Source: Alexander J. Ryu1, Teresa B. Gibson, M. Richard McKellar and Michael E. Chernew, Health Affairs, Vol. 32 no. 5, May 2013
From the abstract:
During and immediately after the recent recession, national health expenditures grew exceptionally slowly. During 2009–11 per capita national health spending grew about 3 percent annually, compared to an average of 5.9 percent annually during the previous ten years. Policy experts disagree about whether the slower health spending growth was temporary or represented a long-term shift. This study examined two factors that might account for the slowdown: job loss and benefit changes that shifted more costs to insured people. Based on an examination of data covering more than ten million enrollees with health care coverage from large firms in 2007–11, we found that these enrollees’ out-of-pocket costs increased as the benefit design of their employer-provided coverage became less generous in this period. We conclude that such benefit design changes accounted for about one-fifth of the observed decrease in the rate of growth. However, we also observed a slowdown in spending growth even when we held benefit generosity constant, which suggests that other factors, such as a reduction in the rate of introduction of new technology, were also at work. Our findings suggest cautious optimism that the slowdown in the growth of health spending may persist—a change that, if borne out, could have a major impact on US health spending projections and fiscal challenges facing the country.
Source: Michael E. Chernew, Health Affairs, Vol. 32 no. 5, May 2013
From the abstract:
Policy makers have considerable interest in reducing Medicare spending growth. Clarity in the debate on reducing Medicare spending growth requires recognition of three important distinctions: the difference between public and total spending on health, the difference between the level of health spending and rate of health spending growth, and the difference between growth per beneficiary and growth in the number of beneficiaries in Medicare. The primary policy issue facing the US health care system is the rate of spending growth in public programs, and solving that problem will probably require reforms to the entire health care sector. The Affordable Care Act created a projected trajectory for Medicare spending per beneficiary that is lower than historical growth rates. Although opportunities for one-time savings exist, any long-term savings from Medicare, beyond those already forecast, will probably require a shift in spending from taxpayers to beneficiaries via higher beneficiary premium contributions (overall or via means testing), changes in eligibility, or greater cost sharing at the point of service.
Source: Jeffrey R. Brown, Scott J. Weisbenner, Journal of Pension Economics and Finance, FirstView Article, Published online: 24 April 2013
From the abstract:
Over five million state and local government employees have lifetime earnings that are divided between employment that is covered by the Social Security system and employment that is not covered. As Social Security benefits are a nonlinear function of covered lifetime earnings, the simple application of the standard benefit formula to covered earnings only would provide a higher replacement rate on those earnings than is appropriate given the individuals’ total (covered plus uncovered) lifetime earnings. The Windfall Elimination Provision (WEP), established in 1983, is intended to correct this situation by applying a modified benefit formula to earnings of individuals with non-covered employment. This paper analyzes the distributional implications of the WEP and finds that it reduces benefits disproportionately for individuals with lower lifetime covered earnings. It discusses an alternative method of calculating the WEP that comes closer to preserving the intended redistribution of the system. In recognition of historical data limitations that prevent the Social Security Administration (SSA) from being able to implement this alternative method at present, the paper also analyzes two alternative ways of calculating the WEP that use the same information as the current WEP, are budget neutral, and come closer to maintaining the individual-level, cross-sectional progressivity of Social Security than does the existing WEP formula.
Source: Edward L. Glaeser, Giacomo A. M. Ponzetto, National Bureau Of Economic Research, NBER Working Paper No. w18976, April 2013
From the abstract:
Why are public-sector workers so heavily compensated with pensions and other non-pecuniary benefits? In this paper, we present a political economy model of shrouded compensation in which politicians compete for taxpayers’ and public employees’ votes by promising compensation packages, but some voters cannot evaluate every aspect of compensation. If pension packages are “shrouded,” meaning that public-sector workers better understand their value than ordinary taxpayers, then compensation will be inefficiently back-loaded. In equilibrium, the welfare of public-sector workers could be improved, holding total public sector costs constant, if they received higher wages and lower pensions. Central control over dispersed municipal pensions has two offsetting effects on pension generosity: more state-level media attention helps taxpayers better understand pension costs, which reduces pension generosity; but a larger share of public sector workers will live within the jurisdiction, which increases pension generosity. We discuss pension arrangements in two decentralized states (California and Pennsylvania) and two centralized states (Massachusetts and Ohio) and find that in these cases, centralization appears to have modestly reduced pension arrangements; but, as the model suggests, this finding is unlikely to be universal.
Source: Sara R. Collins, Ruth Robertson, Tracy Garber, and Michelle M. Doty, Commonwealth Fund, April 2013
From the summary:
Eighty-four million people―nearly half of all working-age U.S. adults―went without health insurance for a time last year or had out-of-pocket costs that were so high relative to their income they were considered underinsured, according to the Commonwealth Fund 2012 Biennial Health Insurance Survey. The survey also found that the proportion of young adults ages 19–25 who were uninsured during the year fell from 48 percent to 41 between 2010 and 2012, reversing a nearly decade-long trend of rising uninsured rates in that age group.
– Chartpack (PDF)
– Chartpack (PPTX)
– News Release
Source: Wei Sun and Anthony Webb, Center for Retirement Research at Boston College, Issue Brief, IB#13-6, April 2013
The brief’s key findings are:
– In an effort to curb Medicaid costs, many states encourage people to buy long-term care insurance by offering enhanced policies through private insurers.
– Under these policies, if individuals exhaust their private insurance benefits, the state allows them to qualify for Medicaid while keeping more of their assets.
– This study finds that, for single men and women, the enhanced policies will likely increase Medicaid costs rather than reduce them.
– The reason is that most of the likely buyers of the enhanced policies would have otherwise bought a traditional policy, which has no subsidy from Medicaid.
Source: Ken Dau-Schmidt, Washburn Law Journal, (Forthcoming), April 19, 2013
From the abstract:
In this essay, I examine the problem of designing a pension plan within the context of our larger public policy of encouraging workers to save for retirement. I discuss the various problems and risks inherent in encouraging workers to adequately save for retirement, invest those assets efficiently, and ensure the planned level of retirement consumption for the remainder of their lives. I also discuss the three major types of pension plans in the American retirement system, defined benefit, defined contribution, and hybrid, and assess how well each of these types of plans deals with the problems encountered in designing a pension plan. I then examine the particular problems that have arisen because of our relatively recent transition from defined benefit to defined contribution plans, and the funding problems caused by the Great Recession. I close with a section discussing policy changes that might be made to improve our pension system and help ensure that workers receive not only the pension benefits they were promised, but also adequate benefits to sustain them comfortably during their retirement.
Source: Janet M. Wilmoth, Andrew S. London and Colleen M. Heflin, Center for Retirement Research at Boston College, WP#2013-6, February 2013
From the abstract:
Although there is substantial functional limitation and disability among veterans of all ages, relatively little is known about veterans’ uptake of Department of Veterans Affairs (VA) Disability Benefits and Social Security Disability Insurance (DI). This project uses data from the 1992, 1993, 1996, 2001, 2004, and 2008 Survey of Income and Program Participation to examine veterans’ participation in VA and DI programs. The results indicate that the majority of veterans do not receive VA or DI benefits, but veterans’ use of these programs has been increasing over time. A higher percentage of veterans receive VA compensation only, which ranges from 4.9 percent in 1992 to 13.2 percent in 2008, than DI compensation only, which ranges from 2.9 percent in 1992 to 6.7 percent in 2008. Furthermore, the rate of joint participation in these two programs is low, ranging from less than 1 percent in 1992 to 3.6 percent in 2008. Veterans experience relatively few within-panel transitions between VA and DI programs. Overall, the likelihood of any disability program use is higher among veterans who served during multiple time periods, are older, black or Hispanic, currently married, and have less than a high school education. Among users, the likelihood of any VA use in contrast to only DI use is higher among veterans who served since 1990, are younger, Hispanic, highly educated, and currently married. Among users, variation in the likelihood of any DI use relative to only VA use generally mirrors variation in the likelihood of any VA use, although there are differences in associations with race/ethnicity, education, and marital status.
Source: Liz Farmer, Governing, View blog, April 19, 2013
Nearly every state in the union and scores of localities have reacted in recent years to their growing unfunded public pension liabilities with reforms that aim to soften that financial burden in the coming decades. The changes have ranged from reducing benefits for current retirees to raising the retirement age to establishing new (read: cheaper) plans for incoming public employees.
But have some of these reforms gone too far? Might governments now be putting themselves in a position where they can no longer attract the best person for the job?…
Source: Liz Farmer, Governing, View blog, April 22, 2013
…Of course Kentucky isn’t the only state that’s patching over its retirement health payment holes with Silly Putty (although it is the only one Kim knows of that is paying off those bills today by issuing more debt for tomorrow). Most states and municipalities today are grappling with the growing cost of retiree health care, a problem highlighted now on balance sheets thanks to relatively new accounting rules that require governments to report their OPEB unfunded liabilities.
As of the end of fiscal 2012, many states’ OPEB unfunded liabilities are in the billions: California’s is more than $80 billion between its state, trial court and university system retirees; Illinois’ State Employees Group Insurance plan reports more than $33 billion in unfunded liabilities; and Maine’s three predominant plans combine for nearly $24 billion in unfunded liabilities (not including life insurance costs)….