Phone scams hit record levels; targeting the elderly for the most part

The Wall Street Journal had an interesting and rather shocking article yesterday with the title "Phone Scam 'Onslaught' Targets Elderly."  It reports that in the first four months of 2016 scammers' calls are up 41% over last year, to 1.7 million calls, a record.

Typical of these recent calls are ones claiming to be from the IRS asking for money with threats of legal action, pleas from relatives needing emergency money, or businesses offering refunds if you give them your bank details.  (They would be withdrawals rather than refunds if you fall for this line.)

These calls are illegal so they are almost always made from abroad, although the caller id's may say they are local.

What is the solution?  The phone companies could block such calls although it would be costly.  Legislation is in the works to force them to do so.  Sen. Susan Collins of Maine and Sen. Claire McCaskill of Missouri, who are co-chairmen of the Senate SPecial Committee on Aging, are working on legislation designed to make phone companies block these calls.  Of course, the cost will be reflected in slightly higher bills for consumers.

To read the article, please click on the picture below:

Prominent Cape Cod Elder Attorney Arthur Crooks Warns of Nursing Home Finance Disaster in New Law

The Baker Administration in Massachusetts has proposed changes to MassHealth/Medicaid that would expand greatly its ability to seize assets from the estates, spouses, and children of seniors whose nursing home care is paid by the state.  MassHealth is basically broke and is dragging the Commonwealth down with it, so this legislation is something of an act of desperation.

Please click on the excerpt below to download the entire article.

Middle aged white women are killing themselves.

Middle aged white women are killing themselves.

And they are not alone.

There was a fascinating article, “A great divide in American death,” about the decline in life expectancy of rural white women in today’s Washington Post. It can be found at this site:

http://www.washingtonpost.com/sf/national/2016/04/10/a-new-divide-in-american-death/

Here is one of many fascinating graphs (click on it to see it better):

There is more and more drinking, smoking, drug-taking and depression in rural America, and it’s not working out very well.

Drugs are expensive, but they are a small part of the medical cost problem

An article in today's Wall Street Journal surprised me.  ("How Do We Deal With Rising Drug Costs?", p. R4) We are all aware of the astonishing costs of some drugs -- for example, biologics. We hear about people whose drug costs are $50,000/year or more.  (Whether paid by the insurance company or not.)

If fact, however, drug costs are only about 10% of health spending, and while drug costs are rising rapidly, so is over-all health spending.  It's a much bigger problem than just drug costs.

Retirement savings: We've got bad news, and worse news

Moody's reports ("Moody's: U.S. pension liabilities moderate in relation to Social Security, Medicare") that government pensions are underfunded by $7 trillion dollars.  (That's "trillion.")  Half of that is for federal pensions and half for state and local pensions.

That amounts to 40% of 2015 GDP.  This is a very big number.

The good (?) news is that this $7 trillion deficit is small when compared to the deficits in social security and medicare.  Social security's deficit is $13.5 trillion, or 75% of GDP, whilst Medicare's deficit is $3.2 trillion, or 18% of GDP.

Added together, the government is underfunded by 133% of GDP.  This compares with with the UK's 66% of GDP and Canada's 12% of GDP.

It is a deep hole; an abyss, in fact.

To access the article, please click on the penguins.

What percentage of their portfolios should retirees allocate to equities?

There is the old "Rule of 100" that financial planners have long used to advise their clients on equity allocation.  The rule goes as follows: Subtract your age from 100; that is the portion in percent of your portfolio that you should allocate to equities.  For example, I am 66, so I should have 34% of my portfolio in equities, which is about what I have.

There is an interesting article on this subject in yesterday Wall Street Journal (R1).  The article discusses possible allocations from 0% to 100% and finds advisors who advocate each mix for retirees.  One advisor, Tim Shanahan in Braintree, MA, says he has 70% of his personal accounts in cash and is advising his clients to do the same.  He believes equities and bonds are both very overvalued.

The article is worth reading.  Here is a link to download it.  (Click on the photo of pigs in the Bahamas.)

The 4% Rule: Making your money last through retirement

In 1994 a financial advisor proposed "The 4% Rule."  According to this rule, a retiree with a portfolio composed of 60% stocks and 40% bonds can withdraw annually 4% of his initial amount, which is adjusted for inflation each year, and still have a 90% probability that his portfolio will last for 30 years.

For example, if your portfolio is $500,000, you can take out 4% or $20,000 in year one.  If inflation is 5%, then in year two you can withdraw $21,000.  And so on.   This is a reasonably good approach,

But we don't know the future, so it is a good idea to start with the 4% but be prepared to change your strategy if conditions change dramatically.

Here is a recent article from The Motley Fool on the subject.  (Please click on the image.)

Hospice owner accused of telling nurses to overdose, kill patients.

Here is the sad case of bad behavior in elder care.

Hospice owner accused of telling nurses to overdose, kill patients.

The owner of a Texas hospice company has come under fire for allegedly encouraging employees to overdose patients and hasten their death in order to avoid the federal reimbursement cap for hospice stays.

Brad Harris, 34, owner of Novus Health Care Services Inc., allegedly told a nurse to overdose three patients on drugs such as morphine, and instructed another employee to give a patient four times the maximum dose allowed, according to an FBI affidavit obtained by a Dallas television station. In another instance, Harris texted an employee of the Frisco, TX-­based company “you need to make this patient go bye­bye.”

The FBI affidavit was written in February, but not publicly released until this week. No charges have been filed against Harris or Novus as of press time, and Harris remains free. The FBI declined to comment on the investigation, the Dallas Morning News reported.

The affidavit also accuses Harris of telling other healthcare executives that he sought out “patients who would die within 24 hours,” and of making comments like “if this f— would just die.” While at least one employee refused to comply with Harris' instructions, it's unclear if any patients were harmed.

The FBI's affidavit says Harris was motivated to find patients whose hospice stays were forecasted to be short, or even speed up patients' deaths, in order to skirt the payment caps placed on hospice care by Medicare and Medicaid.

Another employee said Harris would frequently decide which patients would be moved to and from home care, despite not being medically certified; Harris is an accountant by trade. Harris would have employees sign transfer papers with the names of doctors employed by the company, according to the affidavit.

"If a patient was on hospice care for too long, Harris would direct the patient be moved back to home health, irrespective of whether the patient needed continued hospice care,” the affidavit reads

"Traditional Medicare .. . . . Disadvantaged?"

A case study with the title "Traditional Medicare . . . Disadvantaged?" discusses how seniors under Medicare can find themselves unexpectedly with unlimited liability for their medical expenses.  Obamacare puts a cap on out-of-pocket expenses for those under 65 but not for seniors.  Seniors who do not want this exposure can buy a Medicare Advantage or a Medigap policy.  (The Medicare Advantage polices are HMO and are usually attractively-priced, while the Medigap policies generally cost more, when taking into account the other Medicare charges, but gives the policy holder a lot of flexibility about which doctors to see.)

The article tells of a cancer patient who wanted a surgeon outside his network so wanted to switch to Medigap from Medicare Advantage.  He found that since he had not opted for Medigap at the time of his original enlistment in Medicare, he couldn't get coverage because of his condition.  If he switched to Medicare without the Medigap policy, he would have no cap on his co-payments.

It may be worthwhile, therefore, to pay more and get a Medigap policy in the first place.

Here is a link to the article.  (Click on the bulldog.)

Crisis in Massachusetts nursing homes: MassHealth/Medicare payments are below cost.

One of the worst scandals of MassHealth's various instances of misconduct is its failure to pay the actual costs of the destitute nursing home patients who fall under their purview.  An OpEd article in today's Boston Globe highlights this.  Massachusetts has the dubious honor of being the fourth worst of the fifty states in paying these costs.  As a result, costs are shifted to private patients, the quality of care is short-changed for everyone, and nursing homes are going bankrupt.

Here is a paragraph for the article, "Nursing homes need funding as well as oversight" by Richard Bane, a former nursing home manager.

"The real story is that over the last decade Massachusetts Medicaid reimbursement of nursing homes has been stagnant, resulting in our Commonwealth having the dubious position of being the fourth worst state nationally in underfunding skilled services. For the two-thirds of residents in a nursing home in Massachusetts who are paid for by Medicaid, the state pays $37 per day below cost, at a rate of only $8 per hour of care."

The article can be accessed by clicking on the melancholy image below:

Online retirement calculators and Procrustes' bed

The Saturday, February 20th issue of the Wall Street Journal had an article that questions the validity of retirement calculators.  Researchers at Texas Tech in Lubbock, Texas looked at many examples, including from Fidelity, AARP, T.Rowe Price, Vanguard and Market Watch.  The researchers found that the calculators often found the users to be in good shape for a decent retirement when a more detailed analysis showed that they were in trouble.  The calculators were usually too optimistic.

I have noticed this problem with the calculators.  They focus on average costs and aspirations rather than on the user's actual costs and plans.  This makes sense is you're average, but very few people are. I was reminded of the Greek myth of Procrustes's bed.  Procrustes was a brigand who stopped travelers between Athens and Eluesis when they passed by his mountain stronghold and offered them a bed for the night.  If the bed did not fit them exactly, however, he would cut off the legs or stretch them to make them fit.  He had a weird sense of humor.

In like manner, the calculators try to make the prospective retiree fit into a set size.  For those of us living in high cost regions, like Massachusetts, a higher-than-average income is a necessity.  What this means is that it would make a lot of sense for retirees to plan to move immediately when they retire.  Don't wait for a few years and use up all your savings before you are forced to make the change.  Even moving from the Boston area to the wilds of Berkshire County at the western end of the state can reduce costs dramatically.  Iowa might be even cheaper.

You can access the article by clicking on the image below:

The article evoked some interesting comments.  Here is one of my favorites, from a financial planner named Ginny Butterworth:

"THE best retirement planner is a pencil and piece of paper. As a financial adviser the first step for my clients was to have them prepare a budget of their present financial life, next a budget based on (presumably) reduced expenses in retirement and only then look at income sources and how to finance their retirement expenses. The problem? most clients have no idea how much they spend, much less what expenses are optional and the bigger problem, few people want to take the trouble to prepare a budget. So folks, if you plan to retire someday, start planning now by preparing an annual budget and identifying some $ you can save every month, however small."

Long-term hospice care a boon for the elderly with severe dementia and other terminal conditions

A lengthy article in today's Wall Street Journal deals with the rapid growth of spending by Medicare on hospice care.  As you know, Medicare pays 100% of hospice costs and this is available to all seniors.  To qualify for hospice, a senior must have a terminal illness and must agree to forego attempts to prolong life. The goal is to make the dying person as comfortable as possible. Most hospice takes place in the patient's own home with nurses, aides, counselling, etc. paid by Medicare.

Medicare spending on hospice doubled over the nine years ending in 2013, to $15 billion.  The main reason is that patients with dementia are increasingly qualifying for hospice and living a long time with a lot of services. Traditionally hospice had been for people with incurable cancer.

Hospice is an excellent service.  Families of frail or dying seniors should consider hospice care. Many seniors go in and out of hospice, which as I said is usually in their own homes, several times and sometimes recover enough to go off hospice.  Hospice relieves the family and the senior of the cost of this expensive level of care.

You may access the article in question by clicking on the graphic image below:

MassHealth/Medicaid cuts endanger nursing home residents

There has been a lot of ink in the newspapers about deficiencies at Massachusetts nursing homes. These deficiencies are real, and MassHealth is quite correct in coming down hard on nursing homes that exhibit problems.  What is not sufficiently addressed, however, is that MassHealth is largely responsible for these problems by underfunding nursing homes to the point that  most of them in the Commonwealth are now losing money.

There was a good letter to the editor in today's Boston Globe.  You may access the the letter below or by clicking on the text to go to the Globe's web site:

Margolis' useful summary of 8 more ways to protect your home from the claws of MassHealth/Medicaid

In his blog, Harry Margolis, Esq., one of Massachusetts' leading estate attorneys, lists eight ways to protect your home from Medicaid claims if a family member is in a nursing home and no previous planning has taken place.  (It is better to plan ahead, however.  In a previous blog he had written of using trusts five years or more prior to requiring nursing home care.)

The eight ways are the following:

1. Rent out the house
2. Transfer to a spouse
3. Transfer to sibling with equity interest
4. Transfer to a caretaker child
5. Transfer to a disabled child
6. Transfer to a trust for a disabled individual under 65
7. Transfer to anyone if not in a nursing home
8. Hardship waiver

The full article is worth reading and can be accessed by clicking on the image below:

Realistic Retirement Savings goals

How much you need to retire depends on the level of spending you anticipate in retirement.

The table below assumes that you will be receiving social security or the equivalent.  It is interesting, and good, that inflation is assumed.  (These are investment amounts, not net worth, so what's tied up in your houses and cars don't count unless you cash them in.)

"The return of the tontine." A 16th century solution to a 21st century problem

In my book Nursing Home Nor’ Easter I discussed the history of the tontine, which are named after a Neapolitan banker, Lorenzo de Tonti, who flew to France after participating in an unsuccessful revolution around 1650. The tontine is a 17th century French invention much like an annuity except there is no insurance company involved. A group of people, perhaps thirty, of roughly the same age each contributes a set amount of money to a pot, let us say $1,000 each, for a total of $30,000. If this is invested at 5%, then $1,500 is distributed each year to members of the group, which is called a tontine. So the thirty are getting $50 each. As tontine members die, their income is divided among the survivors, so the $50/year income increases with each death, until eventually there is only one person. That person gets the $1500/year income or the $30,000 principal. This would be an astounding return on his investment of $1,000. It also solves the problem of inflation because people are assured of getting increased income over time should they be still living.  Think of it! As the member of a tontine, you would have income for life and that income would increase over time.

This is a wonderful solution to retirement except for one thing: there is an incentive for members of the tontine to knock one another off in order to increase their income and odds of getting the pot at the end. Because of this, tontines, which were prohibited in the US and some other countries in the 19th century.

I mention this because I just saw an article in the Los Altos Town Crier with the title “The return of the tontine: a means to diversify retirement income.” Tontines are being recommended by Moshe Milevsky of York University in Canada. This would be an excellent solution to the retirement problem, provided that we can get over our hang-ups about the occasional murder that would inevitably result.

The Real Marigold Hotel vs. The Bates Motel: Our choice

A few years ago a friend of mine moved his mother, who was suffering from dementia, from a nursing home in New Hampshire to one in Mexico.  The facility in Mexico was like a luxury resort where each guest had a private room, and in this it compared favorably to nursing homes in the US. The most striking difference, however, was the great respect with which the guests were treated and the loving and caring atmosphere.  In addition, it was cheaper, although this was not the motivation in this case.

I thought of the Mexico alternative when I read this article in the U.K.'s Telegraph newspaper:

Here is an excerpt from the article:

The Real Marigold Hotel

"One reason I loved The Real Marigold Hotel, which concluded last night on BBC Two, is because its uproarious cast of famous pensioners found a country where elders are respected, care is good and easily affordable and old age is something to be savoured instead of feared.

"That country is most definitely not the UK. Frankly, euthanasia looks like a cheerful option compared to the living death that awaits too many of our own senior citizens in extortionate “care” homes."

The author points out that ordinary nursing homes in the UK now cost more than sending a student to Eton. It sounds like the situation in the UK is much like that in the US.  We have one advantage: Mexico is much closer to us than India is to the UK.

Click here or on the picture to read the article, with is rather amusing.

What do you recommend to a client with elderly parents where the client is about to go to prison for a long time?

I saw the following question on Quora: "I'm about to go to prison. Maybe for a long time. My mom & dad are old. What should I do?"  (You can click on the question to read the discussion.)

The key word in this question is "about."  There is little one can do at this point.  The situation of this individual is instructive for others, however.  It is always worthwhile to prepare for eventualities well in advance, particularly if you are in a profession where there is an above-average risk of imprisonment.  But any individual could find himself in prison for one reason or another.

It is a good reason to put as much money into retirement accounts, which are generally protected in bankruptcy and in life insurance and annuities, which sometimes are.  Also, be sure to file your house as a homestead.  In Massachusetts this filing costs less than $100 and protects the primary residence. This is important because in prison there isn't any income and bankruptcy is often the result.

Why do we patronize super-expensive nursing homes that are cold and sterile?

Maybe it's because we don't think we have any choice.  With nursing home care costing $100,000-$150,000 per year, however, one would think that some of them at least could provide a warm and caring environment.

Here is a quotation from an interesting article in today's Washington Post:

"{To Bill Thomas, a geriatrician who is working to change American attitudes about old age, the promise [no nursing home] is a red herring. “It’s actually the only thing we know how to do because we don’t have the actual language to say what we’re really asking: ‘Promise me you’ll protect my dignity, promise you’ll protect my privacy, promise to make sure I don’t live in pain.’

“'Ironically the promise has led to significant amounts of abuse and neglect, because there’s a limit to what people can do.'

"It wouldn’t be necessary, he points out, if people demanded more from the nation’s nursing homes.

“'The nursing home industry has, ironically, benefited tremendously from the low expectations people have,” Thomas said. “They have successfully persuaded people that you’ve got no other choice — it’s got to be cold and sterile and rigid.'”

This is a matter that must be urgently addressed.  There are alternatives: A friend of mine, dissatisfied with the care in a New Hampshire nursing home, moved his mother to a luxury facility in Mexico that was not only cheaper but which provided a warm and loving environment in a resort hotel setting.  If that is possible in Mexico, why do our nursing homes resemble the ward in One Flew over the Cuckoo's Nest?

Please click on the picture below to read the full article:

Low interest rates force Genworth to suspend sales of life insurance and fixed annuities

It was bound to happen sooner or later, and now that it has happened we should expect a great deal more of the same.  Genworth, the country's biggest seller of long term care policies, has been experiencing big losses in life insurance and annuities due to low interest rates.

While I have not examined the financial statements of Genworth, we have known for some time that insurance companies, perhaps including Genworth, have been offering terms that are better than implied by current interest rates in the expectation that low rates would not go on forever.  They are probably right because nothing goes on forever, but low interest rates have gone on a great deal longer than almost anyone expected and some insurance companies have locked in a lot of losses.

Genworth has thrown in the towel.  They are cutting their losses.  They have decided to stop throwing good money after bad.  So they are out of the life and  annuity business until further notice.

We should anticipate that other companies will follow suit.

Here is the article about Genworth.

Crisis is Massachusetts Home Care for Elderly: State's costs up 82%

MassHealth is the Massachusetts name for Medicare.  Governor Baker has proposed a budget of $15.4 billion for MassHealth for next year, which would make MassHealth 40% of the Commonwealth's next budget of $38.5%.   Total Massachusetts spending on Health & Human Services is $20.3 billion, compared to $7.3 billion spent in 2000.  HHS has been described as "the blob that ate the budget."

The Boston Globe reported on February 4th that the governor had asked the attorney general to look into the 82% increase in home health care costs in the past two years for cases of fraud.  ("12 home health agencies probed") The state is on track to spend $755 mn this fiscal year for home care.  In addition to the investigation, the state has stopped paying some of the bills from home health care providers, jeopardizing their existence, according to the article.

This is very unfortunate.  It is true that MassHealth costs are out of control, but home care is part of the solution.  The state, operating under a Medicaid waiver, subsidizes home care in order to avoid the more expensive alternative of nursing home care.  This is also generally regarded by seniors as a much better choice in terms of the quality of their lives.  Of course home care is growing rapidly; this is because it is a success.

We must all agree, however, that supervision is appropriate provided it does not shut down or otherwise constrain the program's legitimate mission.

Looking at the bigger picture, MassHealth needs to be radically restructured if it is not to collapse as unfinanceable in a few years.  Good luck Governor Baker!

Sorry, retirees: You have a 30%-50% chance of running out of money before you die.

A recent study quantifies the risk of running out of money in retirement:

"What Causes EBRI Retirement Readiness Ratings to Vary: Results from the 2014 Retirement Security Projection Model®" By Jack VanDerhei, Ph.D., Employee Benefit Research Institute

The Employee Benefit Research Institute is a serious think tank in this fields and we usually do well to pay attention to its findings.  The report is fairly long, but one chart got my attention.  It is the following:

Even 15% of the top quartile people will run out of money.  Let's hope our kids will take care of us.

(You can see the full report by clicking on the graph above.)

Retirees spend less than when they were working, but is this voluntary?

There have been a number of articles recently that point out that retirees tend to spend 70% or 80% of what they did when they were working.  This message is intended to reassure people that their savings may not be as inadequate as they feared.  Maybe the social security plus a $1000/month annuity payment will be enough?

Of course, you can't spend more than you have.  The typical 65 year old retires with a net worth of only about $130,000 and is constrained by this.  Most healthy retirees would like to travel more and do more things than they did during their working years, but they haven't got enough money, so they make do on less.

The big wild card is health care costs.  If we were to remain fairly healthy and then die at home one night unexpectedly at 85, the numbers might work.  On the other hand, almost no one has enough money for the most expensive costs, like prolonged nursing home stays, so why bother saving?

The present system is dysfunctional.  We need a better Medicare system that covers such things as nursing home care and prolonged home care with reasonable deductions and copays, just like is done in all the other advanced economies.

Here is the upbeat Wall Street Journal report on retirement spending.  Please click on the picture.

My back is killing when I get up in the morning; yours may, too.

Here is a video from AARP with some good back advice.  In a nutshell, the good doctors say, "Keep moving." I would add that being a fidgeter is a good thing.  Welcome the opportunity to go back upstairs when you forget something because that is a chance for beneficial movement.

Don't forget, activity prolongs independance.

Policy leaders present ideas to meet long-term care crisis. But the ideas need to become policies

The Bipartisan Policy Center launched an initiative that it describes as follows:

"In December 2013, BPC launched a Long-Term Care Initiative under the leadership of former Senate Majority Leaders Tom Daschle and Bill Frist, former Congressional Budget Office Director Dr. Alice Rivlin, and former Wisconsin Governor and Secretary of the U.S. Department of Health and Human Services Tommy Thompson. BPC’s Long-Term Care Initiative seeks to raise awareness about the importance of finding a sustainable means of financing and delivering long-term services and supports, and to improve the quality and efficiency of publicly and privately financed long-term care."

The participation of Tom Daschle, Bill Frist, Alice Rivlin, and Tommy Thompson is worth of note. The study can be access by clicking on the image below:

The problem is long-term care for seniors and others who might be disabled.  The study notes that long-term care insurance is not working for the following reasons:

1. It is not affordable.
2. Coverage has become increasingly restrictive.
3. Insurance companies have been losing money on this sort of coverage as costs have skyrocketed. (I would note that most insurance companies have gotten out of the business.)

The report, which is preliminary and not yet very substantive, does make the following excellent recommendations:

1. Long term care insurance premiums should be made tax-deductible.
2. Some sort of long-term care, including home care and nursing home care, should be made part of Medicare.
3. The use of Medicaid-paid at-home alternatives to nursing homes should be expanded.

The long-term care crisis is enormous.  At  least people are talking about it now.  Perhaps something will eventually be done.

Mass. Attorney General Healey threatens to sue over high drug prices

Gilead Sciences Inc. makes two hepatitis C drugs, Sovaldi and Harvoni, which work but which cost $84,000-$94,500 for a 12-week treatment.  10% of hepatitis C sufferers, the most severe cases, are treated with these drugs.

What is unusual is that she is threatening to invoke a consumer protection law that has never before been applied to an established drug price, only to changes in prices.

These drugs certainly are too expensive.  I think we should ask ourselves why.  Some informed observers say that the FDA drug approval process, where it can easily cost $100 million and take many years for approval, costs which the drug company must eat if the drug is not approved, is the root cause of sky-high prices.  There are two reasons for this:

1. The costs are so high that drug prices need to be high to recover those costs.
2. The costs and delays create a barrier to entry that restrict competition.

In the meantime, people die.

Here is the article:  (click on the image.)

Annuities? The lunch may be delicious, but it's not free.

I personally invest a significant portion of my retirement in index annuities; in fact, I believe they provide me with one of the best options available to protect my principal while giving me a lot of the upside of buying stocks.

Nothing, however, comes without costs.  The price one pays for the advantages of annuities is giving up liquidity for an extended period of time, usually ten years.  Annuities should best be used as part of a diversified portfolio that provides a lot of liquidity from other investments.

Contrast this with buying stocks directly: Common stock gives one a lot of potential upside, but also a lot of downside, including losing a lot or even most of your money overnight.  You can sell out and get cash at any time, however. Buying an annuity can give you a similar upside while removing the downside in the long run.  The cost of such protection, however, is to give up the ability to withdraw all of your money before the surrender charge period (e.g. 10 years) is over.

Here is an article I saw this morning about an elderly Pennsylvania woman who put too much of her money into annuities without being fully aware of that she was tying up that portion of her money.

You can access the article by clicking on the picture below:

I highly recommend the New York Times 7-minute workout

It's really effective and quick.  Try it out.  This is enough exercise to achieve a substantial health benefit for most people.

Please click on the icon below to access it.

Developing crisis in MassHealth. Gov. Baker makes cuts.

The MassHealth budget is out of control.  The Baker administration is seeking to limit the number of people on MassHealth/Medicare by eliminating "fraud."  In the past year, according to  MassLive, 250,000 people have been eliminating from the roles.  Homecare Services, provided by the Department of Elder Affairs, has grown by 41% ($178mn) over the past year as the state has been encouraging home care as an alternative to the more expensive nursing home option.  Fraud is suspected.  A moratorium on new health care providers has been declared.

MassHealth is gradually bankrupting the Commonwealth.  What is to be done?  I, for one, don't know.

You may access the article on Mass Live by clicking the picture below:

Six Massachusetts cities are now with the program: age-friendly cities

Six Massachusetts cities have joined the age-friendly-city initiative of the World Health Organization as part of the AARP Age Friendly Network.  Here is the list.  You may access the article by clicking on the list.

Age friendly cities commitment to maintaining an infrastructure that makes life more agreeable for seniors. This would include such things as benches at bus stops and signs with larger letters.  It also includes opportunities for part-tie employment, the availability of senior housing and transportation. Small things can make a large difference in the ability of seniors to "age in place."

Massachusetts 50% above the national average for nursing home costs

The long term care association that goes by the name LTCG has just released its annual survey.   It finds that the national average nursing home cost is $100,000.  I would note that since Massachusetts costs $150,000+ per year for a nursing home, we manage to combine very high cost with below average quality of care.  What is our state's special magic?

The press release can be seen by clicking on the logo below:

Pay rise coming for Mass. Nursing Home Aides? They now earn average $13/hour.

Governor Baker's proposed budget has an extra $30 million intended to provide for higher pay among nursing home aides.  These staff members now average $13/hour in the Commonwealth.  This is a positive development because it shows that the MassHealth/Medicaid is starting to shoulder a bit of its burden in nursing home pay.  Right now what happens is that the private pay patients (roughly 1/3rd) are simply charged more to cover the rising costs of the Medicaid patients.  The private pay patients are now paying $5000-$6000/month extra to cover the costs of the Medicaid patients. (In some states Medicaid pays its full share, but Massachusetts is very big on all sorts of hidden taxes, of which the private pay patient cost is a very big one.)

The Boston Globe story can be accessed by clicking on the link below:

The best and worst states to retire: New England states all in the worst half

Wallethub has evaluated the fifty states and the District of Columbia for their relative desirability as retirement venues.  Florida ranks #1 because it is the second cheapest place (after Wyoming) in the US, has a high quality of life, and reasonably good health care.

Massachusetts has a good quality of life and good health care, but it's the pits for affordability. Rhode Island ranks worst in the US, by the way.  All the New England states are like Massachusetts to one degree or another, however.

The study is worth looking at.  You may access it by clicking on the picture map below:

Should home health care workers get time and one-half for overtime?

This is an interesting question for me as a 97-year-old relative has 24-hour home health which consists of two women/day each working a 12-hour shift.  Federal regulation recently provided for Medicare payments of overtime to home health workers.  Of course, to come into effect, the states must agree to shoulder their half of the costs.

This is an issue in Illinois, which is facing a severe financial crunch.  The result is in doubt, but one unintended consequence may be to limit the hours of home health care available to seniors.

You may click on the photo below to read the article.

MassHealth/Medicaid gets even more aggressive in seizing seniors' assets

MassHealth is now asserting that assets given to properly and legally established irrevocable trusts are still a senior's assets even though they haven't owned them for years in order to deny him or her nursing home benefits.  (It's as if they disqualified you because you have a vacation cabin in Maine even though you gave it to your daughter or cousin twenty years ago.)  Will nothing stop them in their drive to reduce the elderly to abject poverty?  Why are we the only advanced country in the world to do this? The answer is this: the system is broke and officials are under the gun to cut costs.

Here is an analysis of a disturbing recent case by Sarah Foster of Margolis & Bloom. (Click on image to read.)

Zikra virus epidemic spreads

The virus causes babies of pregnant women who contract it to be born with shrunken brains.  The epidemic has become widespread in South America and the Caribbean.  Pregnant women are advised not to travel to these regions.

The governments of Brazil and Colombia have advised women not to get pregnant.  El Salvador has advised against pregnancy until 2018.  (Click on the picture below to read the USA Today's article.)

Retirement is a lot cheaper than working, according to the Motley Fool

It is common wisdom that a retired couple should have at least $1 million in liquid assets for retirement. The Motley Fool argues that they could have a decent retirement with $500,000 plus social security.  Their calculation is based on the following:

1. Income from the $500k at 4%, for $20k/year.
2. Social security of $24k/year

This results in $44,000/year in income.  They go on to enumerate retirement expenses and find that this income would work. There are a few challenges for someone living in eastern Massachusetts, like us. They are estimating housing costs of $1232/month,but for us to stay in our present house it would cost $3,000/month.  Of course, we could move to an apartment in the western part of the state, which would be a lot cheaper.

It's an interesting article.  You may wish to review it by clicking the picture below:

http://www.fool.com/retirement/general/2016/01/25/heres-what-the-average-retired-americans-budget-lo.aspx

Big pharmacies take on big pharma to lower drug prices

Big drug buyers like Express Scripts and CVS/Caremark are refusing to buy certain drugs where alternatives are available to force drug makers to lower prices.  Here is an interesting example:

Express Scripts dropped Advair, a popular asthma drug, and offered its customers Symbicort instead. As a result, Glaxo dropped the price of Advair and Symbicort went down, too. This is a welcome development.

(To read the full NPR article, click on the above graph.)

Survivor: the IRA strategy

Famed IRA guru Ed Slott has given us a quick summary of 7 key IRA tax strategies that you can review in five minutes.  One in particular caught my attention: a surviving spouse who is younger than 59 1/2 should not combine his IRA with that of his spouse because withdrawals from a spouse's IRA by a survivor are not subject to the 10% penalty on withdrawals.  It all adds up, and retirees can't afford to leave any money on the table.

This and the other 6 strategies can be review in Investment News by clicking on the egg picture below:

"Murder for a quick paycheck"

Slate magazine reports a particularly disturbing story of an unscrupulous health worker defrauding the elderly in China.  He Tiandai, a 45-year-old female care worker came up with the following scheme.  She negotiated a deal with an elderly person's family to care for her or him that included the provision that she would receive a full month's pay for any month within which the client died.   She then proceeded to kill the client with a few days and collect the full monthly rate, thus boosting her monthly income considerably.

Let us hope that such instances are rare.

To read the full story in Slate, please click on the picture below:

Sanders' Plan would cover nursing home costs for all seniors

Bernie Sanders has issued a brief "white paper" giving his plan for national medical insurance.  He would simply extend Medicare to everyone and add coverage for vision, dental, and nursing home care.  (You may click on Bernie's picture to access the white paper.)

Medical insurance costs for the average family would drop 90% to a maximum of $466/family. 

The simplicity of the program should result in some cost savings.  (He estimates $600 billion a year in savings out of the  $3000 billion currently spent annually.)  Half of the cost of the program would be paid by taxes on workers and their employers and half by soaking the rich through higher income taxes, estate taxes and taxes on investment.

We may argue about how to pay for the plan, but it has the benefits of simplicity and extending coverage to nursing homes.  This would, on the surface, appear good for seniors.

Message to seniors: Take a hike!

The New York Times reports, in an article named "Goodbye, Golf Clubs.  Hello, Hiking  Boots and Kayak." that over 20% of participants in some of the organized long-distance hiking expeditions are over 60.  Some are in their 80s.  The articles leads off with the case of one Dave Roberts, who is on a 3,000-miles solo hike around Texas.  (Click on the picture below to read the full article.)

Yogi Berra once remarked, "Thinking is 90% mental."  So is aging.

Nursing Home Costs: Let's Make a Deal!

I recently read an article that reminds us that a private pay patient in a nursing home or assisted living facility can and should negotiate on price.  Since a private pay patient is probably paying 2x-3x as much as as a Medicaid patient, facilities are eager to have private pay patients.  Not all will negotiate, but those without long waiting lists are sometimes amenable.

Here is a quote from the article, which was in US News & World Report:

"Negotiating Long-Term Care Costs
Most nursing homes won't lower their rates, which are keyed to the payment levels offered by Medicare and Medicaid. Still, there's sometimes room to negotiate when it comes to long-term care costs. "Sometimes, rather than accept a lower Medicaid rate, a facility will agree to take a lower private pay rate, which is still higher than the Medicaid rate but lower than published private pay rates," says Howard Krooks, president-elect of the National Academy of Elder Law Attorneys. By contrast, assisted living facilities, which don't take Medicare or Medicaid, and home health agencies often face steep competition, so consumers shouldn't be shy about talking prices with these organizations. An assisted living facility with a high vacancy rate or no waiting list may be more willing to negotiate a monthly rate, according to Genworth. If you're considering a home health agency, you may be able to secure a lower hourly or daily rate if you indicate that you're shopping around for the best price."

Click for article on paying for nursing home care

A spoonful of sugar makes the elderly go down.

The BBC reports that the British National Health Service is introducing a 20% tax on sugary drinks to discourage consumption, and the government is considering doing the same nationally.

The article can be accessed by clicking on this link: http://www.bbc.com/news/health-35340752

It says, among other things, the following:

• There has been growing concern about the damaging impact of sugar on health - from the state of people's teeth to type-2 diabetes and obesity
• Sugar has been blamed for providing "empty calories" because it has no nutritional benefit
• Government advisers recommend no more than 5% of daily calories should come from sugar
• That is about 1oz (25g; six or seven teaspoons) for an adult of normal weight every day. For children, it is slightly less
• The limits apply to all sugars added to food, as well as sugar naturally present in syrups and honey
• To put this in context, a typical can of fizzy drink contains about nine teaspoons of sugar

What strikes me is that one can of soda has more extra sugar than one should get from all sources in a day.  That means that each can of soda with sugar brings us closer to the nursing home confinement we are seeking to avoid.  Good health begins with good diet.

Why the social security crisis in the US is worse than in any major country in old Europe

Prof. of Economics Laurence J. Kotlikoff of Boston University testified last year to the Senate Budget Committee.  He presented a paper that argued convincingly that since the federal government has been spending instead of saving workers' social security payments for so many decades, paying the promised benefits will be impossible without dramatic and immediate action.  (Personally, I do not believe that taxes can be raised enough to save the system as is.)

I urge you to read this brief but very clearly reasoned essay.   You may access it by clicking on the icon below:

Seniors are moving into retirement communities with their even older parents

The New York Times has an interesting article about a 71 year old who moves into a community with his 95 year old mother.  This is a great solution and is increasingly common.

Click on this photo to read the New York Times article:

Rule of thumb from Fidelity: Your retirement savings should be 10x your final income

I just read an interesting article on retirement savings by Andrew Biggs in Forbes.  He discusses the Fidelity rule of having liquid assets of 10x one's final income and drawing down 4.5%/year for life and combining this with a social security calculation to determine retirement income levels.

Here is a table from the article:

For retirees who were earning up to about $120,000 this works out, since "experts" say that one should aim at replacing at least 70% of one final income in retirement.

I liked this approach because it sets a clear and easily-understood goal.

The full article can be found at http://www.forbes.com/sites/andrewbiggs/2016/01/14/more-mistaken-retirement-crisis-claims-this-time-from-fidelity-investments/#2715e4857a0b2853dd162998

Using reverse mortgages, immediate annuities and longevity insurance in combination for retirement income

Here is an article by a retired Wharton Business School professor on using reverse mortgages, immediate annuities, and longevity insurance to increase retirement income and to assure that it will last as long as you live.  He says nothing new, but it's a good reminder.

The article was found at http://www.abqjournal.com/705814/biz/real-estate/the-mortgage-professor-life-annuities-and-hecm-reverse-mortgages-as-tools-for-protecting-retirees.html

Lincoln

The Mortgage Professor: Life annuities and HECM reverse mortgages as tools for protecting retirees

By Jack Guttentag / The Mortgage Professor (TNS)

Thursday, January 14th, 2016 at 9:03am

My article last week discussed the longevity annuity as a tool for protecting retirees heavily dependent on a stock of financial assets against the risk of running out of money. The retiree in my example was 65 and had assets of $600,000 from which he could draw $3,000 a month until reaching age 100, at which point his assets would be fully depleted — not a happy prospect for someone who might live that long. But this retiree could use $200,000 of his nest egg to purchase a longevity annuity that began payments of $3,000 after 10 years, which would eliminate the risk of impoverishment.

ADDING A HECM REVERSE MORTGAGE CREDIT LINE

If the retiree described above had equity in his home, he could draw on a reverse mortgage credit line to strengthen his retirement further. A $200,000 line, for example, if added to his other financial assets, would extend the period within which he could draw $3,000 a month without running out of money until he was 110. This would eliminate the need for a longevity annuity, but would very likely leave considerable money in his estate.

An alternative would be to increase his monthly draw from $3,000 to $4,000 and insure the continuity of the payment by investing $150,000 in a longevity annuity. The credit line of the reverse mortgage — the home equity conversion mortgage is the Federal Housing Administration’s reverse mortgage program — could be viewed as the payment source for the annuity.

In sum, the retiree dependent on a stock of financial assets could use a HECM credit line either to increase security as a replacement for longevity insurance, or to increase spendable income with a longevity annuity used to provide security.

USES OF A HECM BY RETIREES DEPENDENT ON PENSIONS

Retirees with equity in their home, who depend on pensions rather than a nest egg of financial assets, can supplement their pension income using a HECM reverse mortgage in either of two ways. One way is to exercise the “tenure” option under the HECM program, and receive a fixed annuity payment for as long as the retiree remains in the house. The second way is to exercise the credit line option, using some or all of it to purchase an immediate annuity from a life insurance company. (Note: An immediate annuity begins payments in month one, where the longevity annuities discussed earlier delay the payments until a future date.)

I shopped both options in early January 2016 for a female of 70 with a house worth $400,000 and no existing mortgage. Under the tenure option, she could draw $1,256 a month. This is the largest amount available from any of the 11 reverse mortgage lenders who report their prices to my website.

Alternatively, she could select the largest credit line available from those lenders, which was $224,280, and use it to purchase an immediate life annuity from an insurance company. The largest such annuity available from nine AA-rated companies that report to www.immediateannuity.com.was $1,349. Note that these purchases must be done in two stages because part of the HECM credit line is not available for 12 months.

ADVANTAGES AND DISADVANTAGES OF THE TWO APPROACHES

While the HECM tenure annuity pays less than the life annuity, the borrower retains ownership of the reserve account underlying the annuity. This allows her to change her mind after a few years and switch to a credit line for the reserve amount still available. And if she dies early, the remaining equity in her home goes to her estate. On a life company annuity, in contrast, early death terminates all payments unless the policy has a guaranteed payout, which would reduce the annuity amount.

In addition, the HECM tenure annuity is guaranteed by the federal government. The life company annuity is only as good as the promise of the insurance company, loosely backed by state guarantee programs. Defaults on annuities, however, are extremely rare.

On the other side of the ledger, if the borrower gets sick and has to go to a nursing home, the HECM annuity will terminate after a year of non-occupancy. That’s why it is called a “tenure payment” rather than a “life annuity.” The lender takes the house after the year and sells it, with any equity remaining going to the borrower’s estate. With a life company annuity, in contrast, the senior could be in a nursing home indefinitely without shutting off the annuity.

REGULATION OF LIFE ANNUITY PURCHASES WITH HECM FUNDS

At an early stage in the evolution of the HECM market, some seniors were induced to take out mortgages for the express purpose of purchasing life annuities. The loan officers involved earned two commissions, and the needs of the senior were often disregarded. As a result, a law was passed that in effect prevents a lender from disbursing funds at the closing that will be used to purchase an annuity.

But the law is not an impediment to seniors whose retirement plan includes the purchase of a life annuity from an insurance company. They need only to take a HECM credit line at closing, then draw on the line later to pay for the annuity. This keeps the HECM transaction and the annuity transaction separate, as they should be, and allows the senior to shop for them separately.

——

ABOUT THE WRITER

Jack Guttentag is professor emeritus of finance at the Wharton School of the University of Pennsylvania. Comments and questions can be left at http://www.mtgprofessor.com.

The "Village" can keep seniors in their homes longer, or indefinitely!

Most retirees would like to spend all their remaining days at home.  This once was how things actually were, but ending one's life at home has become less and less practical as families have become smaller, women have entered the workforce, and children have dispersed.

There is a movement, however, that seeks to return things to the happy state of yore: The Village Movement. This is a membership organization, with annual dues of between $500 and $1000, in many cases, that has a paid core staff that coordinates among the members, who generally live in the same town or neighborhood, to provide mutual help and services.  It is, in fact, an extended family.

I am very excited about this movement, which already has hundred of villages in the US and abroad, and which represents and important solution to some of the main practical problems of old age.

Here is an article on the subject (click on picture):

Here is map of some locations in our region:

Glib answers to retirement problems don't help if you're already retired, but they're worth thinking about if your still working.

A recent Huffington Post article listed five things that retirees don't want to hear; these "solutions" to retirement problems are favorites among those not yet retired and serve mainly to allow those still working to avoid preparing for the future.  Most of us still working are like Scrooge in The Christmas Carol by Charles Dickens and need someone like Marley, who was already dead, to come back to warn us about the problems that await.

Here are the five things retirees don't want to hear.  We should think about them before retiring.

From the Huffington Post.  http://www.huffingtonpost.com/entry/5-things-retired-folks-dont-really-want-to-hear-about-retirement_568fe521e4b0a2b6fb6fc359?4wws714i=%2F


5 Things Retired Folks Don't Really Want To Hear About Retirement

1. "There really isn't a retirement crisis."

You know about Holocaust-deniers, right? Well now we have retirement crisis-deniers. For years, pretty much all the studies and surveys have predicted a tsunami of trouble for baby boomers when they retire. We've been told that the combination of our increased longevity, the loss of our jobs in the Great Recession, and the fact that we've been spenders -- and not savers -- for most of our lives was going to unleash the greatest financial crisis since the bankers did or did not jump from the skyscrapers in 1929. Even among Americans aged 55 to 64 who do save,Motley Fool says the median value of their retirement accounts is a mere $103,000. And that doesn't factor in the millions who have not saved a nickel.

But now, along come the deniers. Andrew G. Biggs -- an American Enterprise Institute scholar who served as deputy commissioner of the Social Security Administration under President George W. Bush -- recently wrote an Alfred E. Neuman "What, me worry?" column in the Wall Street Journal in which he decries any such justification for public panic. He talks about stuff like what percentage of your paycheck Social Security needs to replace, how that formula should be calculated, and other things that will make your eyes glaze over.

But this line, everyone will understand: "Add in 401(k) and other plans, and it should not be difficult for a typical worker to achieve a total replacement rate of 70 percent or even 80 percent through individual savings and Social Security benefits."

Right, except for the millions who aren't covered by a 401(k) or any other plan. A recent report by the Employee Benefit Research Institute put the median amount of a 401(k) plan at $18,433 and noted that almost 40 percent of employees have less than $10,000 invested. Older workers, who have been trying to save for longer, have more. At Vanguard, for example, the median for savers aged 55 to 64 in 2013 was $76,381. That's it. And, no offense intended, that will hardly be enough. 

Me? I prefer to just look at the dollar amounts and ask where it is exactly that an elderly person in America can afford to live on $1,335 a month, which is the average amount of a Social Security retirement check.

2. "You should have saved more instead of expecting Social Security to bail you out."

This is a big "No shit, Sherlock" moment. OK, we should have saved more. Right. Got it. Point taken. But some of us didn't, and now what? Are we really prepared to mandate death squads for the elderly to avoid the unpleasantness of watching them go hungry or having them gobble up too much of Medicare? Seriously, what's the solution going to be? Wagging a finger at people who worked their whole lives and lived paycheck-to-paycheck doesn't seem to further the discussion much, does it? Let's make the assumption that most people did the best they could and it clearly wasn't good enough. Now what?

For many, Social Security is what stands between them and the curb. And besides, they paid into it, so give them back their money.

3. "Why don't you find a part-time job if you need more money?"

Happy to, right after we address the problem of age discrimination that runs rampant in the job market. People in their 60s can't get hired. Most say they would be happy to keep working to feather the nest a bit more, but first they need to be able to find a job. And they can't. The EEOC twiddles its thumbs while companies advertise with blatantly biased language like "seeking someone young" or "digital native" or "a recent college graduate."

Forty-four percent of unemployed workers 55 or older had been unemployed for more than a year in 2012, a Pew study reported. And while older workers have a lower unemployment rate overall because they tend to leave the workplace when they lose their job, the ones who are job-hunting find the process an uphill struggle. Maybe what we need is a jobs corps program for those 60+. Wouldn't it be great to flood our overcrowded classrooms with teacher's aides?

4. "Ageism isn't a real thing. It's just that your skills are genuinely out-of-date."

What skills would those be? The ones that cause us to be dependable, bring decades of experience and knowledge to the job and actually have fewer "bad days in the office" than our younger colleagues? Oh yeah, and technology isn't really all that scary. 

5. "Well, at least you get free health care!"

There isn't much free about Medicare. Part A, which is the part that covers in-patient hospital care, indeed in most cases does not charge a premium. But it does have a lot of tricky rules. For example: If you don't spend two midnights as an admitted patient, you get handed the full bill. And even when you make the two-midnight clause, you still get to pay a $1,288 deductible. The rest of Medicare -- parts B and onward -- all have premiums, copays and deductibles. Plus Medicare covers you and you alone. If you have a younger spouse, he or she will not be covered just because you are. They too must be 65. Same issue for your dependent children. Most employers' plan have options to cover the whole family.

Also on HuffPost: