Tag Archives: income security

Medicaid: Long Term Care Security

As a gerontologist and a member of the Baby Boom generation, I think about what the state of long term care may be in seven years when I join the older-old, those above age 75.  Most of us would prefer to remain in our own homes as long as possible, but ultimately many of us will need more supervised care in a residential setting.  Most people don’t realize what various types of long term care cost, and many have not accumulated enough retirement savings to pay for all of the long term care they will need, especially given the extended lifespan that is now possible.  In addition, there are a lot of misperceptions about the scope of long term care benefits available through Medicare.

logo-genworth-desktopGenworth Financial Insurance Company conducts an annual survey of long term care costs in the United States.  In 2016, the national median annual cost of homemaker services in an individual’s private home came to $45,756.  The median annual cost of assisted living was $43, 536, and the median annual cost of a semi-private room in a nursing home was $82,128.  The median annual 2016 costs in Michigan were generally somewhat higher than the national median.  Genworth is predicting a 34% increase in costs in ten years, and an 80% increase in twenty years.

Americans are not great retirement savers compared with other nations, but there are reasons for that omission.  For the middle classes especially, wages have been stagnant since the 1970s, while the cost of living has increased.  The cost of a college education is more than eight times gregg-chicken-eggs-raw-eggs-eggshell-128885eater than it was in the 1970s, while the Consumer Price Index rose approximately four times  higher during the same period.  Pensions, which guaranteed retirement income for life, have virtually disappeared.  As a consequence, workers have lost one source of retirement income, since the pension replacements, the 401(k) or 403(b) plans, result primarily from employee savings, rather than employer contributions.  Finally, the economic downturn, which began earlier in Michigan than in much of the rest of the country, eroded the savings of many unemployed mature workers.

Our family story is no different; we experienced layoffs in the 2000s, which used up our retirement savings, up to then.  I paid off my student loans two years ago, and my husband just paid off his this year. We’re still paying on Parent PLUS loans for our son’s college education.  We expect to keep working as long as possible, and we’re also working hard to stay healthy so that we can do so.  But health is a result of past exposure and lifestyle, as well as present health practices, and we don’t know what lies ahead.

We do know that we can’t count on Medicare to cover our long term care expenses; it wasn’t designed for that.  Medicare will pay for skilled care, such as rehabilitation services, at home or in a nursing home,  for a limited period of time.  It will also pay for hospice care.  It does not pay for  assistance with managing personal care or housekeeping or ongoing nursing support in any setting, except for the brief period in which skilled care is also needed.  Each of us will have to manage those care expenses out of our retirement savings.  But when we live longer than expected, or health care expenses are greater than anticipated, or when both spouses require custodial care, then income and retirement assets often prove insufficient, and people rely on Medicaid to pay for their care.

Medicaid pays for the health care costs of qualifying poor people of all ages.  Low income older adults most often have Medicare coverage, and Medicaid helps them pay for the considerable out-of-pocket premiums, deductibles and coinsurance costs that Medicare does not cover, estimated to average between $1,700 to $3,000 per year.  Those costs can escalate quickly with surgery or expensive long term medications.  It also helps the low income elders receive care at home, rather than a nursing home, if they are lucky enough to qualify for a Medicaid waiver program.  The Medicaid waiver program allows for case management, in-home services, and community-based services for low income ill or disabled persons who would otherwise require nursing home placement.  In Michigan it’s called the MI Choice Waiver Program, and it’s about one third less costly than nursing home care.

But most areas have long waiting lists for Medicaid waiver services, and rural areas generally do not have sufficient supply of community-based services to keep people in their homes.  At a cost of more than $82,000 a year, most people needing custodial care in a nursing home will run out of personal savings and assets in a relatively brief period of time.  At that point more than half of nursing home residents apply for assistance from Medicaid.  Because of Medicaid older adults worry less at night about where they may end up when the money runs out.

A fixed cap on federal Medicaid payments to states could remove that sense of security.  With increasing health care costs, increasing numbers of older adults, lengthening lifespans, and a stagnant economy, states will have to reduce Medicaid spending considerably.  What will we do with ill, disabled, and poor older people who no longer receive payment for their nursing home bills?

It is these thoughts that keep me exercising most days of the week, meditating daily, and keeping up my license and professional credentials.   However, these are just stop gap measures, and I don’t feel nearly as secure.

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Resources for Tax Time

IRSlogoFiling an income tax return can evoke anxiety.  A person’s income can be a sensitive topic, and all the different forms, rules, and documents can be overwhelming.  Perhaps for these reasons, many people don’t benefit from the tax breaks that are available to them.  Or they pay a professional to prepare their tax returns for them, even for uncomplicated filings.

The IRS has organized two volunteer programs for free tax return assistance.  The Volunteer Income Tax Assistance (VITA) Program is aimed at people earning $52,000 or less per year.  These volunteers file taxes electronically, and can assist with several tax credit programs.    There is an online locator tool to help qualifying tax payers find VITA services.  The second program, called the Tax Counseling for the Elderly (TCE) Program, is coordinated with the Tax-Aide Program through the AARP Foundation.  This service is open to all, but targeted to older adults.  The tax counselors through TCE are better versed in retirement, Social Security, and pension issues.  They can be located through another search engine hosted by the AARP Foundation.

Low income Social Security recipients probably won’t have to pay taxes on their benefits, but moderate income persons may have to pay taxes on up to 85% of the benefits received during the tax year, depending on the amount they receive along with other income they may have.

Adults who work, are moderate to low income, and are between the ages of 25 and 64 may be eligible for the Earned Income Tax Credit (EIC).  The credit amount is larger if the person is caring for a child in his or her home.  Grandparents raising grandchildren or other kinship care can especially benefit from the EIC, as well as the Child Tax Credit (CTC).  To receive the CTC, the person must have earned at least $3,000 during the year.  EIC and TCT credit refunds don’t count as income for federal benefit purposes.

Low income individuals 65 and older or permanently and totally disabled persons under 65 may be eligible to take the Credit for the Elderly and Disabled.   The rules and calculation are somewhat complicated, so getting help from one of the free services listed above may be advisable.

If you have a constituency to whom you can publicize these resources, the Center on Budget Policy and Priorities has a very rich website on EIC and CTC outreach, including outreach materials, tools, and strategies.  Sue Sweeney, Chair, Department of Aging Studies, Madonna University

Health Insurance Coverage

With Medicare open enrollment ending on December 7th this year and the health care marketplaces gaining enrollees, health insurance coverage is the topic of the day.  For those eligible for Medicare, the National Council on Aging (NCOA) has launched more of their Web tools.  MyMedicareMattersLogoTheir Medicare Web site, My Medicare Matters, has a Medicare Quick Check tool in which you enter some basic information about your current Medicare plans, and the tool returns suggestions for how to save money on your coverage and where to go for help.  One caveat: NCOA appears to be encouraging the use of one healthcare navigator, AON Hewitt Navigators, although other options for assistance are also listed.   It appears that AON Hewitt has agreed to meet NCOA standards of service in return for supporting an NCOA subsidiary firm, NCOA Services.

Another NCOA tool now available is a prescription drug savings estimator.  For this to work, you enter your zip code, the name of your Part D plan, and your prescription drugs.  When you enter the drugs, a window will open with dosage options for you to select.  The estimator will tell you whether you may be able to save on the drugs, and approximately how much, by choosing a different Part D plan.  However, not all drugs are included in the estimator’s database.  For example, I tried Advair, a commonly prescribed asthma medication, and it didn’t show up.

MichiganDrugPricesLogoFor those who are uninsured, don’t qualify for Medicare or Medicaid, and haven’t managed to complete enrollment through the Marketplace, the Michigan Department of Community Health has a useful Website called MichiganDrugPrices.com.  It has three parts: a search engine to compare drug prices among pharmacies, a list of retail discount drug programs, and a list of assistance programs for uninsured persons.  For the drug prices comparison, you enter your zip code and your drugs.  For each drug, a window will open with the drug name.  When you select it, in another window, there will be a list of the drug in each of its dosage strengths.  Unselect all but the dosage needed.  Then you’ll get a list of the pharmacies in the area with their price for the drug.  The drug database contains the 150 most prescribed medications in the Michigan Medicaid program, so a number of drugs are not included.

Even if you don’t live in Michigan, the site may be helpful, since the retail discount drug programs may be regional or national, such as Walmart or Kroger, and several of the assistance programs are national in scope.  There are also Helpful Links, which include some of the drug company assistance programs.  There are many more options than I had imagined.  Now people need to know how to find and apply for the assistance that’s available.  Sue Sweeney, Chair, Gerontology Department, Madonna University

Planning for Retirement

A lot of people, whether younger or older, are anxious about retirement because of the various proposals to change Social Security and because of the number of businesses and governmental entities that are curtailing retiree benefits and eliminating pensions.  With these uncertainties, it makes sense to take advantage of any retirement accumulation programs each of us can manage, and to plan for the future.  The AARP has a Retirement Calculator that I found to be easy to use.  Included is a tool that allows you to make changes to your assumptions and plans to see how they will affect your income in retirement.  For example, the amount of a likely shortfall is adjusted if you elect to retire later, work part time in retirement, put aside a larger proportion of your current salary, or reduce your lifestyle in retirement.

The Social Security Administration has a Retirement Estimator that will work for many individuals.  It assumes that you already have enough work credits to qualify for benefits and that certain other conditions do not pertain, such as already collecting Social Security benefits.  You have to enter identifying information, then you can see what your monthly benefit will be depending on the age that you choose to retire.  The same page has links to other calculators, but they are not derived from your earnings record, as the Retirement Estimator is.  There’s also a link to a document that discusses when to start taking your benefits.

Bankrate, an aggregator and publisher of bank rate information, has made a number of calculators available that allow a person to compare their retirement prospects depending on the retirement instrument he or she uses, such as traditional IRA, Roth IRA, 401(k), 403(b), or annuities.

It may be scary to see what would be needed to have a comfortable retirement, but I think it’s better to know what one’s prospects are rather than be painfully surprised when it’s too late to do anything about it.  Sue Sweeney, Chair, Gerontology Department, Madonna University

Do the Old Gain at the Expense of the Young?

This past July, Lansing Community College economics professor Jim Luke gave a presentation sponsored by the Michigan Intergenerational Network on our Country’s intergenerational transfer programs:  Social Security and Medicare.  You can view his PowerPoint slides and read his blog post on the topic at www.econproph.com.  The point that impacted me the most is the fact that intergenerational transfer programs are inevitable, because the very young and the very old cannot possibly generate the resources necessary to support their well being.  When societies lack formal intergenerational transfer programs, the task of supporting the two ends of the lifespan usually falls to the family.  However, that arrangement allows many children and old people to lack support because of death, social changes, economic instability, acrimony within families, mental illness, war or other hazards.

MoneyA form of social insurance is more reliable and benefits the society as a whole, due to the economic stability provided by predictable income, and therefore predictable cash infusion into the economy.  In other words, our intergenerational transfer programs are not perks that old people receive to the detriment of the young.  They’re an organized way of addressing a universal social problem, and the current solution provides additional advantage to everyone in the society.   Indeed, we need to preserve them so that the economically productive group that is contributing now to Social Security and Medicare will ultimately receive the same benefit that they are providing to their elders.  Breaking the intergenerational compact, that would be an injustice to the young!  Sue Sweeney, Chair, Gerontology Department, Madonna University

Retirement Security

We know that the “three-legged stool” of retirement security has largely become a “two-legged stool” over the last several decades.   The “legs” of pension, Social Security benefits, and personal savings, have been reduced to personal savings and Social Security benefits for many.  Company and public pensions (defined benefit programs) are on the wane, while 401(k) or 403(b) plans (defined contribution programs) have become much more common.     While companies often contribute to defined contribution plans up to a given percent of income, the bulk of the contributions come from the employees, and represent personal savings in a tax deferred instrument. Thus the demise of the “third leg” of the retirement security foundation.

According to the Bureau of Labor Statistics, Monthly Labor Review of December 2012, pension coverage of private industry workers has declined from 35% in the last 1990s to 18% in 2011.  Of those who are covered by a pension plan, 1 out of 5 of them participate in frozen plans.  That is, new employees of their companies are not permitted to participate.  Only 10% of private industry companies offer a pension plan, and 48% of those are larger organizations with at least 500 employees. ( But 52% of U.S. workers are employed by firms with less than 500 employees.)  Among private industry employers, there is great variation in the existence of a pension program by industry sector .  Utilities and banking related industries far exceed any other industry sector in the frequency of including a pension among employee benefits.

The National Institute on Retirement Security is a non-profit research and education organization formed by member organizations who are concerned with retirement plans and policies. The Institute recently conducted a poll to assess the attitudes of American adults toward retirement security.  The poll was administered to 800 individuals aged 25 or older through telephone interviews held between December 3 and December 22, 2012.  The findings were released in a report, Pensions and Retirement Security 2013:  A Roadmap for Policy Makers.

The report reveals that 85% of those polled expressed anxiety about their prospects for a decent retirement income, and nearly as many feel that federal elected officials fail to understand their struggles to save toward retirement.  These attitudes are not limited to Baby Boomers (those born 1946-64).  Millennials  (those born after 1976) also express concerns, and 90% of them believe lawmakers need to make improvement of the retirement system a higher priority.  Sue Sweeney, Chair, Gerontology Department, Madonna University

Report Indicates Older Workers Do Not Crowd Out Younger Workers

With the present recession, many older workers have chosen to delay retirement in order to recover retirement savings lost in the downturn or cover out of pocket medical costs.  A current meme suggests that older employees are displacing younger ones or are depriving younger prospective workers of jobs.  A recent Issue Brief of the Pew Charitable Trust, entitled “When Baby Boomers Delay Retirement, Do Younger Workers Suffer?“, refutes that notion.  The document reports on the analysis of Current Population Survey data from 1977 to 2011, and states in the Conclusion, “the evidence suggests that greater employment of older persons leads to better outcomes for the young—reduced unemployment, increased employment, and a higher wage.  The patterns are consistent for both men and women and for groups with different levels of education. And perhaps most notably, the effects of Boomer employment on other segments of the labor market during the Great Recession do not differ from those during typical business cycles.”

We need to carefully examine assertions that contribute to competition and divisiveness among the generations.  Buying into ideas that pit one end of the lifespan against another ignores our interdependence, and could end up depriving the young of the support and experience of our elders, and the old of the joy of contributing to the prosperity of the young.    Sue Sweeney, Chair, Gerontology Department, Madonna University