Wednesday, January 30, 2013

AARP offers tips to caregivers with non-Medicare family members -- how Obamacare works with pre-existing conditions

The AARP has a very useful worksheet of information for family caregivers, which apply in those situations where the person is not eligible for Medicare (usually because of age less than 65) and does not already have workplace-related, retiree, or other individual health insurance.

The link for the fact sheet is here.  

The main point made by the fact sheet is the discussion of the Pre-existing Condition Insurance Plan (PCIP) which stays in force until the “Exchanges” go to work in 2014.

I have to think, when I see so many “right wingers” belligerently screaming about Obamacare, they don’t know anyone with a pre-existing condition.  Maybe they have been excommunicated from family life.  Maybe they think other family members should pay out of pocket.  Maybe they would be willing to pay out of pocket.  Maybe they would just let people die. 

Sunday, January 27, 2013

"Trust fund" for SSDI reported down to 40 months, although the actual mechanism is very complicated

Fox News is reporting that Social Security’s disability trust fund could run out of money (relative to what is necessary to pay promised benefits) in 40 months.  The story was mentioned on George Stephanopoulos’s ABC Sunday morning “This Week” show on ABC Jan. 27, although the fact that it referred to disability was conveniently left out. Jim Angle’s story on Fox is here

The SSDI disability fund  provides an income supplement to people who meet certain disability requirements and who have paid into the system through FICA taxes.  The system is set up in such a way that eventual retirement benefits would not be reduced.  It is all explained at Wikipedia here.  The benefit is somewhat complicated in structure and can lead to earlier Medicare eligibility.  The SSD payments currently are not reduced by other income.  Note that while it is FICA-funded, it is a separate benefit from normal retirement (essentially) and could obviously attract attention of politicians for entitlement reform.  Because the funding source is shared with retirement, it certainly sounds like it can be politically sensitive in budgeting.

 On the other hand The Supplementary Security Income (SSI) is based strictly on financial need (an “ultimate” means test), and is administered by Social Security but not financed by the Trust Fund (linked from wiki above).

“My Social Security Attorney” has a video explaining the two programs (which are very different) here.

The familiar retirement trust fund will begin to redeem assets in 2020, and current calculations call for it to run short in 2033, in just twenty years.  There was some mechanism to reimburse Social Security for some of the revenue lost by the two-year payroll tax holiday, which has expired.  The best account of the details is still here and appears to be recently updated. But because Social Security is reported to use outdated actuarial formulas, the year of reckoning even for the retirement fund could come much sooner, perhaps by 2025.  

Note, on my GLBT blog yesterday, I mentioned the Social Security reference explaining when legal spouses can start Social Security benefits based on spouses's earnings.  As of yet, this is not possible for same-sex couples.  

Tuesday, January 22, 2013

Checking the filial responsibility law case in PA

I checked back to see if there has been any change in the situation in Pennsylvania with the case of John Pittas and the state’s filial responsibility law, and I don’t find anything on the web that indicates any change. 
There is a detailed “clinic alert” post on the website of New Jersey law firm Hill Wallack LLP from July 20, 2012 that indicates that the son still has liability. The law firm notes that a Pennsylvania appeals court had noted that the nursing home had the duty to prove that the son had the ability to pay but had done so.  The law firm writes the post expecting (correctly) that the general public is likely to be unaware of the seriousness of this problem.  The link ("Requiring adult children to pay their parents' unpaid nursing home bills") is here. (The link seems to be inactive now -- try a similar article by MSN Money by liz Weston. "Will you get Dad's nursing home bill?" here
The law firm notes an old case (1969) where a New Jersey court had upheld a New York state claim as not being “penal” and apparently upheld it under Full Faith and Credit (the concept that we hear about today in conjunction with gay marriage).  I am under the impression that New York State may no longer have a filial responsibility law (please correct me in a comment if I’m wrong). 

I looked back to my posting here on May  24, 2012 and found that another link there, the “Legally Speaking” column at “Grimes Legal”, from July 2009, had discussed some other major cases like Don Grant and Andrea August.  The specific Pennsylvania law seems to be “Act 43” in the Pennsylvania Domestic Relations Code, “23 PSA CSA 4603”.  Grimes notes that filial responsibility laws had been common in English law and imported into the colonies, and remained relatively unnoticed until Medicare and Medicaid left people the impression (incorrectly) that they could not apply.

If anything, the pressure on state budgets could lead them to enforce them again. And they also feed the ideological fight in Congress at the national level, that entitlement needs to be scaled back and that eldercare  (and disability care, and backp for the indigent) needs to stay within the family. It’s important to remember that usually Medicare does not pay nursing home bills even today (except for short skilled nursing episodes). 
What’s even more important is the way our culture builds up its ethical rules regarding family responsibility.  People have the impression, if you don’t want to pay someone else’s bills, just don’t get pregnant (or don’t get someone else pregnant).  But, with population demographics, we may be entering a world where deliberately avoiding having a family (because of cost, and in order to pursue one’s own career and expressive goals) could be seen as wrong as having children “accidentally”.  That’s the way it was a half-century ago in a lot of circles, but nobody talked about it that way.  

The Wealth Channel TV has a four-minute video "Filial Responsibility Laws: A Terrifying New Development", in which a tax expert (professor Ted Kurlowicz, Taxation, the American College) notes that the Pennsylvania law applies in both directions:  a parent could be held responsible for an indigent adult child, too.  He also notices that Pennsylvania moved its ancient law to the "domestic relations code" as a reaction to the federal deficit reduction action in 2005 (the technicalities are not clear) and that the significance of the action went largely unnoticed except by a few "public policy trolling" bloggers.  He notes that the law seems to encourage a nursing home to go after a private paying party before asking the state (Medicaid) to pay.  But more states would be likely to do the same thing as their budgets contract and federal deficit reduction measures crimp them.  

The "filial responsibility" issue ought to come up in 2013 in conjunction with deficit reduction. 

Sunday, January 20, 2013

GOP agrees to debt ceiling increase for now; don't forget that Social Security payments collect Medicare premiums

It was widely reported Saturday that GOP leaders have agreed to a three-month extension of the debt ceiling, while a budget is negotiated.  The White House has yet to react and indicate if its “1914-style” ultimatum was violated. The proposal seems to have developed at a Republican retreat in Williamsburg (rather like a church retreat), where the snowstorm originally headed for Washington nosedived (almost completely missing DC) and made Williamsburg the jackptk, even with thundersnow, burying the Republicans.  

The most complete story now may be in the weekend Wall Street Journal, by Janet Hook, here

There has been quite a debate on how a debt ceiling breach could affect recipients of Social Security, with some of the rhetoric (including mine), dire, until some accounting and legal professionals asserted that the Treasury would almost certainly have to give the Social Security Trust Fund the same priority as any bondholder.  That sounds probable, but it is still a “theory”.

One point that has been overlooked is that, when Social Security make payments, it usually takes out Medicare premiums which put revenue (or cash flow) back into the system. That point is often missued, but readily apparent on the W-2 that just came from Social Security yesterday.

Another point is that people who started Social Security early (at 62) might wind up with less effect than those who waited, again not a desired outcome of any policy change. 

Wednesday, January 16, 2013

Legal status of Social Security Trust Fund bond instruments might hold together for beneficiaries during debt crisis after all

I decided I should share the exact text of one of the replies to my question on the New York Times debate on the debt ceiling (link yesterday):, authored by P. Quincy, California.

“The money for Social Security payments IS there: in addition to FICA revenue that continues to come in, which coves the vast majority if current expenses, Social Security holds a large amount in Treasury bonds. Those bonds are as valid and binding as any held by investors, foreign nations, or anyone else. They, like all Treasury bonds, are guaranteed by the 'full faith and credit' of the United States: failing to redeem them on demand when the SSA requests redemptions would constitute default, just like failing to pay interest and to redeem bonds held by anyone else. 

“Social Security, like interest on Treasury bonds, and redemptions of maturing Treasury bonds, must be payed first out of any available funds during a debt ceiling conflict. And of course, changes to Social Security now will not affect the debt ceiling for decades, and are thus utterly irrelevant to the discussion here.”
That would seem to contradict what Dr. Tribe said.  The Treasury cannot fail to reimburse the Social Security Trust Fund on time without being in legal default (presumably in violation of the 14th Amendment).  That reimbursement comprises interest payments and redemption of principles on scheduled due dates (which  probably correspond to disbursements).
Congress can, of course, reduce benefit payments with new legislation (Flemming v. Nestor), or even means test – but that would not affect the “default” event.  It would seem, then, there is no immediate reason for Congress to do so, if Quincy is right.

The Rivkin and Casey piece in the Wall Street Journal Monday (“The Myth of Government Default”, linked yesterday on the “Issues blog”)  says that Congress has no constitutional duty to borrow to pay for entitlements, because it can simply cut them off.  That would sound like an existential danger to the lives of many seniors.  However, it does appear that Congress may well have a constitutional duty to “borrow” (if necessary) to pay bondholders, and the Social Security Trust Fund is a bondholder.  That would appear, for the most part, to answer the scary points in the Rivkin piece, at least for thus go-round.  Most accounts of the Treasury’s cash flow confirm the fact that Treasury still would have the money to pay all bond obligations (implying it can pay Social Security).

There would indeed exist some due bills (salaries or wages for work already one or goods and services already purchased and used) when the debt ceiling crashes.  That would certainly cause chaos, although not directly with retirees.  Furthermore -- and this is the "future spending" decapitation that hardliners want -- most contracts would be suspended, and most contractors and federal workers would be laid off or furloughed, causing massive, if short-term, unemployment and disruptions, and sacrifice in order to go (as some ideological Republicans see it) go “cold turkey”.  The ethics of uneven sacrifice should not go unnoticed. 

One other technical note: the "IOU" mechanism would not seem to apply to Social Security.  The Treasury can give the SSA an "IOU" and the SSA could theoretically give one to a beneficiary (maybe), but the Treasury cannot directly supply a beneficiary with an IOU, because of the trust fund mechanism.  And, given what I noted before about the IOU proposal, that sounds for the best. 

Tuesday, January 15, 2013

Reactions to debate on debt ceiling's impact on Social Security, from NY Times

There are some reactions on the New York Times to my posting under Professor Tribe’s commentary (see link Jan. 13). 

It’s unclear, but here is a rundown of what some people said.

There is a comment that Social Security could sell trust fund holdings.  I’m not sure what this entails.  Social Security has its own statement on this matter here , but it is not clear that it really has its money “now” if the government has spent it on other things.

A direct reply to me by  a “David” noted some analysis by former Social Security commissioner Robert Ball which downplays the “demographic winter” argument but discusses other economic factors which he think can be resolved gradually.  The disability payment program is completely separate and should not be intermingled with Social Security. 

But another “Bill” from Madison WI wrote that I “don’t understand Social Security”.  Does anybody?  He said that there is enough money in the Trust Fund for 30 years. 

What David seems to be saying, on reflective thought, is that the "Trust Fund" mechanism may give existing Social Security beneficiaries some claim for precedence in priortization,  (See my post on my "Issues" blog today.)  It's not clear (given the Flemming v. Nestor decision) that it would, and it might take a federal judge to tell us.  

Maybe so, but the point is that the government already spent that money on other things, with double accounting.  So, without borrowing more, it doesn’t have the money in the bank to make payments.
President Obama’s analogy is right.  If you spend too much money on a vacation and can’t pay the American Express bill, you’d be tempted to take out another credit card just to make this payment.  Otherwise you would default (although it sounds like you could pay the minimum and keep letting your debt grow, which is how the US government has been running).

When legally owed debts cannot be paid, people get hurt.  It’s a simple as that.  Some House Republicans are saying that some in my generation – maybe most of all those of us who didn’t have children – should make an existential sacrifice for future generations.  Others have had to do so. I do get the moral point.  But, if carried too far, that will be the end of my own life.  Again, there are no prisoners, there are no victims.
My other point is that GOP could conceivably make the case that the Social Security debt isn’t owed at all, at least to those with other assets.  I heard John Boehner say something like that in the summer of 2011.  Libertarian Party candidate (from the 1990s) Harry Browne actually wrote something like that in a book in the 1990s.  The idea has been around.

So all of this is very unsettling to me and many in my position.  It’s an “existential cliff” on how people take care of themselves and others, in a world that is not as stable as we have counted on.

Even so,  the ruminations of the past few days suggest that some House Republicans may be willing to back off from this position, of trying to force a “cold turkey” crisis right now (supposedly for the unborn).  But the statements of a few of them (as to Ali Velshi on CNN) makes me wonder if they really understand the credit card billing cycle analogy.

Congress should pass the best bill that it can, with spending cuts and entitlement reform and debt ceiling reform, and then “confront” the president with it. 

But I don’t think we can go on spending the way we have.  How do we deal with infrastructure, the all too vulnerable power grid, and climate change?  

Bernie Sanders speaks out on this: 

Update:  Late Tuesday

Another recent ("conservative") reply to my New York Times post makes what sounds like a more relevant observation, possibly confounding all the other scare talk from both liberals and conservatives:  The Social Security Administration holds Treasury securities and has legally priority for redemption of them or interest payment  (like any other bondholder) if there is a shortfall.  Presumably that could mean that payments to beneficiaries continue.  But then why do so many authorities (including Professor Tribe) say that they could stop?  Is it that knowing constitutional law doesn't mean you understand federal government accounting practices?  If not, who really does?  Even the Treasury Departments's statements are confusing. ("Parlour Timocracy", anyone?)

Frankly, the mainstream media, the law professors, the president, and members of Congress are all over the map on this.  They can't all be right.  Does anybody know what is going on?  

Monday, January 14, 2013

Grantor trust may simplify tax preparation

I did speak to a tax adviser this morning about the strategy for 2012 taxes, now that the Alternative Minimum Tax threshold was raised amply (to about $112000).
I now understand that my conversion of mother’s trust to a “Grantor Trust” will mean that there is only one tax return, mine, from the time that the trust became active (early 2012).
Interest payments or dividends that get deposited to “trust” accounts are taxable in the ordinary sense to me as if they had been in my name. 
Fortunately, this does not kick me into Obama’s higher marginal rates.  There is no tax on money moved from the “trust” to “me”, a concept that would seem to invite abuse.
This sort of arrangement is not for everyone.  In fact, retirees who own businesses that generate substantial revenue should consider setting up separate entities (according to state laws and various regulations – you may need an attorney) and not streaming the money to their own returns. 
The tax preparer, already past the maximum age to start Social Security, noted that people in his boat (or mine) really could be in danger of sudden means testing if Congress drops the ball on the debt ceiling and if the Treasury decides it has to stiff Social Security, as I have noted.  On the other hand, early indications suggest that the administration is taking no position on prioritization and would want to pay debts on a “first come, first served” basis.  But that might not hold.  Certainly bond interest comes first.  

Sunday, January 13, 2013

NYTimes says that President has already played his hand on Social Security in debt ceiling talks

The New York Times has an editorial today in which it says that President Obama “caved in” by offering the chained CPI fix to control social security benefit costs, and has created a situation where including it will be a minimum position expected by House Republicans going forward, in attempts to avoid the debt ceiling.  The URL for the Times article is here.  

The Times argues that the chained CPI will hurt some longer-living poorer seniors and has not been researched as an accurate tool to keep benefits in line with needs. 

The Times does suggest that raising wage base limits and gradual actuarial changes to reflect longer lives, and more “progressivity”.  Presumably these changes would be gradual. 

I still think that an “ownership” interest in one’s own FICA history ought to be written into future law. 

It is true that other kinds of benefits in our culture are strictly “welfare” in nature, and aren’t scaled as if to suggest an accumulation of benefit.  For example, unemployment benefits can’t be collected at all unless one becomes unemployed; there is no ownership of the premiums (paid by the employers anyway, whereas FICA is usually half paid by the employer). 

Thursday, January 10, 2013

The "IOU" proposal for handling the debt ceiling: Social Security recipients should be wary

There is indeed a new idea to give President Obama ammunition in the debt crisis. The government would issue “registered warrants” or “IOU’s” to claimants.  They will not pay interest because they are not loans, and do not violate the debt ceiling.  Paul Kurgman has called them “moral obligation bonds”. 

Recipients of the IOU’s would probably be able to redeem them for a percentage of face value, and then the purchaser (probably a bank) would collect in full when the Treasury deemed itself able to pay them.

There is another proposal, for the treasury to mint a trillion dollar coin.  Of course, this “Weimar” measure could add to inflation and weaken net worth in another way.  But it might protect social security recipients better (although the inflation would still hurt).

Let’s also mention that the Obama administration has suggested that, in the event of default, it would pay existing bills in the order they came due, without preferences.  Many of us have thought that the Treasury really can prioritize based on the legal strength of the claimant.  It does seem probably that the Treasury would pay interest due on bonds first. 

I do have a big problem with the IOU idea as it affects Social Security recipients.  First, one drawback is obvious.  A recipient who gets script and lives “benefit check to benefit check” would have to negotiate the IOU immediately at the bank and lose part of the payment permanently, and still have the same bills (while the bank gets the “profit”).  This hardly sounds like an acceptable practice.
A better-off recipient who did not need the money immediately could seemingly keep the script until the crisis “resolves”.  But there could occur another risk.  The government might say that the recipient has shown other means and no longer has a legal claim, based on the reasoning in the 1960 Supreme Court opinion (Flemming v. Nestor) and deny reimbursement after some period, maybe 30 days. 
California used the IOU mechanism in 2009, but the federal government has never needed it.
Brett LoGiuarto has a story in Business Insider here.

Reuters Video has a 4-minute presentation on the Debt Ceiling.

Monday, January 07, 2013

New York Times: Social Security is using antiquated math to predict lifespans and total payouts

The New York Times Sunday Review section on January 6, 2013 has a full page story by Gary King and Samir S. Soneji,  “Social Security: It’s Worse than You Think”, link here

The crux of the matter is that the Social Security Administration uses antiquated models for predicting life expectancy.  The article provides a lot of technical, actuarial details. 

People who “retire” today will probably live twice as long afterward as people did when I was growing up. 
It would sound as though private insurance companies selling annuities would need to consider the same factors, and make the payouts adjustable.  But the life insurance industry seems way ahead ot Social Security and Congress on predicting life spans.  Congress ought to tap in to private industry experience and hire some actuarial professionals to recalibrate the government’s system for predicting life spans.  It’s all in the math.
The same thing would be true of defined benefit pensions, both public and private, even as these become less common.

People now in their 40s and early 50s probably will have even longer life spans than my generations.  I don't think it's inherently "unfair" to adjust retirement ages and payout formulas (and COLA increases) accordingly to make the system sustainable.  

Still, I'd like to see the "property right" carve-out that I have presented before.  

Sunday, January 06, 2013

Some patients turned away from hospices because of certain kinds of treatment; retiree health insurance might not do well under Obamacare

Paul Span has a New York Times article  ("The New Old Age") Jan 3 about surprising hurdles for patients getting into hospice care.  Many smaller hospices will not accept patients on chemotherapy, radiation, or some sort of intravenous drip even though these treatments, in modern settings, can be intended only for palliative care, not cure.
The link for the story is here

My own Mother was actually in a hospice facility for four days at the end.  All the other treatment was at home.  I don’t see why there would be a problem accepting patients whose palliative treatment continues at home.  She was on oxygen, continuously at the end. 

On Saturday, Ezekiel J/ Emmanuel argued in the New York Times that end-of-life care can be made “better”, but probably not cheaper. 

In another study that can affect retiree health insurance before Medicare availability age, the New York Times is reporting Sunday that many states do not have the ability to control insurer rate hikes under Obamacare.   The worst affected states seem to be California, Ohio and Florida.  This seems like a complicated problem that requires close examination.  Retiree health insurance often provides substandard reimbursement for hospital inpatient (like only 70%) and yet costs about as much as Medicare and Medigap combined.  

Wednesday, January 02, 2013

Let GOP insist on carving out a property right to Social Security contributions; a debt ceiling breach could have dire consequences for some of today's beneficiaries

Well, the FICA tax on most wage earners goes back up by 2% (with a corresponding self-employment tax) and well it should.  It’s my social security benefits that are getting paid. My next payment is due January 9 (sounds like a due date for a term paper in the old days).

But today’s wage earners are paying FICA, very “regressive” when viewed as a tax but sensible if viewed as an annuity premium, with no clear legal claim that politicians couldn’t take away their nest egg for some future crisis.

In view of the 1960 Supreme Court opinion (Flemming v. Nestor) I think Congress should carve out an explicit property right to everyone who has made social security contributions, both current beneficiaries, and people paying now for future retirement.

Some formula, commensurate with life insurance industry standards, should be used for the calculations.  They should allow a sliding scale of starting retirement ages, and factor out a penalty (10%) to allow for the fact that the initial beneficiaries never paid in the 1930s (the Ponzi effect). That amount should be free from political meddling.

And, sorry, the calculated property numbers for current workers will be slightly less because of the two year tax discount.  People not yet retiring would get statements of their “valuations” every year.
Would the GOP like this?  After all, Bush wanted to privatize social security, and this would be a step toward privatization. 

Yet, in the early summer of 2011, John Boehner made a comment that  retirees with other assets and income should give up social security now, because “we don’t have the money”.  It’s remarks like that, previously unthinkable, that are so scary.

Consider the legal consequences of defaulting on the debt, if the new Congress plays the “deconstruct the government” game (sorry, that term came from my first book, and others have jumped on it, even saying “I got what I wished for” from House Republicans).   If current social security retirees (or “annuitants”) don’t have a legal property claim to their money, a court (if another party, like a stiffed government contractor brought suit) could order everyone else paid besides the retirees.  This isn’t because of “Parlour Timocracy” (I’m referring now to the Treasury Secretary, not to the musician who coined the term in August 2011 for political satire); it could happen because of court opinion. (Geithner has already taken emergency steps to extend the debt limit for about six weeks.)  Then, the only way social security beneficiaries could get back in the sheriff’s bankruptcy line is to demonstrate “need”.  Means testing and asset tracking – we do it now for Medicaid – could be easier and scarier than you think.  Some of us might never see checks again.  (And the mathematical complications of early retirement even could raise the specter of trying to collect some of what was paid out.)

The president warned Tuesday night of catastrophe if the GOP plays with the stability of the country’s ability to pay its debts again.  This could be part of what he is talking about.

But I do want some property right to what I put in.  Don’t call me a “selfish baby boomer” or post-baby-boomer.  I want what I thought was promised.  That was the deal, the social contract.
There are some social conservatives who want to exclude all families with children from paying social security tax – which means that the childless carry the entire bill.  Essentially, “he” (like Mero or Carlson) would create a world where only people who have raised children get benefits.   How is that for a “modest proposal”?   You could hear it some day.