MONEY Social Security

How to Fix Social Security — and What It Will Mean for Your Taxes

As Baby Boomers retire, the Social Security trust fund is getting closer to running out of money, a new study finds.

Last week I explained why I thought it would be a bad idea to close Social Security’s long-term funding gap by simply making all wages — not just those up to the annual ceiling, which this year is $117,000 — subject to payroll taxes, thereby socking it to wealthier workers. That wasn’t a popular opinion among those who feel it only right to raise the levies on the top 1%, or even top 5%.

“When all other sources have been depleted soak the portfolio holders even more disproportionately,” one critic responded via social-media .

Tweets, unfortunately, don’t make great policy arguments. And as Social Security’s doomsday clock keeps ticking, it’s all the more urgent to come up with a balanced reform strategy and act on it. Last week the Congressional Budget Office projected Social Security’s trust funds would be depleted during calendar year 2030—a year earlier than its previous estimate. If this happens, the program could then pay only about three-fourths of its scheduled benefits.

How, then, to close the funding gap? Although I do not want to see the wealthy as the primary bill-payer for Social Security reform, I do think the payroll tax ceiling is set too low. Today that ceiling, which is $117,000 this year, captures about 83% of all wage income, but it used to apply to 90%. The reason for the decline is widening income inequality, as the upper end of the wage scale has soared disproportionately higher.

Raising the ceiling until it once again covers 90% of the nation’s wage income would help, somewhat, to improve Social Security’s finances, the CBO found. The big headline here is that hiking the ceiling to cover 90% of wages would require a huge jump—from a projected $119,400 in 2015 to $241,600. The steep hike is necessary because high-end earners are a relatively small slice of the U.S. population. Even so, raising the payroll tax ceiling, which more than doubles the amount of Social Security payroll taxes paid by wealthier earners, would close only 30% of the system’s projected 75-year actuarial deficit.

You might wonder why we don’t eliminate the ceiling altogether so all wages are subject to payroll taxes. Glad you asked. Eliminating the ceiling would still close only 45% percent of the deficit, according to CBO. Both these projections assume that wealthier people would also see their Social Security benefits increase.

To make a more significant reduction in the deficit, you could limit Social Security benefit increases for the wealthy to only an additional 5% of pre-retirement earnings. In that scenario, along with eliminating the earnings ceiling, we could close nearly two-thirds of the funding gap. Still, as I wrote last week, I think soaking the rich this way is nearly as bad as soaking poorer people. Soaking people is not what Social Security was or should be about. It’s about requiring people to set aside enough money through a mandatory payroll tax to provide them a modest level of retirement security.

For most people the payouts are, indeed, modest. In 2013 a 66-year old who had earned average wages during his or her working life would qualify for lifetime Social Security payments beginning at $19,500 a year. This amounts to 45% of average pre-retirement income. What’s more, most workers file for benefits early, which sharply reduces the level of income replacement.

Yet that’s pretty much how the program was designed, and even these low levels of replacement income have been enough for Social Security to be a spectacular success. Before the program began in the ‘30s, retirees had the highest poverty rate of any age group. Today they have the lowest. (Medicare gets major credit as well.)

Problem is, even as Social Security has worked well, the other parts of the retirement system have fallen apart. The move from defined benefit pensions to 401(k)s and other defined contribution plans has shifted enormous retirement risk from employers to employees, and the numbers show that many aren’t saving enough to meet their goals.

Given the looming retirement shortfall, there has been growing support to expand Social Security benefits, not contract them. That will be tough to do. As the CBO reported last week, under current rules Social Security’s long-term deficits will continue to balloon. Over the next 25 years, program income will amount to 5.2% of the nation’s gross domestic product, while program benefits will account for 6%.

The fundamental problem is the aging of America. As the wave of Baby Boomers moves into retirement, the number of people collecting Social Security is projected to rise by roughly a third from 58 million today to 77 million in 2024—and by nearly 80% to more than 103 million by 2039. By contrast, the work force, defined as people aged 20 to 64, is expected to increase by only 5% by 2024 and just 11% by 2039.

Something’s got to give. Higher taxes, in one form or another, are inevitable.

Philip Moeller is an expert on retirement, aging, and health. He is an award-winning business journalist and a research fellow at the Sloan Center on Aging & Work at Boston College. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

MONEY Health Care

Why Does an MRI Cost So Darn Much?

Blood vessel with human brain MRI
This is a very expensive picture to take. Yuji Sakai—Getty Images

A single scan runs $2,600 on average (before your insurance kicks in). Here's what makes this common diagnostic procedure so expensive.

When it comes to pricey hospital procedures, MRIs come to mind. Sure enough, according to recently released Medicare pricing data analyzed by NerdWallet Health, the average cost of an MRI in the U.S. is $2,611. Here’s what’s behind that number.

Make Room for a Big Machine

Magnetic resonance imaging machines use magnets and radio waves to produce black-and-white images of bones and organs, usually to help with a diagnosis. Only five companies make MRI machines, and each specializes in a few magnet strengths, so there is relatively little competition when it comes time for a hospital or medical center to buy one.

Machines come in a variety of sizes and powers. Their imaging power is measured in magnetic field strength units called Teslas; low-field or open MRI machines measure 0.2 to 0.3, while the strongest currently on the market are 3 Teslas. Used low-field MRI machines can be as cheap as $150,000 or as expensive as $1.2 million. For a state-of-the-art 3 Tesla MRI machine, the price tag to buy one new can reach $3 million.

The room that houses the machine, called an MRI suite, can cost hundreds of thousands more. Safety features must be built in to protect those right outside from the magnetic field. Add in patient support areas and installation costs, and a suite with just one machine can cost anywhere from $3 million to $5 million. Recouping these costs factors into your bill, but that alone does not tell the entire story.

Add in the Doctors and Hospitals

Charges for a single MRI scan vary widely across the country for reasons beyond startup costs. According to the recently released Medicare data, MRIs charges are as little as $474 or as high as $13,259, depending on where you go. (Another recent study of medical claims by Change Healthcare found that in-network prices for certain MRIs can run from $511 to $2,815.) That’s because hospitals and medical centers can charge whatever they want, and in most cases they don’t have to justify prices or even disclose them ahead of time.

Doctors can also charge whatever they want, and though the MRI facility probably sets the rates of their staff doctors, you’ll be charged separately for a radiologist to read the MRI. Additionally, your ordering physician may ask for the MRI to be done with or without contrast dye, or both. This “dye” is actually a paramagnetic liquid that responds to the machine’s magnet and helps enhance certain abnormalities on the scan that would not have otherwise been visible, common in neurological MRIs.

This means that in addition to cost of the scan, your total bill for the MRI will include the radiologist fee, the contrast dyes, and the cost of the procedure itself. Depending on the medical center, these charges may be bundled together into one charge. Bundling is one type of common error on medical bills, so always check over an itemized statement before paying for any costly medical procedure.

Read more from NerdWallet Health, a website that empowers consumers to find high quality, affordable health care, and insurance.

 

 

 

 

 

 

 

 

 

 

 

 

MONEY Social Security

3 Smart Fixes for Social Security and Medicare

Betty White in OFF THEIR ROCKERS
Actress Betty White works well past traditional retirement age. Justin Lubin—NBC/Courtesy Everett Collection

The aging of America threatens the financial stability of the nation's safety net programs. Here are sensible reforms that can help.

Last week Washington made a rare effort to help America’s fast-growing aging population. The U.S. Treasury and the IRS issued a new rule permitting people to use funds in their tax-advantaged retirement accounts to buy so-called longevity annuities—deferred annuities that typically don’t begin making payments until a person turns 80 or 85.

Longevity annuities can be a great option to ensure you don’t outlive your assets, as well as provide higher quality of life. Since you can count on future annuity income, you can spend more now, instead of having to set aside a big chunk of your nest egg for a longer-than-expected old age.

Related: The New 401(k) Income Option That Kicks In When You’re Old

But longevity annuities are only a small first step. Much more needs to be done to prepare for the many changes—legal, social, and behavioral—that will occur as we become not only an older society but one enjoying amazing longevity gains. In 1954 a 65-year-old man might be expected to live to age 83. In 2014 the average life expectancy for a 65-year-old is 86.

These gains have led many to push for raising the Social Security retirement age to 68, 69 or even 70. That needs to happen. (It’s already set to rise to 67 for people born in 1960 and later.) Still, longevity increases are not being shared by people with little education, lower incomes and, often, physically demanding jobs that wear out their bodies well before even the current full retirement age. So if we raise the retirement age, we also need to provide improved early retirement benefits for those who can no longer work.

Longevity and related healthcare issues will eventually lead to additional changes in the big three old-age safety net programs—Social Security, Medicare, and Medicaid. Few people in government have been willing to deal with these challenges. We do not have enough money to continue funding current benefit levels. Voters don’t want to hear this.

Well, I’m not planning a run for elective office anytime soon. So here are three aging and longevity reforms that you’ve heard less about but deserve serious consideration:

*Social Security payroll taxes should be reduced for workers who stay on the job past full retirement age (this change should also apply to employers). Continuing to work will improve what are, for millions of baby boomers, looming financial shortfalls in retirement. The design would be tricky, to say the least, but it’s possible to do this in a way that lowers total government spending. Giving employers a financial incentive to hire older employees encourages them to do the right thing and covers any higher costs of employee benefits for this group.

*A hybrid form of Medicare should be blended with employer health insurance to accommodate older persons who are still drawing a paycheck. The federal government will spend less than on pure Medicare. Employers will also spend less than for a purely private health policy. Older employees may spend more but they will have a job to help pay these bills.

*Medicaid must be reinvented or it will (further) bankrupt the nation. A long-term care trust fund should be created to help shoulder the enormous long-term care costs staring at us from the future. This would ease a lot of the financial pressure on Medicaid. Yes, it would cost taxpayers more money but a pooled approach is efficient and can reflect a progressive benefit structure as does Social Security. In the long run, these changes are well worth the cost.

Philip Moeller is an expert on retirement, aging and health. He is an award-winning business journalist and a research fellow at the Sloan Center on Aging & Work at Boston College. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

MONEY Aging

Why Most Seniors Can’t Afford to Pay More for Medicare

Replacing Medicare with vouchers would push costs higher and put older Americans at risk.

Should seniors pay more for Medicare? Republicans think so; they have repeatedly called for replacing the current program with vouchers that would shift cost and risk to seniors.

There’s no doubt this is where Republicans will take us if they capture control of Congress this year, and the White House in 2016. Representative Paul Ryan, the Wisconsin Republican who chairs the House Budget Committee, advocates “premium support” reforms that would give seniors vouchers to buy private Medicare insurance policies in lieu of traditional fee-for-service Medicare.

Under the latest version of Ryan’s budget proposed in April, starting in 2024 seniors could opt to buy premium-supported private plans or stay in traditional Medicare. Ryan has argued that introducing competition will bring down costs over time, and capping the government’s costs does sound like a tempting way to address Medicare’s financial problems.

Medicare’s trustees project total annual spending will jump 78% by 2022, to $1.09 trillion. Much of that increase will be fueled by higher enrollment as the baby boom generation ages.

But premium supports would shift risk to seniors, and could effectively make traditional Medicare much more expensive by siphoning off healthier seniors to private plans. The Congressional Budget Office has estimated that this effect could boost traditional Medicare premiums 50% by 2020 compared with current projections.

Most seniors simply can’t afford to pay more. If you doubt it, check out the new interactive tool launched last month by the Henry J. Kaiser Family Foundation, one of the country’s leading healthcare research groups.

The tool analyzes the income and assets of today’s 52.4 million Medicare beneficiaries, and how their financial picture will change between now and 2030, when 80.9 million people will be covered by the program. It can compare different demographic slices of the Medicare population based on variables such as education, race, gender and marital status—and here you get a stark look at how economic inequality affects the pocketbooks of seniors.

Kaiser’s tool is based on a simulation model developed by the Urban Institute that uses population data to analyze the long-range impact on retirement and aging issues. I encourage you to test-drive the tool, but here are some highlights:

INCOME

Fifty-three percent of Medicare beneficiaries had $25,000 or less in annual income last year; half had savings below $61,400 and less than $67,700 in home equity on a per-person basis.

The income figures reflect the sharp divisions that characterize the wider U.S. population. Just 4% of seniors had income over $100,000 last year; 27% had income below $15,000 (which is just a bit higher than the average annual Social Security benefit).

Healthcare already is one of the largest expenses for seniors, most of whom are on fixed incomes. HealthView Services, which develops software for gauging healthcare costs, recently estimated that a senior retiring this year in high-cost Massachusetts would pay $7,020 in Medicare premiums alone—a number that will jump to $11,536 in 2024. And that figure doesn’t include co-pays and out-of-pocket costs for things Medicare doesn’t cover, such as dental care. It also doesn’t include costs for a catastrophic event.

“Sixty-six thousand in savings is less than the cost of one year in a nursing home,” says Tricia Neuman, senior vice-president at the foundation and director of the foundation’s Medicare policy program. “That tells us that many people on Medicare today don’t have the resources they’d need to pay for a significant health or long-term-care expense if it should arise.”

DEMOGRAPHIC DIVIDES

Neuman says she was especially surprised by the extent of the gaps in income and saving by race, ethnicity and gender. Median 2013 per capita income for white Medicare beneficiaries was $26,400, compared with $16,350 for African Americans and $13,000 for Hispanics.

Men had $25,880 in median income, compared with $21,800 for women. And married couples were better off than singles: Per capita income for married seniors in 2013 was $27,400, compared with $20,250 for divorced people, $21,050 for widows and $14,150 for those who never married.

That’s unlikely to change by 2030. “The model suggests there won’t be phenomenal changes in wealth, or that seniors will be that much more comfortable,” Neuman says.

Neuman says the data also points to continued income inequality and sharp divisions in the status of seniors. In 2030, 5% of Medicare beneficiaries will have income over $111,900, while half will have income below $28,250.

“There will always be a small share of the Medicare population with sufficient wealth and resources to absorb higher costs, but most will not be in that position,” she says. “The assumption that boomers are healthier and wealthier and that we’ll have a much rosier Medicare outlook down the road just isn’t going to happen.”

MONEY Health Care

The State of Senior Health Depends on Your State

Dollars and cents
Finnbarr Webster / Alamy

Reports on senior health reveal a north-south divide. Many worst-ranking states rejected Medicaid expansion.

What are the best and worst places to stay healthy as you age? For answers, take out a map and follow the Mississippi River from north to south. The healthiest people over 65 are in Minnesota, the sickest in Mississippi.

That’s among the findings of the America’s Health Rankings Senior Report released in May by the United Health Foundation. The report ranks the 50 states by assessing data covering individual behavior, the environment and communities where seniors live, local health policy and clinical care.

Minnesota took top honors for the second year in a row, ranking high for everything from the rate of annual dental visits, volunteerism, high percentage of quality nursing-home beds and low percentage of food insecurity. This year’s runners-up are Hawaii, New Hampshire, Vermont and Massachusetts. (See how your state fared here.).

The researchers base their rankings on 34 measures of health. But here’s one you won’t find in the report: state compliance with the Affordable Care Act (ACA). While the health reform law isn’t mainly about seniors, it has one important feature that can boost the health of lower-income older people: the expansion of Medicaid.

The ACA aims to expand health insurance coverage for low-income Americans through broadened Medicaid eligibility, with the federal government picking up 100% of the tab for the first three years (2014-2016) and no less than 90% after that. But when the U.S. Supreme Court affirmed the ACA’s legality in 2012, it made the Medicaid expansion optional, and 21 states have rejected the expansion for ideological or fiscal reasons.

And guess what: Most of the states with the worst senior health report cards also rejected the Medicaid expansion.

Nearly all Americans over age 65 are covered by Medicare. But the Medicaid expansion also is a key lever for improving senior health because it extends coverage to older people who haven’t yet become eligible for Medicare. That means otherwise uninsured low-income seniors are able to get medical care in the years leading up to age 65—and they are healthier when they arrive at Medicare’s doorstep.

Two studies from non-partisan reports verify this. The U.S. Government Accountability Office reported late last year that seniors who had continuous health insurance coverage in the six years before enrolling in Medicare used fewer and less costly medical services during their first six years in the program; in their first year of Medicare enrollment, they had 35% lower average total spending.

The GAO study confirmed the findings of a 2009 study report by two researchers at the Harvard Medical School. That study looked at individuals who were continuously or intermittently uninsured between age 51 and 64; these patients cost Medicare an additional $1,000 per person due mainly to complications from cardiovascular disease, diabetes and delayed surgeries for arthritis.

Fifty-two percent of Medicaid-rejecting states ranked in the study’s bottom third for senior health, including two very large states, Texas and Florida. Many of these states also can be found in a list of states with the highest rates of poverty among people over 65.

What emerges is a north-south divide on senior health. “Many states that haven’t expanded Medicaid are in the South, and there’s a clear link between socioeconomic status and health status,” says Tricia Neuman, senior vice-president at the Henry J Kaiser Family Foundation and director of the foundation’s Medicare policy program. “Insurance may not be the only answer, but it certainly is helpful.”

The United Health Foundation—a non-profit funded by the insurer UnitedHealth Groupdidn’t consider insurance coverage in its study, but it did consider poverty. Minnesota’s rate was 5.4%—well below the 9.3% national rate. Mississippi ranked dead last, with a 13.5% poverty rate.

In states that rejected the Medicaid expansion, we are witnessing a victory of politics over compassion and morality. Jonathan Gruber, an economics professor at the Massachusetts Institute of Technology and a key architect of health reform in Massachusetts and under the ACA, summed it up in an interview with HealthInsurance.org earlier this year, saying that these states “are willing to sacrifice billions of dollars of injections into their economy in order to punish poor people. It really is just almost awesome in its evilness.”

MONEY long term care

The Retirement Crisis Nobody Talks About: Long-term Care

If you become disabled, you may face huge bills for daily help. And, no, Medicare doesn't cover it.

When you try to gauge the biggest risks to your financial security in retirement, health care costs usually top the list. But there’s even bigger danger that doesn’t get as much attention: long-term care costs.

By whatever measure you use, many Americans aren’t saving enough for retirement. In its latest annual retirement readiness study, the Employee Benefit Research Institute found that some 57% to 59% of Baby Boomer and Gen X households are on track to retire comfortably. But if you factor in long-term care costs, the percentage of households running short of money in retirement soars by 100% or more after 20 years for those in middle-class or upper-income quartiles, according to new study by EBRI. The analysis assumes that Baby Boomer and Gen X households will retire at 65 and spend average amounts for food, housing and other living expenses, in addition to long-term care costs.

The risk of falling short financially is highest for those in the lower-income quartile—by the 10th year of retirement, some 70% in this group would have run short of money, according to EBRI, though the majority were already headed for trouble because of lack of savings. But even households in the highest-income quartile saw the percentage falling short reach 8% by the 20th year of retirement vs. just 1% without accounting for long-term care.

If you become disabled, the costs of assistance with daily living tasks (what’s commonly referred to as long-term care) aren’t generally covered by Medicare. That’s something many people don’t realize. A nursing home in the Midwest might run you $60,000 a year, while the median salary for a home health aide may be $45,000 annually. Some 70% of Americans age 65 and older are expected to need long-term care at some point in their lives. And studies have found that many families end up paying huge amounts out of pocket, as much as $100,000 in the last five years of life.

Planning ahead can help, but unfortunately there are few solutions to the long-term care dilemma. One alternative is to purchase long-term care insurance, but it’s pricey, so few can afford it. “Long-term care insurance is something that nobody wants to buy and the insurance industry doesn’t want to sell,” says Howard Gleckman, senior fellow at the Urban Institute and author of “Caring for Our Parents.” In recent years, many insurance companies have raised premiums on long-term care policies. And other insurers have gotten out of the business—that’s mainly because fewer buyers than expected are dropping policies, and low interest rates have reduced profits.

Another option is Medicaid, which many seniors end up relying on to pay for long-term care. But in order to qualify you will have to spend down most of your assets—not anyone’s idea of a dream retirement. And as more aging Boomers and Gen X retirees require care, Medicaid programs will come under increasing financial pressure, Gleckman says, so it’s not clear what the programs will provide in 20 years.

Until more options develop—perhaps some kind of private-public partnership for long-term care—your best strategy is to stay healthy, save as much as you can, and build a community network. People with strong social ties, research shows, live longer, happier lives.

This article was updated to clarify the percentage of households facing shortfalls in retirement due to long-term care costs.

MONEY Health Care

The Mystery Behind Your Doctor’s Charges, Unveiled

Illustration of man unlocking filing cabinet of doctors
Medicare is providing consumers with a new way to research health care pricing. Paul Blow

A quick peek into some Medicare data can help you reduce your medical bills. Here's how to use the new tool.

Medicare has pulled back the veil on what doctors, physician assistants, physical therapists, and other health care providers charge, letting everyone see the rates for a wide variety of procedures in advance for the first time. “This is a big step forward and will be very enlightening,” says Jean Mitchell, a health economist at Georgetown University.

Health care researchers and fraud investigators are salivating over the data—already it’s revealed that some doctors favor the most expensive in-office intravenous drug treatments, likely because Medicare pays them a percentage of the cost, says ­Gerard Anderson, a professor at Johns Hopkins University.

As a patient, you can use the numbers, which are from 2012, to conduct your own research into prices and practices. Even if you’re under 65, you can glean valuable insights. Head to the Medicare Physician and Other Supplier Look-Up Tool to find your doctor. You’ll see how many times he or she did a particular service and the average charges. Then here’s what to make of the information:

If you’re facing surgery
See how often your doctor operates; for complicated procedures, frequency pays. “Research shows doctors who perform more than 50 hip replacements a year have fewer complications,” says Andrew Fitch of Nerdwallet Health. Yet about half of orthopedic surgeons did fewer than 20 a year on traditional Medicare patients, a Nerdwallet analysis of the data found.

The tally excludes operations on patients with private insurance or a Medicare Advantage Plan. Still, a low number compared to other MDs should prompt you to ask how often your doctor does the job, particularly for hip and knee replacements, says Fitch. If the figure is high, keep in mind that at times every physician in a group practice bills under one name.

If you’re on traditional Medicare
For a price preview, calculate the difference between the “average Medicare allowed amount” and the “average Medicare payment.” That’s your share of the bill before supplemental insurance kicks in. One caveat: What you see in the Medicare database are charges per service. So ask if you’ll face other bills or a facility fee if you’re cared for at a hospital or surgical center.

If you have private insurance
Check out the “average submitted charge,” which is the doctor’s full retail price. If you go outside your network, you’ll owe the difference between this amount and what your insurer deems a “customary and reasonable” rate (get that from your insurer), on top of your co-insurance.

You should negotiate with out-of-network docs, and the Medicare allowed amount is a good starting point. If the provider balks at that, go as high as 35% more, which is the national standard for a reasonable charge, says Anderson.

MONEY The Economy

The Shrinking Role of Wages

Senior woman looking at Social Security check
A social security check arrives in the mail Donald Higgs—Getty Images

As the population ages and workers get displaced, a smaller portion of income is derived from actual work.

For Americans, work is becoming less and less important.

Today, wages and salaries make up only 50.5% of overall personal income, according to a new Wells Fargo Securities report. That’s down from almost 60% in 1980.

You can blame some of this on changing demographics, including the aging of the population and government programs that direct transfer payments to certain groups.

Take Medicare and Social Security. In the beginning of 2007, 80% of people between the prime working ages of 25 to 54 was employed. Today that number is down to 76%.

image (1)
Source: St. Louis Federal Reserve and the Labor Department

While the Great Recession lowered demand for workers, “the aging of the baby boomers and longer life expectancies have pushed the share of the population age 65 and older to a record high,” writes Wells Fargo economists John Silvia and Sarah House.

Almost one in seven Americans is 65, according to the U.S. Census, compared to 12.4% in 2000. More Americans over the age of 65 means more Americans receiving Social Security and Medicare.

Then there’s help for the disabled and poor. “Increased eligibility and use of social insurance programs such as disability insurance and food stamps have also prompted the rise in transfer payments,” note Silvia and House.

Right now there are more than 14 million Americans who are deemed disabled by the Social Security Administration.

Consider this from NPR’s Planet Money’s excellent series on disability:

Part of the rise in the number of people on disability is simply driven by the fact that the workforce is getting older, and older people tend to have more health problems.

But disability has also become a de facto welfare program for people without a lot of education or job skills. But it wasn’t supposed to serve this purpose; it’s not a retraining program designed to get people back onto their feet. Once people go onto disability, they almost never go back to work. Fewer than 1 percent of those who were on the federal program for disabled workers at the beginning of 2011 have returned to the workforce since then, one economist told me.

Or take food stamps. Since 1969, the number of people on food stamps has increased by a factor of 16.

The share of income derived from transfers has increased from 12.5% in 2000 to 17.3% today, according to Wells Fargo Securities.

A lousy job market in the aftermath of the recession has left millions without work — 36% of today’s unemployed have been without a job for over 27 weeks, compared to 12.1% in 2000. And that abundance of available labor, writes Silvia and House, “has kept wage growth muted, restraining labor income even as hiring has improved.”

image (2)
Sources: St. Louis Federal Reserve and the Labor Department

For the overall economy, “the general diversification of income sources adds to the stability of consumer spending over time,” House says. “In particular, transfer payments have becoming an increasingly important share of income and have helped to smooth income/spending throughout the business cycle and Americans’ life cycle.”

MONEY Social Security

The Real Reason Social Security Won’t Be There

Congress won't cut your monthly check to shreds, but rising health care costs may well do the job.

You may be worried that Social Security will disappear by the time you retire. It won’t. Here’s the real problem: In 10 years the typical payment won’t be enough to cover medical bills for most middle-class retirees, according to a recent analysis by data tracker HealthView Services.

This scary prospect is the result of simple math. Healthcare expenses are projected to rise 5% to 7% a year, while Social Security cost-of-living increases are expected to grow just 2% annually, says Ron Mastrogiovanni, CEO of HealthView.

A healthy couple who retires a decade from now will need their entire Social Security paycheck just to cover their healthcare expenses, up from 69% today, according to HealthView’s Retirement Health Care Cost index. In 20 years, it won’t even be enough: Healthcare costs will equal 127% of the typical Social Security check.

HealthView’s calculations take into account Medicare premiums, supplemental Medicare plan payments and services Medicare doesn’t cover such as dental and vision care.

Related: How does Social Security work?

One potentially expensive item that isn’t factored in: Long-term care costs. An estimated 70% of people over 65 will need some kind of long-term care to help with the tasks of daily living, such as dressing or bathing. Long-term care isn’t covered by Medicare, and it can be very expensive—the median cost of a home health aide is $45,000 a year, while a private nursing home room averages $87,000 a year according to the Genworth 2014 Cost of Care survey.

Of course, these numbers are just averages and your actual costs will vary widely, depending on your health and where you live. And there’s no way to accurately predict what your health care needs will be as you age. But there are a few tools that can help you develop a rough estimate. HealthView just launched a basic healthcare expense calculator that you can use to gauge your out-of-pocket expenses when you retire based on your current health status. For a more informed estimate, try the Livingto100.com calculator, which lets you add data about your family history, marital status, income and exercise habits.

Build healthcare expenses into your retirement spending plan, and you won’t have to worry as much about whether Social Security will be enough for you.

 

TIME Medicare

Strike Force Arrests 90 for $260 Million in Medicare Fraud

Wifredo Ferrer, Tyler Smith, George Piro
Wifredo Ferrer, left, U.S. Attorney for the Southern District of Florida, announces the arrest of 90 individuals in a Medicare fraud sting operation on May 13, 2014 in Miami. AP

A Medicare fraud strike force has arrested 90 people, including 16 doctors along with nurses and other medical professionals in six different cities, who stand accused of issuing false medical bills for unwanted medical services

A Medicare fraud strike force has arrested 90 people for allegedly defrauding the program of $260 million, law enforcement officials said Tuesday.

The Federal Bureau of Investigation announced that agents in six different cities arrested 16 doctors along with nurses and other medical professionals who stand accused of padding medical bills with unwanted or undelivered services.

The largest batch of arrests occurred in Miami, where 50 defendants were charged with defrauding the system of $65.5 million by falsely billing home health treatments, mental health services and prescription drugs that were never dispensed, according to the FBI.

Investigators said one physician in Los Angeles charged with $23 million in fraudulent bills had ordered hundreds of power wheelchairs for able-bodied patients.

“The fraud was rampant, it was brazen and it permeated every part of the Medicare system,” Acting Assistant Attorney General David O’Neil said in a statement.

The arrest marks the seventh sting operation in the strike force’s history, which has charged almost 1,900 defendants since it was established in 2007.

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