September 1, 2020
Economic Opportunity Reduces Disability
Add upward mobility – an individual’s success in surpassing parents’ economic circumstances – to the factors that can keep federal disability payments in check.
A substantial body of academic research has already established that when the economy is growing, unemployed and marginally employed people have better luck on the job market, and their applications for disability insurance start to decline.
But booms and busts aren’t the only influence on disability. A new study finds that economic conditions of a different type – the ability of low-income people to move up the economic ladder – can reduce disability by improving their health. People who earn more money tend to be healthier for a variety of reasons, ranging from access to better medical care to the lower rates of depression and obesity that exist in higher-income populations.
In a recent study, Yale University sociologist Rourke O’Brien used the data from another researcher’s study that mined IRS tax records to find people born in the 1980s to parents whose incomes were at the lower end – the 25th percentile – of the U.S. income distribution. The children were followed into adulthood to see if they earn more or less than their parents did.
It’s very difficult for children in low-income families to improve on their parent’s circumstances, but the odds are better if they grow up in areas with better schools, less inequality, and more two-parent families.
O’Brien’s research found that counties in which young adults earn more, on average, than their parents were less likely to one day report having a disability in U.S. Census surveys and less likely to be receiving disability benefits.
In a more in-depth analysis, the researcher found some evidence that upward mobility also blunts the well-known tendency of rising unemployment to increase disability applications.
Taken together, the findings indicate that whether someone ends up on disability benefits depends, at least in part, on where they grew up. …Learn More
December 24, 2019
Next Tuesday – New Year’s Eve – we’ll return with a list of some of our readers’ favorite blogs of 2019. Our regular featured articles will resume Thursday, Jan. 2.
Thank you for reading and posting comments on our retirement and personal finance blog. We hope you’ll continue to be involved in the new year. …
October 24, 2019
Part D Cost for Brand Name Drugs Rising
Reforms to Medicare Part D under the Affordable Care Act brought significant relief to retirees by reducing the share of medication costs they must pay out of their own pockets.
But with the healthcare reform now nearly a decade old, other developments have taken over that will drive up drug costs for the most vulnerable retirees – the biggest users of expensive brand name drugs. Although only a few million people will be affected, they are already saddled with the highest spending burden.
This vulnerable group could get some help from Congress. There is bipartisan support for placing an absolute limit on how much Part D policyholders must pay in total for their prescriptions, said Juliette Cubanski, associate director of the Medicare policy program at the Kaiser Family Foundation.
“That’s a positive development,” she said, “but there are also several areas of disagreement in the legislation being considered on the House and Senate sides.”
Under the Affordable Care Act (ACA), retirees are required to pay 25 percent of their total drug costs up to the annual threshold that qualifies them for catastrophic coverage – this dollar threshold is the total of their own payments plus the price discounts from manufacturers of brand name drugs. The upshot in 2020 for retirees is that those with the highest need could spend about $375 more out of their own pockets before they enter Part D’s less-onerous catastrophic coverage phase, according to a Kaiser analysis. And that’s just the increase for next year – their outlays will rise over the next decade.
Once retirees enter the catastrophic phase, they are protected, because Medicare begins picking up the vast majority of the tab. But out-of-pocket costs are rising because the ACA’s controls on the spending threshold they must cross to qualify for catastrophic coverage have ended. …Learn More
October 8, 2019
Medicaid is Crucial to Rural Hospitals
Rural hospital closings can be a matter of life or death.
Residents in these remote locations may have to drive 100 miles or more for emergency medical care. One new study found that hospital closings increase mortality in rural areas by 6 percent. No such impact occurred in urban areas with multiple medical centers.
Both urban and rural hospitals serving poor and low-income patients face myriad financial pressures, led by Medicare and Medicaid’s relatively low reimbursement rates for their disproportionate numbers of older and sicker patients. The 2013 federal budget, which cut Medicare reimbursements for hospitals and physicians by 2 percent, compounded the problems.
But what has become increasingly clear in rural areas is that the option given to states under the Affordable Care Act (ACA) to expand their Medicaid-covered populations of high-need patients has created a dividing line between the most vulnerable hospitals and the survivors, said Brock Slabach, senior vice president of the National Rural Health Association, a hospital trade group.
With closures accelerating across the country over the past decade, 24 of the 31 rural hospitals that closed in 2018 and 2019 were located in the minority of states (14) that have not expanded their Medicaid programs, according to the Sheps Center for Health Services Research at the University of North Carolina, which tracks hospital closures.
In contrast, the ACA has bolstered rural hospitals in expansion states by cutting their uninsured populations roughly in half by bringing in a fresh supply of federal and state revenues to insure more patients under Medicaid. …Learn More
September 19, 2019
Many Demands on Middle Class Paychecks
Ask middle-class Americans how they’re doing, and you’ll often get the same answer: there are still too many demands on my paycheck.
Several recent surveys reach this conclusion, even though wages have been rising consistently at a time of low inflation.
Student loans trump 401(k)s. Two top financial priorities are in conflict: student loan payments, which people described as a “burden,” and saving for retirement, which they viewed as “important” in a TIAA-MIT AgeLab survey.
The debt seems to be winning: three out of four adults paying off student loans say they would like to increase how much they save for retirement but can’t do it until their loans are paid off – and that can take years. One woman described her loans as “draining” her finances.
A promising sign on the horizon is that some employers are finding creative ways to help employees pay down college debt, giving them more leeway to save money in their 401(k)s. But these efforts impact a small number of workers, and the amount of debt continues to rise year after year for every age group, from new graduates to baby boomers who helped send their children and grandchildren to college, a Prudential study found.
Buying a house isn’t an option. The good news is that about half of Millennials already own a home. Most of the others want to buy a house but can’t afford it, 20- and 30-somethings told LendEdu in a survey. Their top reasons were student loan and credit card payments and a lack of savings, which is the flip side of having too much debt.
Millennials are also putting off other goals until they get a house – marriage, children, even pets. “It’s quite obvious that this uphill battle” and debt “is having secondary effects,” said LendEdu’s Michael Brown.
Medical debt looms large. Americans borrowed $88 billion last year to pay their hospital, doctor, and lab bills. That debt fell hardest on the 3 million people who owe more than $10,000, according to an estimate by the Gallup polling company and a group of healthcare non-profits. …Learn More
September 10, 2019
Medicaid for Children Pays Off Later
Medicaid health insurance, which covers a third of the nation’s children, has a payoff down the line: fewer adults on disability.
A well-known benefit of Medicaid is that low-income children covered under the insurance program turn into healthier adults. But a recent study found that these health improvements translate to another positive outcome for adults: fewer applications to Social Security’s Disability Insurance (SSDI) program, which provides monthly cash benefits to people who are not healthy enough to work.
The study, conducted by researchers at Middlebury College and Vanderbilt University, used U.S. Census data to follow 63,000 individuals between ages 25 and 64 who were exposed to Medicaid for various lengths of time during childhood, depending on when they were born and when their state first implemented the program, which Congress passed in 1965.
First, the study confirmed the health benefits of Medicaid coverage for children: the adults in the study could more easily pass a few basic tests of health and physical stamina, such as lifting 10 pounds, standing for an hour, and walking up 10 stairs.
And better health did, indeed, reduce their applications for SSDI – and ultimately, the number of adults receiving disability benefits. In fact, the longer they would have been insured under Medicaid as children, the less likely they were to apply for disability, said the study, which was for NBER’s Retirement and Disability Research Center.
This is a clear example of how early intervention can reduce government spending down the road. …Learn More
August 27, 2019
The ACA and Retirement: Is there a Link?
When older workers are able to get health insurance from a source outside of their jobs – Medicare, a spouse’s job, or an employer’s retiree health coverage – they become much more likely to decide it is time to retire.
So it’s reasonable to ask whether the Affordable Care Act, which provided millions of people with health insurance for the first time, has also helped to nudge more older workers into early retirement.
The answer, surprisingly, is no, according to a recent study for the University of Michigan Retirement and Disability Research Center. This finding is important, because baby boomers who are poorly prepared financially to retire should be working longer – not retiring sooner – to improve their retirement outlook.
The researchers, who are at the University of Michigan and Vanderbilt University, estimated that the uninsured rate of 50- to 64-year-olds dropped substantially after the ACA went into effect in 2014 – from 16 percent in 2013 to 12 percent in 2016. But when they tracked these older workers for several years, they found no evidence that they started retiring at a faster pace after the ACA established the state insurance exchanges and gave tax subsidies to people who purchased coverage on the exchanges.
The study also looked at whether retirement activity increased in response to a separate provision of the ACA: the expansion of the Medicaid health insurance program for low-income Americans. The expansion, which was voluntary for each state, was achieved by increasing the income ceiling for eligibility. The federal government gave a financial incentive to states that broadened eligibility for Medicaid coverage, and about two-thirds of the states have expanded to date.
In comparing states that expanded their Medicaid programs to states that had not, the researchers again found virtually no change in low-income workers’ retirement trends.
There is widespread agreement that turning 65 and becoming eligible for Medicare motivates people to retire. So why is the ACA different?
One possible explanation is that the “political uncertainty” surrounding the ACA and Medicaid expansion “discourage[s] older workers from counting on them when making career decisions,” the researchers said. …Learn More