August 11, 2016
Medicare Advantage: Know the Pitfalls
Baby boomers on Medicare are streaming into Medicare Advantage plans, with nearly 18 million people currently enrolled in them.
But a new study identifies pitfalls that might not be obvious to those signing up.
Advantage plans are HMOs or PPOs that provide both basic Medicare Part B coverage and many of the benefits offered by supplementary Medigap insurance policies. But Medicare beneficiaries’ premiums for an Advantage plan plus Medicare Part B coverage are roughly half, on average, of the premiums for a Medigap policy plus Part B.
One reason is that Medigap policies typically cover more out-of-pocket costs. Another is that insurers offering Advantage plans assemble networks of hospitals and physicians to control their costs and reduce customers’ premiums.
But, the researchers point out, Advantage plans frequently limit “access to certain providers and increase the cost for care obtained out-of-network.”
In nearly half of the 20 U.S. counties examined in a new study by the Kaiser Family Foundation, Advantage plans had limited networks of hospitals, potentially increasing consumers’ costs. Further, a large majority of Advantage plans did not include their county’s top-quality, high-cost cancer treatment center in the networks of approved health care providers.
And it can be very difficult to compare access to care and the future out-of-pocket medical costs that will result from a decision to go with an Advantage plan. Costs vary greatly among Advantage plan networks, with coverage often described in complex, incomplete, or confusing insurance plan documents, Kaiser said.
Consumers also face a dizzying array of choices. One example: In Cook County, which includes Chicago, eight difference insurance companies are selling 19 Advantage plans with 10 different provider networks.
Many retirees learn the ins and outs of the network only after they try to access medical care under the plan. The Kaiser report’s key findings provide a roadmap of things consumer should watch for: …
August 9, 2016
Social Security Replaces Less for Couples
Source: U.S. Social Security Administration poster, 1954.
When Social Security was created in the 1930s, wives were mainly full-time homemakers, with their pension benefits based on their breadwinner husbands’ earnings.
But wives went to work in droves after Social Security’s passage. Today, women make up nearly half of the U.S. labor force. Yet the program’s design remains the same, with the result being a steady decline in married couples’ replacement rates – the percentage of the combined earnings of two working spouses that Social Security replaces when both retire.
A study by the Center for Retirement Research found that the replacement rate for couples has declined from 50 percent for married couples born in the early 1930s to around 45 percent for the oldest baby boomer couples, and it will fall to just 39 percent for Generation X couples when they eventually retire.
A declining replacement rate is an important consideration for working couples as they plan for retirement.
The simple explanation for the declining replacement rate is that household earnings are much higher when both spouses are working, but their Social Security pension benefits do not increase proportionally. The reason is that even if a wife doesn’t work, she still receives a spousal benefit equal to half of her husband’s benefit. The more a working wife earns, the lower the couple’s replacement rate. …Learn More
August 4, 2016
Social Security Credits for Moms?
Dramatic changes in the U.S. family structure over several decades – more divorce, single motherhood, and unmarried couples – could have a big impact on the financial security of baby boomer women as they march into retirement – and on future retirees.
A review of studies on Social Security spousal and survivor benefits by the Center for Retirement Research, which sponsors this blog, examines the difficulty of providing retirement security for the growing ranks of women and mothers who do not fit the traditional family mold.
Social Security’s benefits were designed for the typical family when the pension program was enacted in the 1930s, a family portrayed at the time by Henry Barbour and his wife, Fanny, in the popular radio soap opera, “One Man’s Family.” A spouse, usually the wife, is guaranteed half of her husband’s full retirement age benefit under the program when she reaches her full retirement age – whether she works or not. When her husband dies, her survivor benefit equals his pension benefit.
But women who marry and become divorced within 10 years are not eligible for these benefits. Nor, of course, are single working women, who receive benefits based solely on their own work histories. Increasing numbers of women reaching retirement age today either were in short-term marriages or never married and won’t receive a spousal or survivor benefit. The problem is that most of these women are mothers. …Learn More
August 2, 2016
Rising Health Costs a Factor in Inequality
Inequality is frequently in the news. A new study puts an interesting spin on this now-familiar topic: rising health costs are a significant reason for wage inequality.
The cost of employer-provided health insurance is a larger share of lower-paid employees’ total compensation than it is for the people higher up in the organization. Since insurance costs have been increasing faster than total compensation, squeezing out pay raises, the nation’s lowest-paid workers feel it most.
For people with earnings at the 30th percentile of all U.S. workers, total compensation, including the cost of employer health insurance as well as actual earnings, increased by just 9 percent in inflation-adjusted dollars between 1992 and 2010, according to data in a new study by Mark Washawsky at George Mason University’s Mercatus Center. Total compensation for high-paid workers at the 95th percentile grew 19 percent.
However, the rapidly rising cost of employer-provided health insurance took a larger bite out of lower-paid workers’ earnings – and out of their take-home pay. Inflation-adjusted earnings at the bottom rose by just 3 percent over the 18-year period, compared with a 17-percent increase at the top.
Washawsky correctly notes that employer-provided health insurance is a form of compensation that is valuable to all workers, regardless of how much they earn. The problem for workers living paycheck to paycheck is that they pay their day-to-day bills out of what’s left in that paycheck. That’s where you’ll find the inequality from rising healthcare costs.
So how should policymakers tackle U.S. inequality? Warshawsky argues that any prescription to reduce wage disparities should “focus on reducing the rate of increase in healthcare costs.”Learn More
July 28, 2016
Finally Retired? Now What?
It was Gerry Smythe’s final confirmation he had never quite felt at home working in the Oklahoma airplane manufacturing plant. When well-meaning coworkers bought a cake to celebrate his and another person’s retirement, they got Smythe’s name wrong on the sign inviting everyone to the break room.
At age 63, he until recently was one of the nation’s 10 million older Americans working in physically demanding jobs in difficult conditions. He felt worn down by the factory noise, carbon dust, and standing all night on collapsed arches to assemble cabin floor beams for Boeing 777s. His requests for a transfer away from the hard floor never went anywhere, he said.
“It wasn’t really the job – I kinda liked the job,” said Smythe, who retired on May 27. “I didn’t want to stick in that environment in which I was dealing with air pollution and chemicals and decided I’d had enough.”
Now retired, Smythe savors his freedom. He’s playing more golf, has maintained his obsession with the Sunday crossword puzzle, and might volunteer at an animal shelter. But he also admits to something others have learned upon retiring: it’s a lot to get used to.
“You’re transitioning to a new phase of your life, and you’re not sure where to go. It is sorta scary,” he said in a telephone interview on a sizzling summer day at his home in Tulsa.
Everything is up in the air. He likes Tulsa but might move back to Tennessee – he once worked at the Memphis airport – or to Houston, where his mother’s family hails from. Or maybe he’ll find another job. The aviation industry is booming, so a few recruiters have called him. …Learn More
July 26, 2016
Impact of Raising Austria’s Pension Age
Like the United States, many European countries are concerned about shoring up their pension systems for their aging populations. In 2000, Austria took action by introducing a series of small increases in the earliest age at which workers can begin receiving their federal pensions.
This reform is gradually phasing out early eligibility entirely. Raising the earliest claiming ages, from 60 to 65 for men and from 55 to 60 for women, will cause them to converge, next year, with the pension program’s standard – or “normal” – retirement ages.
Prior to the reform, workers who had signed up for benefits before their normal retirement age received only mild reductions in their monthly benefits. The reform, in addition to gradually raising the early retirement age, exacted a larger penalty on the early claimers, increasing the incentive to continue working.
Austria’s pension changes have provided researchers with a unique natural experiment to see how workers reacted to a delay in their eligibility. A study by economists at the University of Texas at Austin and the Vienna University of Economics and Business, which they will present tomorrow at the NBER Summer Institute, have concluded that the reforms have had a “pronounced” effect. …Learn More
July 21, 2016
Inner-City Teen Interns Are Better Off
High school students who participated in Boston’s summer jobs program in 2015 work on a public beautification and landscaping project.
It’s a spring rite in Boston. The mayor’s office and private and non-profit employers hustle to get ready for a program employing more than 10,000 inner-city teens for the summer.
A new study of the summer 2015 participants shows that the high school students made remarkable strides, compared with the kids who applied but were not accepted for the limited number of slots available in the program. New York and Chicago have similar, large programs.
The Boston teens, who are mostly either black or Hispanic and from low-income neighborhoods, improved their job readiness, from showing up on time to developing their resume-writing skills, and also boosted their confidence and sense of identity. Perhaps most important, the program increased aspirations, particularly among black males.
Two out of three participants have single parents, and one in three is from immigrant families who do not speak English. While college-bound children of wealthy parents may choose summer camp over a summer job, being idle in the summer can be a big disadvantage for inner-city kids.
“These kids just have less opportunities to develop [job] skills just by growing up in the neighborhoods they do,” said Alicia Modestino, the Federal Reserve Bank of Boston researcher who studied the program. “Fewer people in their lives have a job. They’re living in a neighborhood with fewer job opportunities.” Further, single parents in low-income households often work nights or have multiple jobs and are too pressed for time to help their children develop these skills.
The jobs in Boston’s program are primarily either with private-sector employers – some of the top-tier internships are with major corporations – or with non-profit organizations such as local YMCAs, Sociedad Latina, the Boys and Girls Clubs of Dorchester, and the New England Aquarium. A requirement of the summer program – one of the nation’s oldest – is that each high school student attends sessions in which they learn to write resumes, practice job interviews, and answer questions properly on online applications.
Modestino was surprised that the strongest results in the study came in the category of “social engagement.” For example, her study found a sharp increase in the share of participants reporting they felt they “had a lot to contribute.” …