September 8, 2016
Women Often Quit Work to Help Parents
Here’s just some of the evidence of the enormity of the challenge of caring for our elderly parents:
- One in three baby boomer women cares for an elderly parent.
- Even if they work, these caregivers devote anywhere from eight to 30 hours per week to that parent.
- The estimated value of informal senior care provided by family members approaches $500 billion in this country – or double the amount spent on formal, paid care.
Caring for an elderly parent is usually done with love or out of a feeling of familial obligation. But there are real costs to taking on this responsibility, which most often lands squarely on a daughter’s shoulders. These costs could come in the form of lost wages and employer health insurance or in sacrifices of future pay raises or promotions. It’s also more difficult for older women to find a new job if they drop out of the labor force to help an ailing parent.
According to preliminary findings in a new study that used 20 years of data, taking care of a parent does significantly reduce the chances that women in their early 50s to early 60s are working. Interestingly, the number of hours devoted to caring for a family member do not seem to affect women’s decisions about whether or not to work (though the researchers plan to revisit this finding).
But Sean Fahle of the State University of New York in Buffalo and Kathleen McGarry of UCLA said caregivers “may simply leave a job in order to provide care.” Their paper was part of a series presented at the National Bureau of Economic Research this summer. …
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 12, 2016
What’s New in Public Pension Funding
A small group of researchers at the Center for Retirement Research, which sponsors this blog, produces a large volume of analysis of the nation’s state and local government pension funds.
Their work isn’t typical of the personal finance information that appears in this blog. But it turns a bright light on the financial condition of the pension funds that millions of state and local government workers and retirees rely on. The bottom line, according to these studies, is that while some funds are in poor condition, many more are managing.
The following are short descriptions of the Center’s recent reports, with links to the full reports:
- The big picture is updated in the new brief, “The Funding of State and Local Pensions: 2015-2020.” Eight years after the financial crisis, new data have confirmed that pension plan funding stabilized in 2015. And despite poor stock market performance last year, plan funding improved slightly in 2015 under traditional accounting methods. On the other hand, funding is slightly lower under new accounting rules that require the plans’ financial statements to value their investment portfolios at market values.
The appendix in this brief provides funded levels for 160 individual plans in the Center’s public pension database.
- “Are Counties Major Players in Public Pension Plans?” The answer in this report is no, with the exceptions of California, Maryland and Virginia, where counties account for about 15 percent of pension assets.
- While retiree health plans are quickly disappearing at private employers, they remain prevalent in the public sector. These plans are not fully funded, and their unfunded liabilities are relatively large – equivalent to 28 percent of all liabilities for unfunded public pension plans – according to a March report, “How Big a Burden Are State and Local OPEB Benefits?”
- New accounting rules, known as GASB 68, require city pension funds that are joint participants in plans administered by their state, to transfer their net unfunded liabilities from the state’s to the local government’s books. …
June 9, 2016
Medicare vs Medicaid in Nursing Homes
When a spouse or parent requires long-term care, quality is the top priority. But a report last year by the US Government Accountability Office (GAO) cited concerns about the quality of the federal data essential for monitoring the quality of care. For example, three key indicators point to improvements: better nursing staff levels and clinical quality and fewer deficiencies in care that harm residents. Yet consumer complaints jumped 21 percent between 2005 and 2014, even though the number of nursing home beds has remained roughly flat in recent years.
Anthony Chicotel, an attorney with the San Francisco non-profit California Advocates for Nursing Home Reform, said care quality is intertwined with affordability, payment sources, and dramatic changes under way in nursing home economics. For his views on this important topic, Squared Away interviewed Chicotel, who is also part of a national coalition of attorneys advocating for patient rights.
Question: Recent Boston Globe articles have highlighted substandard care at nursing home companies that allegedly sacrificed resident care quality for profits. Are these a few bad actors or is this a larger problem?
Problems exist in the traditional buyer-seller marketplace for nursing homes and long-term care services. Providers all get paid pretty much the same rate regardless of whether the care they provide is good or bad. It’s usually the government who’s paying, and they’ve got an imperfect monitoring system to make sure the rules are followed.
The bottom line is that dollars can be extracted from a for-profit facility that don’t go into patient care. What you sometimes see is a nursing home affiliated with a number of other companies that provide services to the nursing home at above-market rates. The same web of companies running the nursing home might be in charge of the linen supplies, medical equipment, therapy, and the above-market rents for the facilities. If they’re paying, say, $12,000 a month for linens instead of sending it to a non-affiliated company, and it costs only $7,000 per month to supply the linens, they’re making a $5,000 profit. I don’t think the government’s going to catch that or account for that money.
Q: Long-term care is so expensive – more than $6,000 per month, on average. What are the top three financial issues that face nursing home patients and families? … Learn More
January 21, 2016
Seniors Vulnerable to Drug Price Spikes
Total U.S. spending on prescription drugs by individuals, insurers and governments jumped 13 percent last year – the largest increase since 2001. One in four Americans report having difficulty paying for medications.
Older Americans are somewhat shielded from the full impact of rising drug prices by Medicare’s Part D program, which greatly expanded their coverage. Since Part D’s implementation in 2006, seniors’ average out-of-pocket spending on medications has actually declined, from $708 to $564 annually in 2012.
But a recent trend of price spikes for specialty drugs might be a snake in the grass for seniors on fixed incomes. Since most take multiple prescriptions, they face greater odds of needing at least one of these expensive medicines.
Drug cost stability for seniors “is starting to reverse as newer specialty drugs come into the marketplace,” said Juliette Cubanski, a senior Medicare policy researcher for the Kaiser Family Foundation. Part D plans “are covering these drugs and people are taking them, but the costs are going up.”
They include new breakthrough drugs that cure – rather than just treat – Hepatitis C, as well as medications for rheumatoid arthritis, multiple sclerosis, and cancer. Kaiser estimates that a senior who takes one of the 12 specialty drugs it analyzed can pay anywhere from $4,400 to $12,000 per year out of their own pockets, even after taking into account Part D’s subsidies. …Learn More
December 22, 2015
Readers’ Picks in 2015
Squared Away readers should know this ritual by now. We consult Google Analytics to determine the articles with the most reader traffic over the past year.
This blog covers everything from student loans to helping low-income people improve their lot. But this year’s Top 10 was dominated by one topic: retirement.
Readers’ favorites are listed in order of their popularity, with links to each individual blog:
- Navigating Retirement Taxes
- Medicare Primer: Advantage or Medigap?
- Why I Dropped My Financial Adviser
- The Future of Retirement is Now
- Annuities: Useful but Little Understood
- Winging it in Retirement?
- Fewer Need Long-Term Care
- Misconceptions about Social Security
- Late Career Job Changes Reduce Stress
- Mortgage Payoff: Freedom versus the Math
To stay current on our Squared Away blog in 2016, we invite you to join our free email list. You’ll receive just one email each week – with links to the two new posts for that week – when you sign up here. Learn More
December 10, 2015
How Couples Deplete Retirement Savings
Americans who save for retirement throughout their working lives often hold tight to that savings after they retire. A new study shows they eventually do spend much of this money and sheds light on where it goes.
The study focuses on the retirement spending patterns of couples, adding to similar past studies on single retirees. While both spouses are alive, the researchers found that a couple’s wealth remains relatively stable over time – until they start paying for medical care, nursing homes, and other major end-of-life expenses.
The researchers examined spending patterns for more than 4,600 households over a 15-year period using a subset of the Health and Retirement Study that collects data on the health and wealth of people over age 70. Wealth included savings and retirement accounts, investments, and home equity.
Couples in two different income groups were compared: the average couple at the 20th percentile has about $14,000 in post-retirement income and $70,000 in wealth at age 74; the 80th percentile couple has more than $30,000 in income and $330,000 in wealth.
Here are the study’s main findings: