Saturday, December 29, 2012

Means testing might yield faster deficit savings than gradual changes for future retirees


Congress is unlikely to look very much at entitlements this New Year’s weekend as it tries to ponder emergency legislation to avoid the “Fiscal Cliff”.
  
It’s important to remember, however, that the biggest savings in entitlement spending could come from relatively sudden changes.

Reducing the use of “fee for service” and reforms to discourage unnecessary tests and treatments may reduce costs and do the least harm to patients (actually leaving patients alone might do some good).  But down the road is rationing of procedures for people over certain ages.  “It’s no longer your turn”.

Means testing on Medicare premiums might be moderately effective, but about 5% of a seniors pay higher premiums now.  And wealthiest healthy  seniors might indeed find private plans (Advantage) cheaper.  Republicans say they want this, but it might deprive Medicare of premium revenue from seniors who use it relatively less.

On Social Security, the unpleasant and inconvenient truth is that means testing now even of existing better-off beneficiaries might yield more savings than gradual changes in retirement age or in cost of living calculations (the chained CPI debate).

If we really go over the debt ceiling (after “Timocracy” methods to stave it off for two more months), it could turn out that Social Security beneficiaries are the first to take the hit after all.  That’s because of the 1960 Supreme Court opinion (Flemming v. Nestor) denies the claim of a “property right” to an annuity based on contributions, which could lead contractors to sue that they are first in line.  If benefit payments were missed, they might not be legally recoverable.

One grim and inconvenient possibility is based on a form of “means testing” already in effect for early retirees, the maligned “Annual Earnings Test”.  It could be extended past full retirement age.  It could be extended to incorporate investment income, other pensions (which are already compromised by the “social security offset”) or even inherited money, distributed any time within a reporting year or possibly previous years.  It could take the form of a “2:1” reduction, or even total exclusion.  And unlike the current AET for early retirees, it would not save rights for future benefits after a later age.
  
Means testing could also penalize seniors who did not take early retirement more.  Social Security has already stopped the privilege of turning in benefits and allowing it to be restarted later at higher benefit rates. 
There are ways for the skies to fall in the first part of 2013, whatever Congress does this weekend. 

Friday, December 28, 2012

Estate tax could jump suddenly unless Congress acts in 2013


NBC News has a wicked story from CNBC, by John Carrey, “Death and (estate) taxes sometimes go together”, link here

The issue is that, without action by Congress, a death in 2013 will lead to the old inheritance tax threshold of $1 million and a top rate of 55%.

It could matter to heirs whether a death certificate says 11:59 PM Dec. 31, 2012, or 12:01 AM Jan. 1.  For deaths in 2012, the exemption was 5.12 million.

But Congress has until Dec. 31, 2013 (not 2012) to fix this problem.  It doesn’t have to agree to anything right now for the Fiscal Cliff.   But families or heirs could be kept in suspense.
  
My own belief is that, in policy matters, changes should occur gradually and incrementally to avoid sudden catastrophic discontinuities which can throw people under the bus.  Congress’s practice of defining tables of threshold amounts for some years and stopping, rather than automatically indexing them, causes this kind of crisis.  A similar problem exists with the AMT (Alternative Minimum Tax).
Imagine a Hitchcock movie based on this problem.


Thursday, December 27, 2012

CNBC analyzes the "ugly" fixes to social security: reduce spousal survivor benefits?


NBC News and CNBC have a primer on how to fix Social Security – “but it won’t be pretty” or “it may get ugly”, by Allison Linn, link (website url) here.

All the familiar proposals are included, such as raising the FICA limit, the FICA rate, gradually increasing eligibility age, and using a chained CPI.

Of course, means testing is mentioned.  And almost no one discusses when means testing starts, only at some point in the future, or even for current retirees? 

There seems to exist a philosophical disagreement as to whether social security is “insurance” against old age poverty, or whether it should be a viewed as an annuity related to FICA “premiums” paid.  The 1960 Supreme Court ruling on the subject does not comfort those who made years of contributions already.

A new wrinkle is to dial down benefits for married surviving spouses (yes, even straight spouses) because two  income families are so much more common.

Changes in retirement age might affect poorer people more, because they don’t live as long. But a chained CPI would affect the very elderly poor the most.  

Tuesday, December 18, 2012

A chained CPI could hit seniors who live a long time; more on the Supreme Court and on the "Ponzi" idea


Ed O’Keefe and Dylan Matthews, in an article Monday December 17, 2012, explain (in the Washington Post)  how switching the inflation adjustment formula on Social Security to a “Chained CPI” (or “Chained Consumer Price Index” could affect beneficiaries.  Over time, a typical beneficiary could see his or her beneficiary check be about 5% less than it would have been in about ten years.  This could add up for beneficiaries who live a long time.  President Obama has proposed compensating with a slight step-up at age 85.  The Chained CPI reduces inflation rate by assuming people tend to buy generic brands over time as major brand prices increase, or will migrate to cheaper but similar products (probably not to pigs' knuckles).

The link for the story is here.

 There is more to say the recent discussions of an old Supreme Court ruling that denies a property right to FICA contributions.  When people and employer pay FICA (or self-employment) taxes, the government uses the taxes collected to pay current beneficiaries, and has (when there was a surplus) lent it to other governmental operations.  When new people retire and the government starts paying them benefits, it must, in a Ponzi-like chain letter, “borrow” from current workers to keep making payments.  People are living longer, and for a variety of cultural reasons, not having as many children to provide workers to “loan” the money, although immigration has, until just recently, made up for some of the gap.  In a situation where the debt ceiling is exceeded, there could a  legal case that in fact social security benefits might not be paid (at least those with other means).  I would like to see Congress hire an insurance annuity contractor (like Vantage) to make the actuarial calculations and carve out a legal property right for some of the benefits based on actuarial math.  

When people make FICA contributions and expect to be paid back in their own retirement, there's another part of the deal that we miss:  providing another generation that is capable of paying us back!

Monday, December 17, 2012

AARP published "15 Medicare Proposals You Should Know About" in its "Earned a Say" column


The AARP has a web reference to the “15 Medicare Proposals You Should Know About” in its “You earned a say” series, here.  (See a similar story about Social Security Nov. 27.) 

Medicare is generally seen to be a bigger problem in entitlement budgets that Social Security, and even less of it is covered by pre-paid special taxes.

It’s easy to see problems with most of the major proposals.  Gradual raising of the Medicare eligibility age won’t do much to reduce expenses in the short run. Seniors would have to fend for themselves (or deal with their last employers and COBRA or retiree policies), but that may be inevitable as lifespans raise.

Since highest income seniors already pay more for Part B and D supplementals, raising their premiums with means-testing would eat further into the middle class.

I think there is an opportunity to encourage providers not to order unnecessary tests.  My recent dental surgery resulting in a biopsy, which was justified by ruling out malignancy,  but probably added $1000 or so to Medicare’s bill for a test that was largely unnecessary.  I think I am prudent in the way I use services, taking advantage of generics and informing myself of the enormous volume discounts hospitals and providers can give  large insurance companies.  I try to ask about prices and competition. But it is very hard to control what providers insist on doing, even with relatively healthy beneficiaries.  We need to think seriously about reforming fee for service.  Like it or not, health care is a business.

AARP has some petitions for visitors to sign, but I think that form petition letters are self-serving and ineffective. 

Another proposal would be that the government no longer indemnify providers when patients don't make copays. 

Thursday, December 13, 2012

Another look at Supreme Court's 1960 opinion suggests that Social Security is more like "welfare" than an "annuity", a dangerous idea now


I looked some more at the 1960 Supreme Court opinion “Flemming v. Nestor” at the Court’s reason *see Dec. 3 posting). 

The Court noted that Congress set up Social Security through normal democratic political processes with the intention of its continuing “indefinitely”, and that to keep it sustainable, Congress needs to be able to adjust it.  It also says that voters generally have understood it as a kind of disability and retirement insurance, not a contractual annuity.
   
It also notes that benefit amounts are more closely tied to earnings (at least they were in 1960) than to FICA contributions themselves (a notion more relevant during Social Security’s early days), an idea that would be consistent with a hybrid product.  The concept seems to have been to continue some semblance of a standard of living that the recipient had earned while working (including that lifestyle for spouses).  It also notes that Social Security normally limits benefits until full retirement age based on means with an Annual Earnings Test, which in 1960 could be as late as 72 (I wasn’t aware of that). 

All of this would tend to point to a legal justification to withholding benefits even from current beneficiaries under a fiscal emergency, based on means.  It is possible to imagine this happening after a default due to a debt-ceiling excess, or possibly even as a fallback if there is no Fiscal Cliff solution.

Some members of the GOP and the Heritage Foundation have sounded cavalier in their public statements, that people like them didn’t “need” benefits and should give them up.  That’s scary, because that can lead to a dangerous assessment of “need” along any ground imaginable, a problem well known in libertarian thinking. 
It’s not clear how much money is saved by gradually raising retirement ages for Medicare and Social Security, by further means testing Medicare premiums (maybe driving more seniors to private plans), or  by being less generous with COLA’s.  These measures wouldn’t help with short term deficits or immediate debts.  It would be possible to provide calculations on means testing of current beneficiaries in different levels, as well as to perform actuarial calculations based on actual FICA records and scale payments back accordingly.  These sorts of numbers should be made known to the public.
 "
Means testing could be based on income (and an obvious, innocuous place to start is to tax the benefits as ordinary income). A more sinister idea, well known to people with exposure to the ideology of the far Left a few decades ago, would be to look at estates or accumulated wealth.  Wealth could be inferred from investment income (that is, non-wage, in contradiction to the Annual Earnings Test which does not consider investments), or by more intrusive methods, to look at estates that have been probated or passed in trusts in the last so-many years.  This gets the government into areas that most people (me, at least) would not want it to be.  But that’s another reason why I’m astonished at statements by Lindsay Graham and others that better-off people should just do without their benefits in order to help the deficit.  That’s a very slippery slope, that could suddenly become a legal trap for everyone.  I think some members of the GOP don’t see what they’re inviting.  

Wednesday, December 12, 2012

Family caregivers often neglect own health



NBC News has a story December 11, 2012 that echoes the increasing burden on family caregivers as the elderly live longer with crippling disabilities, including Alzheimer’s Disease. 

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The problems extend well beyond surviving spouses, to other adult children, often said to be caught in the “sandwich generation”.

As caregivers neglect their own health, they will create a feedback cycle that intensifies for the next generation. 

When I was growing up, nobody talked about problems like this.  When elderly people became seriously ill, they typically did pass away soon, and families moved on with the next generations.   

Increasing life spans, often with grave disability, coupled with fewer children, makes up one of the gravest sustainability problems that we have.  

Picture: My own maternal grandmother, in Kpiton Ohio, around 1960.  She passed away at age 80 in 1969. 

Wednesday, December 05, 2012

Surviving spouses under 62 are losing homes that had reverse mortgages


ABC News is reporting that spouses of seniors who pass away after taking out reverse mortgages are sometimes losing their homes if the spouses are under 62.  It appears that the spouses must come up with the cash immediately or the house can be sold right out from under them, even after death notices appear in the newspapers.

The story by Jim Avila and Serena Marshall is here

In some cases, refinancing options are possible, but apparently only when the spouse turns 62.

It would be interesting to follow what is happening with same-sex spouses (even if over 62).

A story posted here March 29, 2011 indicates that HUD rules promulgated then could be complicating the problem.  
  
A house belonging to a trust normally cannot get a reverse mortgage.  

Monday, December 03, 2012

Supreme Court, in 1960, said that retirees don't have a "property right" to Social Security benefits based on their FICA contributions; another argument for means testing?


Here’s an obscure fact for the ABC “Millionaire” game whose consequences may not be so trivial. The Federal Insurance Contributions Act tax (FICA), which most wage earners pay to fund Social Security (usually with employer match), does not confer a “property right” (to use Cato-like, libertarian parlance) to promised future benefits from Social Security.  This point is made in the Wikipedia article on FICA, well worth reading, link here.

The Supreme Court case that is relevant is Flemming v. Nestor in 1960, with the Opinion available on FindLaw here

The Social Security Administration has an informative page on this matter here

The plaintiff had been denied benefits, despite his contributions, in 1954 because he had been deported and had been a member of the Communist Party. (Yes, in the 1970s, I remember tables from “The Party” right in front of the West 4th Street Subway station in NYC.)

The Social Security Administration on this page admits that Social Security benefits are an entitlement, subject to the (political) determinations of Congress, and not a contractual right or property.
In one sense, that may feed arguments in some circles that all benefits should be means tested, even for current beneficiaries, in a fiscal emergency.  As far as the Supreme Court is concerned, it is conceivable that future retirees could get zero benefits (especially wealthier ones), even if that is not what we think should happen. 

The legal case also has another alarming potential corollary.  Should Congress not extend the debt ceiling (the next deadline is in February, 2013, probably), the treasury could delay or deny existing benefits, and Social Security beneficiaries, who would certainly try to sue under class action, could not be guaranteed winning in court (as I had thought in 2011) because of this precedent. In worst case scenarios, some benefits could be lost permanently.

In a column in the Washington Post Monday, December 3, 2012 Robert Samuelson argues, on p A19, argues in a column called “Bad-Faith Bargaining”, orders “Put Social Security on the table – clearly and irrevocably.”  The consequences seem vague until the end of the piece, where he does argue for gradualism in changing the inflation-adjustment formula, taxing Social Security benefits as ordinary income (at least for higher earners), and raising the retirement age more rapidly than before.  His link is here.  I would add that it makes no sense at all to continue the 2% FICA tax "holiday" in 2013 given these problems,  

While these incremental changes seem appropriate as part of a “deal”, I don’t know how effective they will be.  I am left with the queasy feeling that my entire Social Security benefit could be yanked away as part of an emergency because I seem to have other resources.  Why shouldn’t it be my turn to be unlucky?  (I get this out of some of the unwelcome proposals that people make to me, given their knowledge of my generational karma.)   Any change will stiff some people.

I do have a “modest proposal”.  I would like to see an actuarial calculation of the benefit that would be paid based on FICA contributions (including employer match, or the “self-employment” tax explained in the Wikipedia article) had these “contributions” instead been made to purchase a private annuity from a life insurance company.  One immediate complication is that life spans increasing, which would make a justifiable lifetime annuity benefit less.  Indeed, private insurance companies may be finding the rapid increase in longevity (sometimes with heroic medical tricks) a real challenge for them.  Another problem would be that something would have to be subtracted from the monthly benefit to make up for the fact that in the 1930s the original beneficiaries had contributed nothing. 

I could propose, pass a law that gives me legal contractual right to that amount and nothing more.  In other words, partially privatize.  Maybe it would go back to being tax free. 

Then there is still another problem.  There is still a presumption that the government has “borrowed the money” from me (and, I'm afraid, spent it on other things and just wrote soem IOU's back to Social Security).  A life insurance company has to account for the annuity premiums collected in a specific way that protects the ownership rights of the policyowner (hence the word “owner” – and performing  these accounting calculations are a very big deal in life insurance valuation I.T. systems like Vantage  -- no wonder that company “rules the world”)   Remember, too, that in the insurance world, some products have “value” (like Whole Life) and other cheaper policies (term) are really just “insurance”.   That raises still another philosophical question about the intention of FICA (however regressively it was set up): is it really a premium for a pseudo-annuity, or is it “insurance” against old age poverty (that is, welfare).  In any case, if we accept the idea that the FICA tax payment amounts to an annuity premium payment for a “hybrid” concept (insurance and annuity, which is somewhat progressive anyway in that lower income retirees do get a little bit of a break compared to typical annuity payouts), we have to deal with the fact that the government will have trouble collecting enough “premiums” from current and future workers to pay back even this actuarial amount owed.  That’s because the birth rate is lower, and also because middle class wages have not risen properly in recent years.   (Ever since Sandy, “hybrid” has become a bad word.)

Still, I think that doing this calculation and informing all beneficiaries where they stand now is an important first step to reform.  And that reform should include some partial ownership rights, beyond the reach of politicians. 

The Young Turks talk about Boehner’s proposal in 2010 to stop all benefits to wealthier people, regardless of what they put in:


The FICA (and related self-employment) tax is not an effective vehicle for helping just the poor in old age.  From the way it was set up, it sounds as if that was not the intention, regardless of the Flemming Supreme Court case in 1960. Responsibility for the elderly poor (who sometimes collect no Social Security now) is then in some sense a wealth redistribution question that cannot escape political consequences.  It belongs in the debate of general tax policies, as well as family law (like filial responsibility laws), and volunteerism.  Admittedly, the problem makes us ask very basic questions about family and marriage.  

Saturday, December 01, 2012

AARP promotes open enrollment of Medigap, Medicare Advantage, Part D


AARP has been advising members, and the public, of open Medicare enrollment, apparently for Medigap (Supplemental), Medicare Advantage (which replaces Medicare) and Part D plans, through Dec. 7.
   
The link with the explanation of the open enrollment is here.

The page has a sublink that in turn explains the differences between Medigap (for people on conventional Medicare) and Medicare Advantage.  The latter replaces the entire coverage (including prescriptions).  It may well be cheaper for healthy seniors with high incomes who have to pay higher Medicare premiums under current means testing rules.  In that sense, it may well provide some credibility for Paul Ryan’s proposals to “privatize” Medicare before the election.

I have been approached, in retirement, a couple times to sell these products (as well as long term care).  I do not want to do this, because if I write about things (as a journalist) I cannot be partial to one company or one kind of product.  This is a very important point to me which I will cover again soon.

AARP reports that Medicare Advantage is increasing in sales and popularity despite Obamacare.

Friday, November 30, 2012

Eldercare guardianship case in VA suggests need for tighter regulation of "paid" caregivers


Justin Jouvenal has a detailed  front page story in the Washington Post, Friday November 30, 2012, about how guardians can abuse the elderly and their families.  The title is “Guardian fees come under scrutiny; As population ages, concern rises about lack of oversight of those responsible for elderly and incapacitated”, (online it is “Guardianship case in McLean illustrates lack of regulation for those caring for the elderly”), link here.

The specific case concerns the family of Samuel Drakulich and a law firm, Needham, Mitnick and Pollack (NMP) which took over guardianship when the adult children couldn’t agree on some aspects of their parents’ care, according to the story.

In my case, I had a power of attorney for my mother, and it really did confer a lot of “power”.  In theory, it could be regulated by Adult Protective Services, and others (such as hospice) could have the capability to report suspected abuse.  

Wednesday, November 28, 2012

Medicare premiums are already means tested


It’s worthy of note that Medicare premiums are already somewhat means tested. 

There is a SSA link that explains the rules, with the "heart of darkness" of the matter here

Social Security looks at your 1040 and computes a MAGI (Modified Adjusted Gross Income) by adding tax-exempt income.  A single person with a MAGI of over $85000 would pay $40 for Part B, until he reaches $107000.  About $214000 the additional premium can be a whopping $219.08 for 2012.
Social Security says that right now this affects less than 5% of beneficiaries, so relatively few people know this.

A moralist could propose looking at how much investment income a person has as a sign of accumulated wealth, and use it as another excuse for means testing.

NBC Nightly News covered the current means testing of Medicare Part B premiums tonight (Wednesday, November 28, 2012) and hinted that reform could means test Medicare premiums even more. Since Supplemental Insurance is private, it normally would not be means tested (and substantial discounts are available through AARP if the person signs up when starting Medicare).

If Medicare premiums for the wealthy are raised even more, some of the people could buy substitute Medicare Advantage policies on the open market, as private insurance companies would step in and probably offer better deals to healthier seniors.  But sicker patients would be left to Medicare -- the old cherry picking problem. 


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I pay about $99 for Part B, and about $110 (as I recall) for the Supplemental.  That's over $200 a month, plus about $40 or so for Part D. 

By comparison, my retiree health insurance through United Health Care at age 64 from ING (my last major employer) was about $168 (in 2007-2008) but covered only 70% of hospitalization, which I never needed.  I did need an outpatient cat scan in 2005, and found that having insurance coverage at all through UHC and ING knocked the "list" price from $1700 to $380 (the ING contract price with the provider) for the procedure (about $180 was out of pocket).  In 2010, under Medicare, the contract price for an outpatient double hernia repair dropped from a list $14000 to a reasonable $3500, and UHC paid the 20% copay (about $620).  You pay a lot less out of pocket merely by having any insurance at all from a big company. The hospital gets repeat business.  (Auto insurance works the same way with dealer repair shops, and so does property insurance with reputable contractors.) 

Tuesday, November 27, 2012

AARP "Earned a Say" column discusses Social Security future, including means testing, which could come fairly quickly if politically expedient


As Congress stumbles toward a temporary budget resolution to avoid the worst of the “Fiscal Cliff” on January 1, 2013, some observers are paying attention to the idea that Congress could look for very stiff retrenchment on entitlements given GOP prerequisites for revenue enhancement.  Putting aside the debate on whether  Social Security accounting is deceptive (regarding the IOU issue), it’s possible that Congress could be tempted to reduce benefits to some people, possibly even current beneficiaries, if it’s politically easier than “obvious” revenue enhancements, like closing deductions and raising rates on highest earners.

The AARP has a web page called “Earned a Say”, and one sublink  “The Future of Social Security: 12 Proposals You Should know About” with pros and cons or “opposing viewpoints”. 

Two of the most important are reducing benefits for high earners, and means testing of social security benefits.  They’re not the same idea.  The first would reduce benefits for those whose history yields the largest earnings over time and therefore largest benefits.  In a sense, benefits would be more “progressive” with respect to need.  The second would look at current income outside social security (and possibly total wealth, maybe even that held in associated trusts) and eliminate benefits entirely fir the “best off” and reduce it for others.  It’s at least conceivable that politicians could be tempted to stiff even current beneficiaries. One question is why the conservative "Heritage Foundation" supports cheating seniors who "don't need it" in reasoning that sounds worthy of Karl Marx. (Note: accumulated wealth could be inferred from investment income.) 
  
It’s pretty obvious that these proposals would go in the direction of making social security a welfare rather than savings program, and would be a tremendous breach of faith for those who have already contributed and been told they would receive certain benefits for life.  (It would create novel issues fort those who started benefits early at 62, possibly at the urging of employers buying them out.)   It's possible to make the extravagant argument, however, that the FICA tax paid for years was a mandatory insurance premium against retirement poverty, but not a ticket to easy income. That would sound like a curious echo of the criticisms of the mandatory aspects of Obamacare -- but this would break a promise made in the past. 

It’s possible to imagine other ideas that would express better faith.  For example, Social Security benefits, for those with ample other income or assets, could be taxed as ordinary income (rather than up to 85% as now).  Or everyone’s benefit could be recalculated to match their actuarial worth, which could hurt older recipients or those with significant self-employment (assuming employer match was counted).  It’s possible, as AARP suggests, to reduce benefits with longevity increases – if we could suddenly live to 150 (as on a recent ABC special) we would have an actuarial issue indeed.  But conventional private life annuities, while being adjusted for survivors,  don’t get reduced for longevity.
  
I still favor migrating toward an idea of a mandatory account, conservative managed so as not to lose principal, that the retiree owns and that is shielded from politicians, based on actuarial math.

The National Seniors Council has a warning about means testing, and a comment about its immorality, link here.

The Ludwig van Mises Institute also has a meandering, speculative discussion without any straightforward predictons, here.

Senator Bob Corker (R-TN) mentioned "introducing" means testing without specifics in a Washington Post op-ed  “A Plan to Dodge the Fiscal Cliff”, Monday November 26 here, with a proposal supposedly in a bill already before Congress, the Post article here.    There is a smaller version of the story in the Memphis Commercial Appeal here. I have not been able to find this “bill” online or find any specifics on mean testing as it might apply in the near term of 2013 or 2014.


Monday, November 26, 2012

"Granny Pod" by "Medcottage", a VA company, said to provide an alternative to nursing homes


Frederick Kunkle has a front page story in the Washington Post on Monday November 26, 2012, “Pioneering the granny pod”.  A family in Fairfax County. VA has erected a separate small house for an elderly parent, complete with extensive medical monitoring equipment which family members or caregivers or visiting or remote nurses can monitor by secured Internet or other electronics.   The home is designed by a firm, Medcottagem in Blacksburg, VA, probably with the help of Virginia Tech.

The link for the story is here.

MedCottage calls itself “the affordable nursing home alternative”, with link here
   
“We Are Hello Studios” gives a tour of the cottage on YouTube.

Even through the cost of the cottage may be reasonable, the family still has to arrange (either do or hire) monitoring.  That usually wouldn't be covered by Medicare.  Maybe eventually the long term care insurance industry will support this. 

Sunday, November 25, 2012

End-of-Life care: NYTimes offers major editorial


The New York Times has an editorial today, Sunday, November 25, 2012, “Care at the End of Life”, link here.

There was a proposal to encourage Medicare to pay for discussions of a patient’s wishes for life extension during terminal illness, that were muted by GOP claims that they amounted to death panels and euthanasia.

Nevertheless, the Hospice program under Medicare encourages such preparations anyway.  Generally, people are eligible for hospice care if a physician certifies that a life expectancy is less than six months, and family members with power or attorney can start it.

The editorial discusses Physician Orders for Life Sustaining Treatment, or POLST, authorized in fifteen states, as well as practices in many health care systems, such as Gundersen in Wisconsin.

There is a belief in some people that sustaining biological life under all circumstances is a personal responsibility that everyone (including the childless) must accept.
   

Thursday, November 22, 2012

Veterans sometimes can receive eldercare in medical foster homes (private families)


NBC Nightly News tonight covered the opportunity for aging veterans to receive care in “medical foster homes”, hosted often by individual families.

There was a report on the practice on the “As Time Goes By” website on Aug. 7, 2012 here

 The cost is much less than a typical nursing home or assisted living center and sometimes VA benefits do apply to some of the cost.
  
NBC reported on a 92-year-old WWII veteran from “The Greatest Generation”  receiving subsidized care in a private home.

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Wednesday, November 21, 2012

Could 2012 budget negotiations adversely affect current Social Security and Medicare beneficiaries?


Can budget negotiators during this 2012 lame duck session really go after current Medicare and Social Security beneficiaries?

I have to say it’s possible.

Previously, I’ve reported a study indicating that people who started Social Security benefits in the late 1990s are likely to be collecting what they “earned” actuarially speaking from FICA taxes.  People who started earlier than that may be collecting more.  It would be possible to reduce their benefits even now according to some actuarial formula, which could be continually adjusted for increasing life expectancy.

From my own dealings with the SSA, it looks like I am collecting very close to what I “earned”.  So to reduce my benefit would amount to “expropriation”.

The basic problem comes from the fact that the first beneficiaries in the 1930s had never paid anything.  Therefore, the Social Security system became a Ponzi scheme of sorts, and it can’t be changed to an ownership mechanism without stiffing some people.  And some day, at some point in the future, there has to be a day of reckoning.

It is often written that younger people will not recover what they put into Social Security.  Perhaps so, if they get sfiffed intentionally. But one reason for later retirement start dates and lower benefits could be increased life expectancy.  Remember, some  younger workers will have contributed slightly less because of the 2011 FICA tax temporary reduction. Another area  to look at is the “early retirement” (at 2), where benefits are reduced and a queasy “Annual Earnings Limit” from wages is enforced.  The trouble is many corporate defined benefit plans had “social security offsets” predicated on starting Social Security at 62.  Maybe budget negotiators should take a hard look at that practice by employers. It even sounds conceivable that Congress could direct Social Security to reduce payments for current beneficiaries slightly and gradually as expected life spans increase, according to actuarial formulas for annuities. 
    
One Medicare, it seems that people may be getting more in benefits than they put in, partly because of runaway costs and still a tendency for physicians to practice defensive medicine and order excessive tests. 



Monday, November 19, 2012

How would an "income neutral" budget deal affect seniors?


Robert J. Samuelson hints strongly at means testing in a Washington Post op-ed on Monday, November 19, 2012, p. A13, “An outline for a deal”, called online “The ‘fiscal cliff’ deal we need”, link here

Samuelson suggests a one year increase in top rates while the parties negotiate a long term plan that treats all income the same but doesn’t raise rates. 

I would think that incremental rates on income that is consumed personally could be raised at the top, whereas income that is plowed back into hiring workers for a business would not be. 

From a moral perspective, it’s possible to go after inheritance and certain potentially abusive use of trusts – except that when people take care of their own families, the government won’t have to take care of them.  Spousal survivorship inheritance has always been based on the notion of complementarity – an idea that offends some when thinking about how reforms affect same-sex couples – until again, think – if people even in same-sex relationships take care of one another after death, they won’t need government as much.
While Medicare premiums could be raised somewhat based on income, I don’t think that current Social Security benefits should be touched, because they are (for practical purposes) income from what amounts to an annuity contract for FICA taxes previously paid.  To take from those “who can afford it” would amount to expropriation of current means, not future. 

I supposed I could be personally vulnerable to bargaining.  “Bill, you could give up your own online publishing and go sell life insurance [using your online presence to support only that] because you do have expertise in it.”  That could even be combined with certain kinds of medical supervision.  See how offensive that it to me?  Do others have a right to tell me what my own goals in my life must be (which were calculated based on past “promises” and “contracts”)?  Yet some social conservatives like O.S. Guiness (Books blog, Nov.  5, 2012) say emphatically, “yeth” – my purposes mean nothing until they meet the demands (real needs) of others.

One idea could be counting Social Security income fully (not pre-exempting it before 1040 Line 38 and then having the “up to 85%” formula), starting in 2013.   That could be fair, if the overall rates were set up right.
   
By the way, I modified my Nov. 5 posting on the Alternative Minimum Tax (AMT). There does not seem to be any discontinuity in the tax, as I had previously thought (as had other commentators).  Samuelson didn’t mention the AMT in his column today. 

Friday, November 16, 2012

Newer brain scans for Alzheimer's not covered by Medicare or insurance, could preclude long-term care coverage


New brain scan imaging technology is able to detect “true” Alzheimer’s disease even relatively early during the appearance of symptoms, according to a front page story in the New York Times by Gina Kolata on Friday, November 16, 2012, link here.   

There is new MRI detection technology that is still not covered by insurance or Medicare.  Furthermore, a “positive test” result could result in denial for long tern care insurance, unless Congress or states actin the future to provide patients more protection. 

Thursday, November 15, 2012

If you have Part D insurance, the actual price charge to everyone for prescription drugs will drop considerably


A statement from United Health Care for my AARP Part D coverage for October showed a total of $17.51 paid out-of-pocket for three prescriptions associated with major dental work (Chlorhex gargle, a Tylenol-Codeine, and Amoxicillin).  The Plan paid for nothing. But what is significant is that, with an insurance contract through AARP supplemental to Medicare, the price actually charged to me is much lower than the retail list.  I know that when I had Chlorhex prescribed in 2004, it cost around $28.  Now, with an insurance contract in place, the total price charged to all parties is only $6.43.  Use of generics certainly plays a part. 

Monday, November 12, 2012

Queens NY hospital that housed Sandy senior homeless victims is caught in the middle, between Medicare and FEMA, for doing the right thing


AC360 (Anderson Cooper) reported Monday night that St. Johns Hospital in Queens, NY faces losses of up to $3 million for allowing some elderly patients made homeless by Hurricane-superstorm Sandy to remain in the hospital past the time justified by medial length-of-stay needs.  Some of the patients had come from nursing homes not in operation because of Sandy.  Medicare will not reimburse the hospital, but FEMA might provide some reimbursement, and is just starting to consider the case.


This bureaucratic anomaly does not help the Obama administration continue to look good in disaster response, as it had before the election (compared to Bush and Katrina). 
    
Anderson has also covered a high rise building on the Rockaway Peninsula with many senior residents. That has not had power since Sandy and whose management has not gotten temporary generators installed yet.
There is a story about the highrise on Fox here.

Long Island Power Authority told frustrated consumers to “download forms on the Internet” , New York Post story by Julia Marsh, Sally Goldenberg and C. J. Sullivan here

Wikipedia attribution link for Far Rockaway picture of elevated subway terminus.  I used this facility numerous times in the 1970s. 

Tuesday, November 06, 2012

Young people really face a bleak retirement future


Michael A. Fletcher has an important front page story in the Washington Post on Election Day, “Young workers’ retirement hopes grow bleaker amid economic downturn”, link here

The triangle of retirement used to be social security, pensions, and accumulated savings and investments.  But on 33% of private sector workers had defined benefit coverage in 2010, down from 44% in 1995 and 88% in 1983.  The Center for Retirement Research  (website url link)  supplied the numbers.

The current baby boomer generation has not handed its kids as prosperous a financial future as it had itself, partly because of overseas competition and partly because of demographics. 

It's hard to say which candidate this finding "helps" today. 

It strikes me that young adults who are socially savvy aren't too worried about this.  And now every community has its own idea of social popularity and competitiveness.  

Monday, November 05, 2012

AMT ("alternative income tax") could hit seniors with relatively modest incomes hard for 2012 unless congress restores higher "exemption" amount


The Alternative Minimum Tax affect ordinary retirees this year (2012) heavily unless Congress acts by the end of the year to raise the inflation adjusted exemption amount. In 2011 this had been $48450 for singles (because of annual increases) but it would drop back to $33750 (for singles), unless Congress acts.   That table appears near the end of the Wikipedia article, here

The alternative tax is based on line 38 of the 1040 for people who do not itemize, which is likely to be true of many seniors.  The personal  exemption and standard deduction are not allowed.

The federal form IRS 6251 for calculating it is here 

A critical point  (for retirees) seems to be that social security income is still counted the way it is for the regular tax, because the “85% rule and over” rule applies before reaching line 38 (it’s line 20 on the 10410). 

Charitable deductions could still be taken out for seniors who itemize deductions, but most home mortgage interest would not (generally speaking).  Here's a typical explanation of the charitable giving issue (which occurs by "omission" on the 6251), link.  (It looks to me right now that it works only if you originally itemized deductions, after all.) Pass-thrus from unsettled estates (form K) are added in, also.
  
It sounds conceivable that a particular person could give enough to charity to make it worth itemizing to avoid the AMT.  Or it may be possible to keep the income within the trust and do the charitable contributions from it, putting the AMT issue (including itemization) on a separate return (for the trust).  That is what I do now (because of the way my trust and my mother’s will were written).  At this time, the issue seems murky and I cannot say definitely further what is allowable without consulting again with my regular tax preparor.

I had previously thought (as has some commentators) that the tax liability can have a discontinuity jump if the Line 38 1040 amount goes over a lower amount.  This does not seem true, as if you follow through Part II of the 6251 and then lines 44-45 of the 1040, you can find the "interpolation".  Still, the tax is steep and for 2012 would not be in line with other tax rates.  Most seniors would not have an issue  if Congress keeps the amount at $48450 or increases it during the lame duck session. There seems to a lot of confusion (even among tax preparers) as to what really will happen if Congress fails to fix the 2012 amounts.  

The other big hit for many people would be the end of the FICA-tax holiday.  This would affect retirees who earn income from regular wage jobs or who have real self-employment and who generate income from work, not investments.  That might hit the self-employed harder.

HR Block has a link on the tax here

The Finance Buff has a page showing some arcane analysis on how the “Obamacare” Medicare tax of 3.8% interacts with the AMT, and issue that could spoil trouble for the president Tuesday of the GOP jumps on it enough today, link here. 

Lori Montgomery has a front page article on the AMT Monday morning Nov. 6 in the Washington Post, “Middle class faces quick impact from fiscal cliff in form of alternative minimum tax”, link here

The AMT rules could provide very perverse incentives for some seniors not to work part-time when they otherwise would, because they could be penalized big time for having adjusted gross that reaches the exemption threshhold.  Congress must fix this problem.  It is a gross, self-inflicted public policy blunder with major economic consequences.  

Here is an hour long webinar by FI360 on the “fiscal cliff”.

These two issues (FICA and AMT) are things Congress needs to address during the lame duck session. They may affect most people a lot more than who wins the presidential election tomorrow. 

Saturday, November 03, 2012

Retirees should be careful about junk bonds, private equity


Retirees may want to make note of the editorial Nov. 2 in the New York Times, “The junk is back in junk bonds”, link here.

The editorial refers to a recent paper by Nathaniel Popper, explaining the effect of artificially low interest rates, which might have been perceived as propping up the valuations of bond portfolios. 

Companies have resorted to junk bonds with optional interest payments, where companies can “default” on interest if they can’t pay.  They have also reverted more to private equity, and issued riskier paper to get out of trouble,  This practice seems to be legal again with regulators.

The whole practice reminds me of the film “End of the Road: How Money Became Worthless”, reviewed on the movies blog Nov. 1, explaining how “fiat currency” is not the same thing as “money”.  Accumulated wealth, which people who no longer work depend on to live well, is at risk.  That’s especially true of retirees who aren’t skilled in making money by selling to others.  One of the nastiest comments I ever heard, sometime after the 2001 recession, had been, “any retiree with a brain can make $200000 a year anyway”.  

Sure, by peddling things.  Like real estate, cash flow management, or various Ponzi schemes.  I’ve looked at them all.

That brings up the question of how much good financial planners do.  Indeed, they do know specific products, like annuities. But they can’t really predict how the economy will do or what will hold value any better than “you” (or “I”) can.

Here’s a video, “What is Private Equity”, by “Privcap”.

Tuesday, October 30, 2012

If you don't want to join the Letterman Zipper Club, never to go the doctor: active seniors may like things the way in the 50s, when we didn't try to live forever


I will have my annual Medicare physical Nov. 1 (it was postponed from today because of Sandy), and will follow up with a visit to an orthopedic surgeon about pain in my left hip, left over from an acetabular fracture from a convenience store accident in Minneapolis in 1998.

That could mean surgery, which could be simple (one morning, outpatient) or more complicated, meaning hospitalization and a period of no access to Internet (as I discussed on my main blog Oct. 27).  Or it could mean only medication and no interruption.

There’s always the possibility that any physical will turn something up.  In the generation in which I grew up (50s and 60s) people usually lived out their lives, productively in their own way, until something potentially fatal happened.  Usually, little could be done, and people died rather quickly after being active almost all of their lives.  That was “normal” and generally led to life spans of 65-85 years. 

Medicine can now prolong lives much longer, but this requires a change in heart of values from the patient, and it also demands social cohesion from family or others around him or her.  As Dr. Oz says, most radical treatment doesn’t work unless “you love somebody who loves you back.” Or as Jonathan Rauch, advocate of gay marriage, writes, a single person is an “accident waiting to happen.” Social isolation can preclude the possibility of life extension.

Yet, for me, the best result is to be 100% active as long as possible, and that may mean doing as little as possible.  As we know from prostate cancer, which often remains indolent for years, many men are better off for many years or decades if they do nothing.  (That doesn’t seem to be true of breast cancer for women.)  But prostate cancer can suddenly explode, as it did with my own father, who died after only four weeks of illness on New Year’s morning in 1986, just before his 83rd birthday.  But that was the way he wanted it.  He could not stand the idea of dependency or helplessness or shame, despite my mother’s devoted attention.  With less “pride” he probably could have lived much longer, but he didn’t want that.  He wanted to keep everything until the end.  Then he let go.

My mother broke her hip in 1996 at age 83, and during ensuing hospitalization the first sign of heart problems ensued.  Interns were surprised I didn’t “know” much more about her health, and there was a concern that the fracture had resulted from old breast cancer metastasis .  It had not. That blew over. In 1997, she had a hip replacement, which led to a more complicated hospitalization than had been expected. I arranged brief home health care.  Because of circumstances regarding my book publication and to avoid “conflict of interest”, I took a job transfer to Minneapolis in September of 1997.  In 1999, she had a heart attack (which had probably been detectable earlier, but it was easier for me that it was not), and that resulted in coronary bypass surgery in May 1999 at age 85 (after deciding that angioplasty was itself too risky).  I had never heard of bypass surgery, which in her case was very invasive, done at such a late age.  I had a concern that this could not be done unless I gave up the job and came back, but that did not happen. Nevertheless, this was a scary time for me, given filial responsibility.  It could have been fatal for my own intentions for my own life.  It could have meant sacrifice.

I could say, on an intellectual level, that we should have a real discussion about how far we should go with extending life.  In mother’s case, the surgery worked and she got at least eight good years out of the surgery despite the advanced age, before starting to decline at around age 94 (and passing away right after her 97th birthday).  So the surgery seems justified by the result.  But it’s clear that today, in comparison to times past, radical treatment at advanced age cannot be justified except for people who have strong social support systems, including other family members (not just spouses) who can deal with the personal sacrifice.  I can say that we should have a public policy discussion about his question, in light of all the concerns about the sustainability of our health care and Medicare systems.  People take offense when I say this, like how can I look at something in such an detached, “impartial” way when “she’s my mother”?  If I had children, I couldn’t afford to be objective.  But I think there is a point where we must become objective.  There are times when some people would let go.  I can be one of them some day.  Everyone of us will die of something (except those of us who get to become angels, as in my novel and screenplay).

Remember what happened to David Letterman in 2000, albeit it at age 50 or so?  He went to the doctor, and didn’t come home again until he was a member of the zipper club, his destroyed chest a subject for cartoonish, even clownish satire in Esquire.  That is not for me.  I must keep on trucking.  

Wikiepdia attribution link for picture of Asheville, NC (Oct. 1991 visit). 

Sunday, October 21, 2012

Increasing Social Security tax contributions and mitigating benefits will be a tricky proposition (Diamond/Orzag)


Dylan Matthews has an important article on p. G4 of the Washington Post, Sunday Oct. 21, 2012, “A nobelist’s views on Social Security”, in which he discusses the writings of Peter Diamond, and Peter Orszag, “Saving Social Security: A Balanced Approach”.  The Wonkblog that hosts the article was not available online Sunday morning.   But there is an earlier interview of Peter Diamond Oct. 14 here

Matthews points out that raising the full retirement age will reduce the benefits (by percentage) of those who retire early, and he also notes that those who retire early tend to have lower life spans.  He feels this is wrong.

Generally Diamond and Orszag favorite benefit cuts for the better off and progressive but small tax increases.
He also points out that Paul Ryan’s proposal includes health insurance premium income in the wage base, and effectively raises the FICA tax for ordinary workers, instead of raising the wage base maximum.

The nice thing about privatization is that, although the government could make savings mandatory and regulate the way they are invested, the account owner would get the actuarial value of his savings at retirement (calculated as an annuity) and would not be subject to the possibility of political expropriation for “means testing.”  But it is very difficult to get there without sacrifices.

The Diamond-Orzag plan goes all the way back to a paper published in 2005 by the Brookings Institution, Vol. 2, Issue 1, Article 8, “A special issue on Social Security”, link here.  

Wikipedia attribution link for Grandfather Mountain picture (my last visit, 1994). 

Tuesday, October 16, 2012

Social Security announces COLA benefit increase of 1.7% for 2013


The Social Security Administration has announced a 1.7% COLA (Cost of Living Adjustment) increase in benefit payments, to start in January 2013.

The basic link for the table is here

Since the average recipient receives about $1237 a month, the increase would typically be about $21.
But some of the increase will be consumed by an increase in Part B Medicare premiums, expected to be about $7 a month more.

The FICA tax rate 7.65% per employee, 7.65% to employer, of 15.30% total (which would be the self-employed rate).  And the FICA tax rollback of 2% probably won’t be continued.

Stephen Olemacher has an article in the Huffington Post, here. I’m not sure what he means by that “3.6%” increase number.  He also quotes a FICA  tax rate of 6.2%, but SSA says it is 7.65%.  The maximum wage base increases to $113,700.

I can remember as far back as 1975, when working for NBC in NYC and making $16,500 a year as a programmer, that we reached the Social Security cutoff around the end of September and had a “raise” for the rest of the year. 

Small Biz Tax Training has a video (Jan. 2012) explaining Social Security tax for self-employed individuals:


These rules can affect people forced to work as independent contractors by "employers", such as taxicab drivers and often home health caregivers.  

Monday, October 15, 2012

Many seniors would pay more out of pocket under a Romney-Ryan "premium support" plan


Most seniors would pay more for premiums out-of-pocket in a voucherized system to replace Medicare with what might resemble today’s Medicare Advantage plans. 

Ricardo Alonso-Zaldivar has a typical story in the Huffington Post, link here.  

A typical comparison would have to be made between today’s Part B Premium, plus typical Part B Supplemental (which tends to be reasonable if started at age 65 through AARP), plus Part D, and assume “free” Part A (almost, allowing for Part A deductibles largely covered by supplementals),  with the total premium for a voucherized system for all of this, minus the government voucher, which could be means-tested (it could be zero for some people).

The results came out to $200 more for many patients in Florida, $100 more for many in Nevada.
The latest Part A deductible sheet for 2012 is here

The study comes from the Kaiser Family Foundation, “Transforming Medicare into a premium support system: Implications for beneficiary premiums,” link here

The Associated Press supplied a YouTube video on President Obama's response to the Medicare premium support plan: 


Thursday, October 11, 2012

Younger seniors caught in the middle with obligations to the very old, and to the young; consider De Tocqueville


Eduardo Porter has an important perspective on the Business Day of the New York Times Wednesday, Oct. 10, “Cutbacks and the fate of the young”, link here

Porter notes that both (major) parties are promising to protect the benefits of current and near seniors. The "elders" just have too much political clout to be asked to sacrifice for the next generation to have its turn, he implies.

He recounts a list of cutbacks on programs that would help children and families, necessitated at least indirectly by the need to pay for seniors who are living longer.

Of course, one can say that, at least beyond a certain limit, it’s not the proper function of government to provide for the elderly; it is a duty of the adult children in families.  It strikes me that this idea in conservative though does indeed look back to De Tocqueville’s ideas about the proper granularity of individualism (as explained in a Wikipedia article link; look at the fourth paragraph in the “Democracy in America” section). 

I wound up coming back “home” in 2003 to look after my own mother, who died at 97 at the end of 2010.  I did hire caregivers starting in 2009, and I’m grateful that my father left her with the resources to be cared for by his lifelong conservative investment strategies (lots of utilities and oil). Even so, I felt a certain shame in having become a 60-something man living with his mother (in his old house), being legally responsible for her without ever having succeeding (in “reproductive competition”) in having a lineage (and therefore domain) of my own (I would have felt OK if in a same-sex relationship taking care of her in my home, not hers).  Technically, I had a situation for about 19 months where I could not legally leave her alone and pursue my own choices without a caregiver present.  This whole episode certainly can affect my perspective on marriage and procreation.

The possibility that in the future people might not age at all (with biological engineering) could provoke a moral and policy debate the likes of which we can hardly imagine now. For example, see Discover, Oct. 19, 2012, “Forget immortality: live life without aging”, here

Tuesday, October 09, 2012

NBC revisits problem of disabled elderly drivers; when must adult children take away the keys? When must a physician?


Tuesday, October 09, 2012, NBC Nightly News revisited the problem of “taking the keys away” (even removing the car battery) from older drivers. 

Visit NBCNews.com for breaking news, world news, and news about the economy

Five states (including California and New Jersey) require physicians to report stroke patients to the DMV’s, but there is no national standard of potentially disqualifying conditions for driving.

With my own mother, at age 95, in 2009, I was told I might be liable if I let her continue driving, after her stroke (in Virginia) and she had a wreck.  (She passed away at the end of 2010.) 

States do have various medical standards. Virginia has a rule that no one may drive within six months of a seizure of blackout, link

A list of AMA guidelines for physician responsibilities is here

AARP and AAA offer a link giving licensing laws for seniors by state here