Monday, August 30, 2010

An insurance company mails me info about Medicaid and LTC and getting out of spend down (hint: partnership policies)

Today I got a mailer from “Bankers Insurance and Casualty Company” saying “as a Virginia resident, you are NOW ELIGIBLE for government assistance for protecting your assets under a new state sponsored program. Virginia residents can now receive Medicaid payments for long-term care services without having to first spend down their own savings to qualify.”

The letter asks you to mail back for a “Guide for Program Benefit Information” but a little web checking shows that this is about “partnership policies” for long term care insurance. Bankers's own link is here. The two basic requirements for these policies are inflation protection and federal IRS qualification.

Ohio has a similar program, and the state offers a very detailed explanation here (PDF).

Remember, typically long term care plans can be tapped only when at least two life activities are compromised.

With partnership plans, a patient could use Medicaid for co-pay (or if the LTC plan was insufficient) without the spend-down. The whole spend-down thing is disheartening, but there are strict lookback rules against giving away the assets to heirs first to spend down.

States are likely to get stricter with Medicaid and long-term care as their budgets are crimped due to recession and credit crisis. And in many states (including Ohio and Virginia), state laws give state Medicaid the legal right to go after adult children for reimbursement, under “poor laws” or “filial responsibility laws”. These haven’t been enforced much yet but probably will, but one wonders how they would stand up to constitutional tests, especially (like social security itself) they were enacted when life spans were shorter.

Even when there are funds available (from LTC or even private wealth) placement in a good facility is often difficult for many families.

Sunday, August 29, 2010

Social Security setting to ditch payback-and-restart options (which would give bigger lifetime payouts)

In the Business Section, on p G3, of the Washington Post, Sunday Aug. 29, Mary Beth Franklin has an important warning piece: “Social Security Wants to Scrap Payback Action”, with the online title, “Social Security payback option may disappear,” link here.

This refers to the opportunity to stop benefit, get a letter from Social Security telling how much to pay back, and then restarting benefits at a higher amount for life. The option is popular with people who start early benefits (as at age 62) for a lower amount, possibly because of layoff or job loss, and whose self-provided financial circumstances improve later (perhaps through a job or through inheritance), and who also believe that they may live longer than they had expected.

The Office of Management and Budget has the authority to make the decision, which could go into effect by early 2011, and would probably affect current early retirees. Congress does not need to have a say.

The measure could be seen as reducing Social Security’s exposure to eventual benefits deficit, as widely reported in the media, especially due to rapidly increasing longevity.

Private insurance companies may face similar calculations with life annuities.

Thursday, August 26, 2010

Even privatized retirement annuities and "social security" lose money to expenses, when compared to extended family care

As I’ve noted before, the Right Wing has sometimes expressed criticism of “hyperindividalism”, in which many adult live entire lives apart from their families or origin and for a variety of reasons often do not have children of their own and find expressive ways to make their lives “productive”. As family lineages become geographically and culturally fragmented, it becomes harder to take care of the elderly, who are living longer and often with longer-lasting disability.

The liberal answer to this was social insurance programs like social security and Medicare. The libertarian answer is that people save for their own retirement (and non-working spouses’ when appropriate), and that generations take care of themselves. And social security is a mixture of the two, because if is largely an annuity paid for by contributory taxes by employees and employers in proportion to wages, up to certain limits related to eventual payout.

It’s true that the original conception of social security was “welfare” and original beneficiaries didn’t contribute. It’s also, and much more important, that as life spans lengthen previously collected FICA “taxes” become inadequate. Increasing the wage base really would amount to a tax (not a self-funded annuity premium) because the increased wage earners wouldn’t get the “annuity” payments for the increased FICA contributions, so here it’s true, the “Right” is “right” in that taxes are suppressing intergenerational family responsibility. In another infrequent circumstance, FICA is a potentially redistributive or expropriative "tax": if someone doesn't pay tax in 40 covered quarters of wages, he or she becomes ineligible to collect any benefits at all.

But some of the FICA and Medicare tax contributions also amount to “taxation” because some of the “tax” goes to paying employees of the SSA and Medicare, toward administrative expenses. But even in a totally private but managed or regulated “forced annuity” system, some of the “premiums” would go to paying insurance company employee salaries or toward insurance company profits as they do now (the Mutuals make for an interesting question).

Therefore, in any system where workers are expected to provide for their own retirement rather than depend on children, there is some loss to administrative expense. So the “Right” is again right.

Of course, a “libertarian” take-care-of-yourself approach does work for many people, the kind who are more introverted and take care of themselves with fewer social bonds. It afford them more freedom. And some closed communities, like the Amish, where extended families take care of their own completely use medical services very little and ironically don’t experience long end-of-life periods with severe disability.

But for most of us, there is a problem. We really need to get a grip on preventing Alzheimer’s and other extreme disability if people are living so much longer suddenly.

Monday, August 23, 2010

Finanical companies should become ERISA ficuciaries and help workers stop premature 401(k) withdrawals

AOL was hopping this early Monday morning with a story that 401(k) premature withdrawals are soaring because of foreclosures and job losses. But when I went to check the story on Daily Finance, I found a criticism of Fidelity Investments by Daniel Solin, “How Fidelity could reform the 401(k) plan system, but won’t”, link here. The report says that the average 401(k) balance at mid 2010 was about $62000, hardly enough for “dignity.”

The article says that Fidelity should become a full 3(38) ERISA Fiduciary, a concept explained at Morningstar Advisor here (“The Different Flavors of ERISA Fidcuciaries” by W. Scott Simon. I remember a talk with Morningstar after Christmas at the end of 2001 after my layoff when the financial planner said in a phone call, “after all, you aren’t going to be working.” I was still 58 then.

The article says that Fidelity should limit its client portfolios to “low-cost, stock and bond index funds” and makes a comparison to Vanguard.

Saturday, August 21, 2010

Are social security benefits really like private annuities? Don't ask the right wing.

In connection with proposals concerning possible means testing, I’ve written on this blog that social security is still primarily an annuity based on a worker’s (number holder’s) own FICA contributions over the years (a minimum of forty quarters) or sometimes a (legal) spouse’s.

The amount of contribution is related to the worker's contributions through the FICA tax. It is true that up to a point, when viewed as a "tax" FICA seems regressive since it caps at a particular income, since benefits will not be paid above that income. But conceptually the amounts of FICA tax (proportional to income up to a point) resemble annuity premiums, whose amount eventually determines the benefit. Like social security, many private annuities are paid for life, so the premiums and incomes are determined from actuarial math and probability tables.

The “right wing” has been characterizing social security as a tax that “socializes” eldercare and removes the burden from adult children, who should arguably share the family responsibility.

It is true that at the current level of promised benefits, revenues from FICA taxes will gradually become inadequate and eventually benefits could not be delivered as promised. That’s true for several reasons. One of these is that people live much longer, and longer than was expected when the rates were set. Another may seem to be low birth rates (according to the Right), but the fertility rate in the United States, while maybe higher among some minorities and some immigrants, still is approximately at replacement level. A more relevant point is that employers, despite age discrimination laws, are more inclined to lay off highly paid older workers than is good for the economy.

All of this means that public policy must address increasing revenues, especially through increasing the taxable wage base. It must also encourage people to work longer (with some measures aimed at employers) and gradually raise retirement ages.

It’s also true that the first social security recipients in the 1930s had never paid anything in, so there is always a lagging accounting deficit that would have to be paid back somehow if social security were privatized.

I still believe that younger workers ought to have control of their own benefits and “own them”, but with regulation. If social security were “privatized” the only allowable investments should be those that do not lose principal.

I also see no point in continuing the “Annual Earnings Test” for early retirees. The payment is actuarially lower anyway if started early. That rule in the Social Security program should be dropped. As I've noted, private defined benefits pensions often base social security offsets and bridges on the assumption that social security will start as soon as possible, right now at age 62.

Private insurance companies that issue annuities have to face similar issues, and consider longer life spans in setting premiums. Likewise, defined benefit pensions could be undermined by rapidly increasing life spans, and companies and unions that consider them will have to consider new actuarial formulas. None of this means that pensions, social security, or annuities are like “welfare” undermining “families.”

Medicare is also partially funded by a Medicare payroll tax, which is much lower than FICA. But the analogy with health savings accounts (favored by the right) is somewhat facetious. People who need less medical care in their life time will draw less. This really is more like shared risk, as insurance is usually perceived. Cost savings, records automation, and elimination of redundant unnecessary tests and treatments remains an important component of Medicare control.

Thursday, August 19, 2010

SEC accuses New Jersey of pension misrepresentation; SEC charges against many governments could undermine tax free bond funds of retirees

The Securities and Exchange Commission has formally accused the state of New Jersey with pension fraud, according to a New York Times story, by Mary Williams Walsh, link here.

There SEC issued a cease-and-desist order to the state, which accepted it without admitting fault. The SEC maintains that the state has been claiming it funds workers’ pensions when it does not. The state can no longer make these claims. One ultimate result could be jeopardy to state bond holders. That could affect many people with municipal bond funds, such as many retirees, who pay little attention to individual bonds.

This is only the second charge against a government entity; the first was the City of San Diego.

The word on the Street is that many more such charges are coming, which could affect the values of some kinds of bond funds, especially tax-free funds composed of local government and school district or transportation authority bonds. What about DC’s Metro?

Wednesday, August 18, 2010

ABC's Hobson gives primer on Social Security Benefits 101, especially taking early retirement

Melody Hobson gave a presentation of “Social Security 101” on ABC Good Morning America on Wednesday, Aug. 19.

She said that your benefit goes up about 6% every year that you wait up to age 70. If you start benefits at age 62, early retirement, you get only 75%, with a lifetime payout pivot at about age 78 (a bigger problem for women). At full retirement age you get 100%, and at age 70-1/2, the latest possible age, it’s 132%. If you take early or full retirement, and then get a good job, you can pay back social security, wait, and take it out again at 70-1/2 at the higher rate.

One problem is that many corporate defined benefit plans have social security offsets and bridges presuming that the retiree will start benefits at 62, and many employees have cut older workers loose with buyouts on that assumption.

For married couples, she recommended that the lower earning spouse take early retirement at 62, and the higher earner take it at 70-1/2.

She did discuss the Annual Earnings Test for early retirement, with the loss of $1 for every $2 for anything earned in wages (not pensions or investments) over the maximum (which is not much). She did not justify it.
She noted an AARP finding to the effect that 14% of elderly retired Americans depend on Social Security for all their income, and 50% say that they will get more than 50% of their income from Social Security.

Melody’s article is here, title “Considering Early Retirement? Mellody Hobson's Tips for Social Security Benefits: Financial Contributor Mellody Hobson Gives Expert Advice.”

She also recommends visiting the site of the Certificed Financial Planner Board of Standards, here.

Social Security’s table on retirement ages is here.

Monday, August 16, 2010

Annuities provide some insurance against outliving savings

Sarah Morgan has an important discussion about annuities, reproduced from Smart Money, reproduced in Yahoo! today, with the following link.

Life insurance companies promote annuity sales, and major commercial information systems, like on the Vantage mainframe system, have been written to administer them, with even more sophistication than with more traditional insurance products.

Morgan makes the point that with annuity products its possible to structure defined contribution plans (401(k)’s, etc) to behave more like defined benefit plans once one retires.

She also points out that even mathematically sophisticated people have trouble coming up with the actuarial formulas, based on the present value concept, to calculate how long any level of savings would last in a particular interest rate environment.
Annuities, properly constructed, provide some reverse life insurance against outliving one’s savings.

That’s why I’ve often written here that social security benefits are essentially, in most cases, like government-mandated annuities.

Sunday, August 15, 2010

Harrisonburg VA (JMU) Alzheimer's Conference notes that 60% of family caregivers do not oulive Alzheimer's patients

The Harrisonburg (VA) Daily-Record has a fortnightly insert called “Seasons Plus” from the “Elder Alliance” and the (Shenandoah) Valley Program for Aging Services. Neither Bing nor Google returned a website for the group. The address for Elder Alliance is given as 411 Stone Springs Road, Harrisonburg, VA 22801, near James Madison University.

However the print version for August 2010, if you can find it, has some provocative articles. Jeanne K. Russell, Director of Marketing & Community Relations, Home Instead Senior Care, has a column “A Family’s Commitment to Care.” Valda Garber-Weider has a column on the same front page, “Memory Loss Is Not Contagious.” But the most startling piece appears on p 8, by Samantha Jennings (JMU Social Work Intern, Generations Crossing), “Alzheimer’s Symposium Recap,” apparently held at JMU.

The most startling finding was that, with Alzheimer’s patients, 60% of family caregivers “will pass away before their loved ones because they do not take care of themselves.” But Alzheimer’s places demands on caregivers and families that confound or contradict all the usual moral assumptions of an individualistic culture.

Saturday, August 14, 2010

Is GOP still fighting for social security privatization? Then why means test?

The Washington Post is again hitting the social security issue hard on Saturday Aug 14, in a story by Michael D. Shear and Lori Montgomery, “In weekly address, Obama returns to campaign chestnut: Warning of threat to social security”, link here.

Note: Dick Cheney used to use the term “old chestnut” to characterize the military ban on gays. The article points to Obama’s radio address Saturday as saying that some Republicans want to privatize social security. Not true, the article says, any more. The Bushies and neocons (so endeared to Peter Beinart when he wrote for the New Republic) gave up on it.

In a “Free for ALL” (pun) letter on p A11 of the Aug 14 Washington Post, Barbara B. Kennelly, president and chief executive of the National Committee to Preserve Society Security and Medicare, writes “since Social Security hasn’t added a dime to the deficit, neither should its beneficiaries be asked to sacrifice their benefits to repair the damage of past economic policies”.

The President, too his credit, described the current system (toward the end of his address) as largely a system of providing for one’s own (and sometimes one’s legal spouse’s) benefits by paying a mandatory FICA payroll tax.

Yet, some want to take that “benefit” away from the “least needy” and give it to someone else. That’s called expropriation in my book.

Remember, it's true that the longer one lives, the longer one collects; the earlier one starts receiving benefits, the less one receives a month. This is the way private annuities work now.  Call it private socialism.

Picture: A “social security bridge”??

Friday, August 13, 2010

New spinal test for Alzheimer's is accurate but raises issues

The media reports a new spinal fluid test for signs of Alzheimer’s disease that may be able to detect it even before there are symptoms, presumably allowing the starting of medication to prevent the brain plaques and tangles from forming. Obviously, the information would have to be protected as it could lead to discrimination and insurance problems.

The Archives of Neurology link for “Meta-analysis Confirms CR1, CLU, and PICALM as Alzheimer Disease Risk Loci and Reveals Interactions With APOE Genotypes” is here.

The New York Times story (Aug.11) by Gina Kolata is here.

The story starts by reporting that the test can be 100% accurate.

The article points out that patients in research studies are not told the results of the studies.

Wednesday, August 11, 2010

Social Security: Washington Post hints that means testing may be appropriate component of reform

The Washington Post ran a provocative lead editorial Wednesday, Aug. 11, p. A16, “Social security’s tough truths: Whatever the deniers say, the program needs reform, and soon”, link here.  This may sound like another variation of the Al Gore “inconvenient truth” mathematics.

The Post is critical of proposals to harden Social Security from the revenue side only. It mentions “means testing” as an unacceptable measure on a list examined by both Erskine Bowles (D) and Alan Simpson (R), among reduction in benefits and raising retirement age, however incrementally.

The Post wants a “balanced approach”. (Already, my full retirement age did not occur until 66, but I was able to start payments at 62, and my employer’s “social security bridge” pension payment had made the assumption that I would, as do most “social security offset” provisions in many defined benefit pensions).

The Post sensibly does say that reforming Social Security should not add to the deficit (and accounting gimmicks often discussed by conservatives should not hide it either), but the post also says, “Some adjustments on the benefits side, particularly making benefits less generous for the highest-income recipients, would also make sense.”

That’s the rub. My experience with social security is that it is essentially an annuity, with the FICA taxes over the years (a minimum of ten) amounting to a premium. “I earned it.” (As my Army buddies said, “put it in “The Proles”.) If you take it away, that’s redistribution of wealth. You don’t take annuity payments away. (I admit, there’s a question that when Social Security started, the earliest beneficiaries in the 1930s had not made contributions, but that doesn’t make the entire system into welfare. Curiously, some corporations call their severance packages “welfare programs”.)

But once you except the idea that Social Security is not an annuity (that is, what the Bushies wanted with complete privatization, as does Cato) but a “tax” on the working to "support" the elderly, then you have the argument that the “pro-family” people make all the time. That is, we have socialized eldercare (while "privatizing" parenthood) so that individual family members, especially the childless and LGBT, get the “false freedom” of total personal autonomy, without sharing the family responsibility elected by those who choose to marry and become parents (both).

Of course, if social security retirement benefit is an "annuity", why does the law require Social Security to enforce the "annual earnings limit" test before full retirement age? Since the benefit is acutarially reduced when started earlier according to life expectancy (and may prove disadvantageous, especially for females), it seems unnecessary to restruct the benefit. Furthermore, if there were means testing, there might exist rules that no more than one benefit could be paid per household (spouses, domestic partners [a twist for same-sex], or even a very old person living with an adult child himself or herself old enough to receive social security retirement benefit; right now, the benefit is strictly based on individual "number holder" (wage earner or spouse of wage earner, and the rules allow spouses a choice, as to how to use separate work records to their advantage).

I wrote blog postings earlier this week on my Issues and GLBT blogs, based on other news and columns. In any case, eldercare is not completely socialized: custodial care is still family responsibility, and budget-hurt states are likely to start enforcing filial responsibility laws in lieu of Medicaid payments for nursing care in many cases.

Tuesday, August 10, 2010

Baby boomers have trouble finding good jobs in forced retirement

USA Today ran an article by Christine Dugas, a cover story on Aug. 10, “For Boomers, retirement jobs can be a tough fit: Many want to keep working, but options are often limited”, link here.

Indeed, a corporate-driven culture two decades ago of buying out highly paid and skilled workers in their 50s has become unsustainable and backfired. Many retirees do not have enough money to live expanded lifespans without slipping into poverty, and many will not have any health insurance (or be able to afford it) before reaching Medicare age.

AARP has teamed with some companies, like Home Depot, to hire more seniors.

There is a tendency to push seniors into “lifestyle” or sales oriented jobs, when some may have the wisdom that companies and government actually need in areas like intelligence, security and strategic planning.

Outplacement companies like to talk about "interim jobs" that become permanent. The prospect for baby boomers to become teachers has become guarded as school budgets suffer during the recession, but could improve again with some recovery or federal stimulus.

Think about the intelligence idea. Someone in his 50s or 60s with a lifetime of different experiences may be better able to “connect the dots” and notice dangerous developments than younger analysts. Do law enforcement and intelligence agencies realize this?

Sunday, August 08, 2010

CBS 60 Minutes presents the cost of "end of life care" issue and hits hard

CBS 60 Minutes tonight presented a report by Steve Kroft, “The Cost of Dying: End-of-Life Care: Patients ‘ Last Two Months of Life Cost Medicare $50 Billion Last Year; Is there a better way?” link here. (The CBS video may resolve properly only in Internet Explorer.)

This report mentioned hospice as if it were obscure to most people.  It also presents dying as inevitable for everyone as a result of biological senescence, so dying badly can be worse than dying inevitably.

There is a web extra about staying at home in the last days, here.

The main report makes the point that the health care reform this year ("Obama care" as conservatives call it) did not address the cost of eldercare during the final months and the desperate attempts to cling to life at all costs. (It did provide some resources for community in-home care and made changes that arguable indirectly help Medicare.) All European countries, with national systems, limit how much can be spent in the last months of life given certain ages and conditions. That’s “rationing” but what we do is still unpredictable rationing.

Kroft interviewed Dr. Ira Byock at a medical center at Dartmouth in New Harmpshire. He said we need to develop “morally robust” ways to face the inevitability of death for all of us.

Update: Aug. 11

On p. 56 of the July-August 2010 issue of Mother Jones, there appears a long article by James Ridgeway, "Meet the Real Death Panels: Should geezers like me give up life-prolonging treatments to cut health care costs?", link here.  I found it with Bing; Mother Jones hasn't indexed it yet into its own site. He discusses the inconsistency of bioethicist Daniel Callahan (apparently not the David Callahan of "The Cheating Culture"), discusses the QALY calculation  and concludes "Here, then, is my advice to anyone who suggests that we geezers should do the right thing and pull the plug on ourselves: Start treating health care as a human right instead of a profit-making opportunity, and see how much money you save. Then, by all means, get back to me."

If Medicare (or as in Britain, the NHS) denies coverage over QALY "rationing" should family members be put in a moral bind and be expected to foot the bill themselves "if able"?  There is no end to this.

Thursday, August 05, 2010

Social Security reports on its own financial health today: permanent tilt in 2015

The Social Security Board of Trustees issued its annual report on the “financial health” of the Social Security Trust Fund, today, August 5, 2010, link here for the official "Press Release".

The Trust Fund would be exhausted in 2037, no change from before. Program costs will exceed revenues in 2010 and 2011, be better than revenues from 2012 to 2014, and then permanently exceed tax revenues.

CNN had a discussion of Social Security today, including Boehner’s proposal. But CNN mainly focused on increasing the taxable wage base and gradually recovering the retirement age, and did not mention means testing.

Annalyn Censky has a report for CNN, here , saying that it’s official, social security is reaching it’s tipping point this year. But really, that’s 2015 as far as a permanent “Pisa tower lean”.

Tuesday, August 03, 2010

Lower hospital operating margins may help keep Medicare solvent longer; Lewin, Dobson, other companies active in analyzing Medicare-based businesses

An AP story by Ricardo Alonso-Zaldivar, printed in the Washington Post on Tuesday Aug. 3 on p A2, (link) indicates that the Obamacare law will help Medicare stay solvent, and save Medicare $8 billion through 2011.

Spending cuts associated with the Affordable Care Act will help seniors reduce their supplemental Medicare premiums by $200 a year by 2018.

The Obama administration report contradicts “inconvenient truth” claims that Medicare is sliding into insolvency.

The biggest saving seems to have come from cuts to Medicare providers, especially hospitals. Medicare operating margins for hospitals (as predicted and tabled by various categories by a “policy simulation model” of the Prospective Payment System) were the primary focus of my own I.T. job with Lewin-ICF from 1988 to early 1990. See the company’s page for hospital consulting here.

For many years (as when I worked there), Allen Dobson, Ph.D., was a leader of the effort to analyze hospital revenues and margins at Lewin, but now it appears that he has his own company, Dobson DaVanzo & Associates, LLC, and has a major paper published and noted online with The Commonwealth Find, for example, here (“Measuring Efficiency: The Association of Risk-Adjusted Hospital Costs and Quality of Care”, in 2009, here.

In a tangentially related matter, I got a call yesterday from a long term care insurance and supplemental (and probably Medicare Advantage) agent, who compared my monthly premium ($101) at age 67 for Medicare supplemental with United Health Care through AARP with another company (Mutual of Omaha). It seems that AARP’s rates are very close to industry norms, within 1% either way.

Sunday, August 01, 2010

"The New Yorker" looks at medical practice and "letting go" at end of life

The Aug. 2, 2010 issue of The New Yorker has a very long and explicit article by Atul Gawande about the enormous prolongation of the dying process that has been enabled by modern medicine, on p 36, title “Letting Go: What should medicine do when it can’t save your life?” link here.

It’s true that some of the cases presented here (especially the first one involving a young pregnant woman with an unusual lung cancer) deal with the non-elderly, but the issue certainly is increasing astronomically with age.

The article points out that comfort-only hospice care at home often results in more months remaining than expected, and sometimes results in longer lifespans than aggressive treatment (possibly partly because home visits are easier on the patient – and caregivers). Aetna has experimented with allowing hospice and conventional care to be paid for simultaneously (in regular health insurance; Medicare will cover hospice when properly authorized, but patients can continue to use regular Medicare and supplemental insurance for non-hospice authorized prescription drugs and doctor visits).

The article says, “For all but our most recent history, dying was typically a brief process.” It did not constitute a potentially major part of our social contract.


Don Lemon on CNN interviewed a Georgia man (Garry Phebus), 61, with ALS (Lou Gehrig's Disease) who wants to donate his organs before natural death, but that is illegal in every state. CNN video: