Feb
14
Social Security
This Post was last updated on September 5, 2010
Chapter 12 (Government Sponsored Plans and Mandated Benefits)
Reimbursing Medicare Providers
An interesting historical note about Medicare: “How Should Medicare Pay Doctors?” This is a revealing podcast from NPR, February 26, 2010, by David Kestenbaum and Chana Jaffe-Walt. Listen to the podcast here. NPR: How Should We Pay Doctors?
Social Security Reform: Add to Footnote 22 at page 361:
The Congressional Budget Office (CBO) has weighed in on the financial viability of our Social Security Administration System (SSA). The CBO indicates that currently outlays exceed revenues for the first time in SSA’s history. It predicts that SSA will not have the legal authority to pay benefits by 2039. They point to the emerging crush of baby boomers as the principal reason funds will be exhausted. The CBO also analyzes various approaches to redress the financial crisis. These include changing the Full Age Retirement Date, increasing the FICA payroll tax, reducing benefits for some, lowering the COLA adjustments, and increasing benefits for low earners. See: The CBO’s Social Security Policy Options, July 2010. (http://www.cbo.gov/). Read the Report to find out the specific reform measures discussed and their impact on the fiscal status of SSA.
At the same time, the AARP’s Public Policy Institute (Nonnemaker, L. and Sinclair, S., Medicare Beneficiaries’ Out-of-Pocket Spending for Health Care Services, June 2009) reports that the average Medicare participant spends $4934 per year for out-of-pocket medical expenses not covered by Medicare. This represents about 28% of their annual, average income. Ten percent pay 50% of their income on health expesnes. How does the new Patient Protection and Affordable Care Act affect this expense? (Note: the Patient Protection and Affordable Health Act provides for the eventual elimination of Medicare’s “donut hole” which is a deductible that applies to the prescription plan.) How will this affect the overall fiscal status of Medicare? Should cost caps be dependent upon a participant’s income? Describe a range of possible solutions that might be effective in addressing the problem of out-of-pocket health expenses in retirement.
More on Social Security Reform (Add at page 362)
Proposals to rescue Social Security from its fiscal crisis continue to be offered. One involves a plan to make a 401(k)-like supplement to Social Security. In addition to the 6.2% payroll tax for the Social Security benefit, an employee could defer and contribute up to 15% of income. The funds would be invested in Treasury Inflation Protected Securities (TIPS). What would be the pros and cons of such a change?
The Roger Ferguson, CEO of TIAA-CREF, has some interesting new perspectives on retirement, and, in part Social Security Reform. Speaking at the 2010 Martin Feldstein Lecture, Ferguson pointed to the need for sufficient funding, guaranteed income, and proper asset allocation as the three most important principles for retirement reform. See: http://www.tiaa-cref.org (July 28, 2010).
Typos in Chapter 12, at page 369, the Vera Jackson Vignette:
Change the first sentence in footnote 1 to read, “Both she and her employer have contributed a total of 12.4 percent (6.2% each) of her annual income . . . “ The sentence mistakenly refers to “12.5” percent. In the same footnote the 2d last sentence should read, “They have also each contributed 1.45 per cent of her annual income to Social Security for Medicare.” The sentence mistakenly refers to “2.45%.”
Chapter 12, Add to Footnote 111, at Page 390 (Medicaid and Long Term Care)
See an interesting article by Stuart Butler in the Washington Times, June 18, 2009, “Long term care . . . as you like it.” The author stresses the importance of changing the incentives for state-run Medicaid programs so as to encourage more home care instead of nursing home care. The savings would be considerable and the quality better - the approach would take care of 3 persons in home care for every 1 in a nursing home. With baby boomers coming who will be living longer, and the current nursing home expense of over $70,000 per year, this is a problem in need of an immediate solution.
Long Term Care Insurance
Chapter 12, add footnote to first sentence of fist full paragraph on page 391: In several developed countries such as France, Germany, and Japan the governments have changed long term care benefits from a “welfare” program to a social insurance program. Everyone is required to have long term care insurance and it is funded by a payroll tax. Thus, there is no need for a recipient to meet minimum income or net worth requirements in order to be eligible. Germany apparently has some financing difficulties because the rate of participation is higher than expected. The U.K. is studying the issue but still considers the care to be part of their welfare program. Estimates are that it would take a 2% additional payroll tax to fund an insured program in the U.S. See: “Long term care- lessons from overseas - an interview with Howard Gleckman, visiting fellow for Retirement Research, Boston College,” Entrepreneur Newsletters, August 31, 2009 (www.entrepreneur.com/tradejournals/article/). The Patient Protection and Affordable Care Act does include a new voluntary payroll deduction that will be used to provide a long term care benefit facilitated by the federal government.
HIPPA Correction
Chapter 12, at page 396, footnote 124: the second last sentence in the footnote should read, “HIPAA does allow health care plans to offer rewards or impose penalties provided they do not exceed 20 per cent of the cost of coverage . . . “ The sentence mistakenly refers includes the word “vary,” and states the penalties can exceed 20% of the plan cost.
Chapter 12, at page 405, add the following sentence to Exercise No. 6:
The Center for Retirement Research at Boston College published a revised “Social Security Fix-it Book” (2009) that includes a variety of approaches to resolve the program’s financial crisis. It is easy to read, explains how Social Security works, and offers a range of possible solutions to the funding crisis. You can access and download an electronic copy of the publication at the link below. Review it and be prepared to discuss a variety of Social Security reform approaches.
(http://crr.bc.edu/special_projects/the_social_security_fix-it_book.html)
COBRA Reprieve, Electronic Medical Records, and More
President Obama’s stimulus package has several items that relate to Mandated Benefits: (1) a COBRA subsidy for those who are unemployed and unable to pay the 102% premium; The participant who is laid off will be permitted to pay 35% of the premium and continue coverage for 36 months. The employer will pay the 65% balance but be reimbursed by the government. (See: http://www.dol.gov/ebsa/cobra.html) (2) Federal funding to accommodate an enlargement of Medicaid eligibility that will enable more to qualify. (3) It also includes a proposed $20 billion for the development of Electronic Health Records and information.
End of Chapter 12 Exercise, Page 407
Number 16: The spouse’s choice under Social Security
Suppose a spouse dies at age 50. The surviving spouse, who is in good health, is also 50 years old and has her own record of Social Security earnings that are lower than her husband’s. At what age will she be eligible to receive a widow’s survivor benefit? Whose earnings record must be used to calculate this pension? Will there be an actuarial reduction and possible earnings offsets of the survivor’s benefit is she applies for survivor benefits on the earliest date of eligibility? Can this same spouse, when she reaches full age retirement, switch to her full age and unreduced benefit using her work record? Check: www.ssa.gov/ and search for the answers.
No. 17: FMLA - what is a serious illness? Flu? No. Unless. . . .
Drafters of the Family and Medical Leave Act has left unabated the confusion over what is a “serious health condition” that would allow an employee to use the leave provisions of the Act. The U.S. Labor Department issued a final rule in November, 2008 (effective January 16, 2009). Labor says that short term illnesses such as “flu” do not qualify as a serious condition. Also, employees are now required to give prompt notice of their intent to take FMLA leave instead of waiting up to two days after the absence commences. Employers are given more latitude under the new Rule to obtain more information about the employee’s health condition.
Number 18: War and absences - exigent leave
Another major change in the FMLA deals with exigency leaves for an eligible employee whose spouse, child, or parent is called to active military duty. In such cases an eligible employee can take FMLA leave to facilitate childcare, financial, and other related obligations. Additionally, an eligible employee can take up to 26 weeks to care for a family member who is injured in the line of military duty and who meets a special definition of “serious illness or injury.” Discuss some hypothetical or real situations that could give rise to such leave. What are the potential factual issues in such cases? See: U.S. Labor Department.
Number 19: Paid FMLA leave? Is it coming?
Many expected the next Congress to take up the issue of a national paid sick leave policy. Employers with 15 or more employees would be required to offer 7 days of paid sick leave. Also, there was some discussion of the expansion of FMLA coverage. Currently, only employers with 50 employees are covered. A new proposal would reduce the number of employees to 25. It would also require leave to be offered for certain school related obligations and include more family members when dependent care is involved. These changes may, however, be postponed pending economic recovery in the U.S. Check some of the papers published by the Society for Human Resource Management (SHRM) that discuss the current employer practices with respect to FMLA and paid leave and organize a policy discussion of the social and economic impact of such changes in the law. (See: SHRM Survey of 500 Employers, 2007; www.shrm.org/).
Number 19: Group health plans and a new way to get health coverage
Unlike an individual policy seeker who can be denied coverage, most state laws require an insurance company to issue a policy to such a “group.” The premium quoted by the insurance company, however, will be determined by the health risks and other factors relevant to the group. See: www.statehealthfacts.org/ (search for “small group guaranteed issue.”). Suppose you have lost your job and have elected to continue the employer’s health care coverage under COBRA. Your 180 days are soon to expire and you will lose COBRA coverage. You have suffered over the years from diabetes. Determined to be your own boss, you start a house painting company and “employ” your wife as a bookkeeper and estimator. You apply for a group policy from a health insurance company. What are the potential advantages to you in selecting this course? (Wall Street Journal, May 27, 2009, D1)
Number 19: Sam Murphy is employed at Marketing and Beyond as a marketing analyst. He and his family are covered by M&B’s health care plan. Unfortunately, Sam’s performance has not been up to M&B’s standards and he is being separated. He is concerned about health care. Can he continue to be covered by the company’s plan? What are the issues here and how would you resolve them?
(a) What is the relevant law?
(b) Does this law cover the employer? What are the requirements?
(c) Are the circumstances of Sam’s separation relevant to his claim to continued coverage? What if he stole clients’ money and was separated for this reason?
(d) How long can he continue coverage after his separation?
(e) Can his family continue to be covered? For how long?
(f) What if one of his children graduated from the university, is 24 years old, and is no longer a dependent?
(g) What are other major life events that are included under this law?
(h) What if Sam were reduced to part-time and not eligible for health care? What result?
(i) Assuming Sam can continue coverage does he have to pay for it? How much?
(j) Let’s check: www.ehealthinsurance.com/ and see what he could buy on the market to cover his of health care insurance over the period his period of unemployment.
Number 20: Suppose Sam is separated as stated above. He suffers from chronic diabetes. He quickly finds a job at Management and Beyond and is covered by their health care plan. They tell him, however, that any claims for treatments related to his diabetes will not be covered for one year. What are the issues and how would you resolve them?
(a) What is the relevant law?
(b) Does the law generally apply to the new employer?
(c) Can Sam’s diabetes be considered a “pre-existing condition?” What are the requirements?
(d) What other facts do we need to know to determine whether Sam can claim protection under this law? What is creditable coverage?
(e) Can Management and Beyond exclude any months of coverage? What is the maximum allowed?
Number 21: Sam continues working for M&B. The company has a rather robust attendance policy that limits absences to 7 per year. It is a no-fault system. For those who are proven to be seriously ill and unable to perform their job, the company provides a short-term disability plan that pays 70% of salary for up to 6 months of leave. Sam has had some “health problems” during his early tenure with M&B. He has been absent for 5 days over a 3-month period, and the company has issued a written disciplinary warning telling him that his absences are unacceptable and he is on “probation.” Sam believes his absences for illness should have been excused and wants to contest the company’s warning letter.
(a) What law provides the optimal basis for a challenge of the company’s discipline?
(b) What are the maximum absences a person can claim under this law? Must the employer pay for these absences under the law?
(c) Does the law apply to the Company? Does it apply to Sam? What facts do we need to know?
(d) What facts do we need to know to determine if the Sam’s absences must be allowed by the company?
(e) Under the circumstances is the company’s no-fault attendance policy viable?
Number 22: Suppose Sam’s wife delivers their 3d child and Sam has asked off work to care for his wife and child at home.
(a) Can Sam take off for this reason? Under what law?
(b) For how long?
(c) Can the company require him to take paid vacation in lieu of leave?
(d) What if he asks for 2 days off each week for 10 weeks? Must the company agree to this under the law
Number 23: Suppose Sam’s father has developed a terminal kidney problem and needs home care and dialysis. Sam asks his employer to take off work a half day twice per week to care for his father. What are the issues here and how would you resolve them?
Number 24: What if Sam’s wife is a Staff Sergeant in the Army Reserve? She has been called up to active duty and must depart next week. Sam asks his employer to take off 2 weeks to assume his wife’s family duties with respect to the children’s school, arrange for babysitters, and take care of numerous other family obligations that were the responsibility of his wife. What are the issues and how would you resolve them?
Number 25: Suppose Sam’s oldest son is also in the Army and is wounded in Iraq. He returns home and is undergoing extensive surgeries and rehabilitation of his wounded leg. Sam has asked his employer to take off work 2 days a week to help care for his son. What are the issues and how would you resolve them?
Number 26: What if Sam has now been working at M&B for several years? He serves as a Sergeant in the Air Force Reserve and his unit is being called up for active duty. He advises his employer of his “call up,” and leaves for service. He deployment is for one year?
(a) With respect to Sam’s rights to return to his job, what law applies?
(b) When Sam returns from military leave, how long does he have to report for work at M&B?
(c) Sam participates in a Defined Benefit Plan at M&B. Will he get credit for this “military” year of service under the plan?
(d) Will his family continue to be covered under M&B’s health care plan? Under what circumstances?
(e) What if Sam gets into trouble with his Commanding Officer while in Iraq and is Dishonorably Discharged from the Service? Does he have any rights under this law?
(f) What if Sam’s peers who work in the same job category are moved up to the next pay level while Sam is gone. Is Sam entitled under the law to be elevated up to this level as well?
(g) Suppose six months after his return from Iraq, Sam’s work at M&B is perceived to be below par. His productivity is low and he has trouble getting along with his supervisor. The Vice President decides to separate him. As HR Manager for M&B, what would you advise the Vice President?
Number 27. At page 372 in the text we discuss how the Medicare Prescription Drug program allows pharmacy benefit providers to compete for business directly with Medicare Part D participants. This approach has been criticized by some who would prefer that Medicare use its negotiation leverage to get the lowest possible prices from these providers. How should the program be designed to get the lowest prices? What about participant’s preferences for certain named drugs? Will this choice be impaired by such an approach? Read the June 2009 report by the General Accountability Office and be prepared to discuss the various alternative approaches to selecting providers and which lead to better results. Government Accountability Office, “Overview of Approaches to Control Prescription Drug Spending in Federal Programs.” (June 24, 2009)
Number 28: As we have discussed, one way to improve the financial health of our Social Security system is to change the retirement ages. The Full Retirement Age has been extended by law to age 67 for persons born after a certain date. The Early Entitlement Age for retirement (age 62) has not changed for 40 years. If it were to be changed to, for example, age 64, would there be an adverse effect on persons with low life expectancy? Explain. How would the SSA practically determine whether a person has low life expectancy? Would such an approach be fair to others? See: Monk, C., Turner, J., and Zhivan,N., Adjusting Social Security for Increasing Life Expectancy, Working Paper No. 2010-9 (August, 2010), Center for Retirement Research at Boston College
Chapter 13 - Global Benefits Comparisons of efficacy - U.S. v. Universal health care countries
At pages 422 and 423, there should be sentence after the reference to the “Source” of data contained in Table 13.2. There are significant differences in the way in which countries report infant mortality. For example, some do not include still born babies in their statistics, some do. Others do not include infants born at certain pre-mature intervals and weights, some do. For a review of the different reporting of infant mortality statistics, see: MacDonald,E., Health Care Myths, Fox Business News, June 23, 2009,
Also, with respect to the comparative efficacy of OECD countries with universal health care and the U.S., recent studies by professional economists contributing to the Bureau of Economic Research have conclusively shown that lower life expectancy and higher infant mortality rates in the U.S. are not the result of its health care system, but rather a direct result of social and behavioral factors. Further, their research shows that in direct comparisons of survival rates and medical screenings with economically developed countries (OECD), the U.S. performs equally or better with respect to heart disease, cancer, and other chronic conditions. See: Preston, S., Hu, J., “Low Life Expectancy in the U.S. - Is the Health System at Fault?” NBER Working Paper 15213 (August 2009); The following Canadian study also included an analysis of the higher infant mortality rate and found that it was due to low birth weights which were attributable to behavioral factors of the mothers and not the health care system. See: O’Neil, J., O’Neil, D., “Health Status, Health Care, and Inequality - Canada v. the U.S.”, NBER Working Paper 13429 (Fall, 2007).
TEM: Last revised: September 5, 2010
Comments
Leave a Reply