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”.