “Social Security Administration: Retirement, Survivors, and Disability Insurance” yesterday.

They use euphemistic language. “We are writing to tell you about the Social Security benefit that will be available to you when you reach full retirement age in July 2009.”

“The earnings limit will no longer apply to you.” Whoop-ee!

The letter explains “if you worked and had your benefits reduced because you earned over the limit, the reduction stops in July.” Then “if you have not been working, the limit has not affected you and we will continue to pay you.”

Later it makes the most important statement, which addresses some email questions I have gotten. “Remember, your Social Security benefits are based on your earnings. If you decide to keep working or return to work, the additional earnings could increase your future benefits.”

The Full Retiremet Age chart is available on the Social Security Administration website here.