Squared Away Blog

September 1, 2022

Suburban ‘Rent Deserts’ are a Problem

Boston, a city of fewer than 1 million people, is surrounded by layers and layers of suburbs linked to the city by subways, ferries, and a commuter rail. The suburbs’ opposition to a new state law requiring them to zone some land for apartments illustrates why U.S. rental housing is scarce and rents have soared.

The sprawling town of Hamilton, with 8,000 residents, told The Boston Globe that rental housing will “destroy the well-being of our community.” Other municipalities warn their schools, infrastructure, and police and fire departments will be overwhelmed by population increases or that they don’t have enough land to accommodate multifamily rental properties.

Not all of Boston’s suburbs are opposed to building more multifamily housing. Before the state law passed, the city of Newton had already started revamping its zoning regulations to encourage more rental properties around transit stops. But three out of four of the 23,000 lots in Newton are currently zoned for single family homes.

Suburban neighborhoods around the country account for more than two-thirds of “rental deserts,” according to a report by Harvard’s Joint Center for Housing Studies. The deserts are mostly white and mostly higher-income, and less than 20 percent of their housing stock is rentals, compared to a range of 50 percent to 80 percent in areas with ample rental properties. Low inventories nationwide have fueled double-digit rent increases from Idaho to Florida.

In the city of Boston, house prices have skyrocketed, so suburbs with mass transit are somewhat more affordable for lower- and middle-income workers who commute downtown to their jobs. But rental deserts, with their “not-in-my-backyard politics” are “a significant factor in limiting opportunities for rental households and for lower-income renters in particular,” the housing center said. …Learn More

August 23, 2022

Good Riddance Medicare Donut Hole!

Medicare’s donut hole is the bane of existence for retirees with expensive medications.

They will get substantial relief in 2025, when the Inflation Reduction Act, signed by President Biden last week, will cap all retirees’ annual drug copayments at $2,000. Monthly drug plan premiums are not included in this cap.

The cap will effectively eliminate the donut hole that currently requires retirees to pay 25 percent of the cost of their prescription drugs until they reach a threshold amount. The threshold increases every year and hit $7,050 this year.

A relatively small group of about 1.5 million retirees pay more than $2,000 for their prescriptions. But many of them are spending $5,000, $10,000 or more.

“It’s going to be an amazing thing” if the cap is implemented as Congress intended, said Ashlee Zareczny, compliance supervisor for Elite Insurance Partners, a Medicare health insurance broker outside Tampa.

Some of her firm’s retired clients pay so much for their medications that they have to make difficult choices between medications and food or other essential items. People who rely on Social Security “shouldn’t have to make those choices,” Zareczny said.

The cap will apply to all Medicare beneficiaries, whether they get their prescription drug coverage through a Part D plan or Medicare Advantage insurance plan, she said.

Under the current system, insurers that sell Medicare drug plans have a $480 maximum they are permitted to charge for the deductible. After meeting the deductible, retirees make their predetermined copayments under the insurance plan. They enter the donut hole after they spend $4,430 out of pocket, and then they are required to pay 25 percent of the cost of their drugs until they reach a threshold that pushes them into the catastrophic phase of Medicare’s drug coverage.

Once the catastrophic coverage kicks in, however, they are still responsible for 5 percent of the remaining drug costs. In 2024 – a year before the $2,000 cap goes into effect – the new healthcare law will eliminate the 5 percent copay.

The cap on total spending will protect any retiree who develops a medical condition requiring them to take very expensive medications. Currently, there is no limit on how much they may have to spend.

And, Zaraczny said, “They’re not prepared to put forth this money.” …Learn More

August 2, 2022

ACA Policyholders May Dodge a Bullet

It looks like some 13 million people who buy their health insurance on the state and federal exchanges may not see large hikes in their premiums next year after all.

The more generous premium subsidies for Affordable Care Act (ACA) policyholders approved in 2021 under the American Rescue Plan for COVID relief are set to expire at the end of this year. There have been months of uncertainty over whether Congress could pass a bill to continue the subsidies.

But The Washington Post reports that the House and Senate are on a path to agreeing to extend them for three more years, along with allowing Medicare to negotiate the prices of some prescription drugs.

Last year, the American Rescue Plan enhanced the ACA’s original subsidies by capping insurance premiums at 8.5 percent of a worker’s income for 2021 and 2022. If the caps are renewed, ACA policyholders would also avoid the “double whammy” of insurance companies’ 2023 premium hikes, which they have started submitting to their state insurance regulators.

The prospect of an agreement comes months after state insurance commissioners warned lawmakers that the uncertainty around whether the subsidies would continue meant that some insurers would raise 2023 premiums by more than they might have. ACA subsidies make health insurance more affordable to more people, which takes some pressure off of premiums by expanding the pool of customers and reducing insurers’ risk.

Two groups that historically have paid more for health insurance are benefitting the most from a premium cap set at 8.5 percent of income: middle-income workers, who tend to pay a larger percentage of their income for an ACA policy, and older workers, who pay higher premiums because insurers view them as risky.

Before the caps were put in place, workers earning four or more times the federal poverty level did not get any subsidies and paid full price for ACA coverage. Without the assistance, for example, a 40-year-old earning about $51,500 would be paying 20 percent more – or $438 per month instead of the $365 she currently pays, according to the Kaiser Foundation.

Premiums would’ve been 62 percent higher in New York and more than double in Wyoming. …Learn More

July 14, 2022

Inflation Takes a Toll on Workers

The headline on a January blog asked, “How Long Can Wages Outrun Inflation?” Now we have our answer.

Inflation is increasing two times faster than private-sector wages, according to the Federal Reserve Bank of St. Louis’s handy website. As of June 1, the Consumer Price Index had surged by 9.1 percent compared with the index at the same time last year. Average wages have risen 4.2 percent over the year.

To slow the economy and bring down inflation, the Federal Reserve is raising interest rates. The silver lining is that Americans are still fully employed – the 3.6 percent jobless rate is back to pre-COVID levels – and have used this leverage to secure the hefty wage hikes.

But workers’ standard of living is eroding because their paychecks can’t keep up with a one-year increase in apartment rents exceeding 10 percent and gas prices that have dropped recently but are still well above last year’s prices. The grocery tab is shocking too. The Bureau of Labor Statistics reports that potato prices are up 16 percent, ground beef up as much as 12 percent, and flour is 40 percent more expensive due to the war in Ukraine, the world’s breadbasket.

Inflation is changing the economy in fundamental ways, and it looks like Americans already exhausted by two-plus years of COVID are in for more tough times. …Learn More

July 7, 2022

Imagining the End of The Age of Labor

The tension between technology and work is at least as old as the economics profession itself. A question some people are asking now is: if computers run by artificial intelligence can do the job of humans, will work disappear someday?

Two economists are proposing a couple different scenarios in a new paper that is part science fiction and part mathematical models. In one scenario, lower-paid workers who are not highly valued by society – say, McDonald’s hamburger flippers – are more readily replaced by computers than a scientist searching for a cure for Alzheimer’s disease. This will drive down wages for a larger and larger segment of the lower-paid labor force.

In a second sci-fi scenario, machines run by artificial intelligence, or AI, will ultimately be able to do any worker’s job. In that world, work “would cease to play the central role that it currently plays in our society,” the researchers predict. A computer, they muse, could even stand in for a judge. Farfetched? An AI judge might be superior if it “make[s] more accurate and humane judgments than humans, leaving behind the noise, discrimination and biases that have plagued our justice system.”

There are a host of reasons to doubt work will disappear. The economists who reject this worst-case scenario argue that technology is not job-crushing but job-creating. Machines, they say, free up workers from one type of job but open up new opportunities. Only the nature of work changes. It does not disappear. After World War II, for example, new industrial technologies created jobs that lured farmers into the cities. Artificial intelligence shouldn’t be any different.

The authors of this new paper do concede that what they call the End of Labor is far in the future. Supercomputers capable of the most sophisticated AI are extraordinarily expensive. It seems more plausible that jobs involving simple, repetitive tasks will be the ones increasingly replaced by machines. This has already started happening as robots have moved onto factory floors.

But if workers of all types are eventually replaced by machines, how would they buy their groceries, cell phones, and shoes? Something would have to be done to replace their earnings and “avoid mass misery” and “political instability,” the researchers say. They propose a universal basic income. …Learn More

June 28, 2022

Limiting Medical Debt: a 50-State Ranking

Lawmakers in Maryland, California and Maine have made the most effort to prevent residents from drowning in medical debt. Texas, South Carolina and Tennessee do the least.

This is the assessment of an organization known as Innovation for Justice, a team of researchers at the University of Arizona and the University of Utah. They ranked the 50 states on whether they have taken myriad steps to minimize medical debt. These legislative measures range from restrictions on the healthcare industry’s billing and collection practices to how debt claims are handled in the courts.

Medical debt is the single largest category of consumer debt, and the Kaiser Family Foundation estimates that 100 million Americans are behind on paying their medical or dental expenses – and a quarter of them owe more then $5,000.

This project would be important at any time and is even more so during a pandemic when many people have incurred medical debt for COVID. Some of that debt is even for bills the federal government would’ve paid on behalf of the uninsured cashiers, drivers, retail workers, restaurant servers and cooks who were on the front lines in the worst days of the pandemic.

Putting the state rankings into a national perspective, the consumer protections to prevent the accumulation of debt are not exactly impressive. Only three of the 50 states qualify as having good protections. The researchers ranked another 27 states as weak and 20 as poor.

Maryland, which sits at the top of the medical debt scorecard, satisfies most of the researchers’ criteria for debt reduction. State lawmakers have limited residents’ debt by mandating that patients be screened for health insurance or government health benefits. The state also regulates hospital billing practices, instructing them to offer a payment plan before sending a patient’s bill to collections and requiring that bills itemize every charge, every payment, and whether charity care has been provided to the patient.

Last but not least, Maryland expanded its Medicaid program, as encouraged by the Affordable Care Act, to extend subsidized or free health insurance to more of its low-income workers. Medical debt has been reduced in the states that expanded their coverage. The lowest-ranked states – Texas, South Carolina and Tennessee – are among the states that have not expanded Medicaid.

Visit the medical debt scorecard to see what your state is – or isn’t – doing. …Learn More

June 16, 2022

Economists Show Inequities’ Roots in Slavery

Conversations about the vast White-Black disparity in U.S. wealth may acknowledge its roots in slavery. But four economists have now made the case quantitatively by charting changes in the wealth gap since the Civil War.

The political and societal influences on wealth accumulation between 1860 and today are multifaceted but the basic trajectory is this:

The wealth gap shrank by roughly half during the Civil War era from 1860 to 1870 and dropped in half again between 1870 and 1920, the researchers said in their recent paper. The decades of improvements in Blacks’ per capita wealth, compared with Whites’, occurred despite a quick end to Reconstruction after the Civil War and the rise of Jim Crow laws around 1890 that curtailed recently freedmen’s rights in the South. (I’ll explain more about this counterintuitive finding below.)

Progress continued but was more modest after the 1920s and started stalling out around the 1950s. The situation deteriorated after the go-go-1980s on Wall Street as Black Americans’ wealth levels fell behind largely because they own much less stock and haven’t equally enjoyed the bull market gains of recent decades.

The wealth gap is so entrenched today, the study concluded, that reaching equality is “an extremely distant or even unattainable scenario.” …Learn More