Category Archives: Benefits

Peer pressures – Use of CEO compensation comparisons draws heightened scrutiny

Source: Melanie Evans, Modern Healthcare, May 11, 2013
(subscription required)

As chief executive pay continues to draw heightened scrutiny in the wake of the Great Recession, compensation comparisons used by governing boards to justify the payouts to shareholders and regulators are coming under fire from critics. The practice, common in the healthcare sector, has drawn fire for years. Critics claim reliance on peer group analysis is flawed and artificially inflates salaries and bonuses. Their complaints are beginning to be heard, including by the healthcare sector. One of the largest publicly traded health systems has revised its executive compensation peer group, which considers the market in which companies must compete on pay to recruit and retain top talent. … The use of peer groups by board compensation committees in determining CEO pay has played a major role in driving those salaries upward, critics contend. Ira Kay, a compensation consultant and proponent of their use, says executives operate in a competitive market for top talent and incentives such as stock options, bonuses and generous retirement packages have successfully retained highly mobile executives….

CEO pay at Leading Hospital Chains

Differences in union and nonunion compensation, 2001–2011

Source: George I. Long, Monthly Labor Review, Vol. 136, No. 4, April 2013

From the abstract:
Union workers continue to receive higher wages than nonunion workers and have greater access to most employer-sponsored employee benefits; during the 2001–2011 period, the differences between union and nonunion benefit cost levels appear to have widened

Recent data from the Bureau of Labor Statistics (BLS) show that, on average, union workers receive larger wage increases than those of nonunion workers and generally earn higher wages and have greater access to most of the common employer-sponsored benefits as well. These trends appear to persist despite declining union membership. The National Compensation Survey (NCS) measures compensation levels and benefit provisions for many worker and industry characteristics. This article uses NCS data to examine some of the similarities and differences between union and nonunion compensation during the period from 2001 to 2011.

State and Local Government Workforce: 2013 Trends

Source: Center for State and Local Government Excellence, May 2013

From the summary:
This annual survey conducted by the Center and the International Public Management Association for Human Resources (IPMA-HR) finds that as local and state government workers head for the exits, human resource managers say their top concern is staff development.

Key findings:
– 33 percent report pay freezes, compared with 51 percent in 2012
– 18 percent report layoffs, compared with 28 percent in 2012
– 27 percent report hiring freezes, compared with 42 percent in 2012

Limiting the Tax Exclusion of Employer-Sponsored Health Insurance Premiums: Revenue Potential and Distributional Consequences

Source: Lisa Clemans-Cope, Stephen Zuckerman, and Dean Resnick, Urban Institute, Timely Analysis of Immediate Health Policy Issues, May 2013

From the Robert Wood Johnson Foundation summary:
As attention is increasingly paid to the federal budget and deficit reduction measures, taxing employer-sponsored health coverage is likely to be debated in earnest. In 2011 alone, federal tax revenues were reduced by $268 billion because of subsidized employer-sponsored health coverage – the largest federal expenditure, by far.

New analysis by the Urban Institute with funding from RWJF finds that capping the dollar amount at which this coverage is tax exempt, would raise hundreds of billions of dollars over the next decade by taxing the most expensive employer-sponsored health insurance premiums and other benefits.

The analysis finds that:
– $264 billion in new revenues would be raised from 2014 – 2023 by imposing a 75 percentile cap on employer-sponsored health coverage.
– The policy change would affect public-sector employees to a greater extent than private-sector employees.
– The cap would lead to a tax increase for 15.7 percent of people who file taxes in 2014 and 20.0 percent in 2023.

The Slowdown In Health Care Spending In 2009–11 Reflected Factors Other Than The Weak Economy And Thus May Persist

Source: Alexander J. Ryu1, Teresa B. Gibson, M. Richard McKellar and Michael E. Chernew, Health Affairs, Vol. 32 no. 5, May 2013
(subscription required)

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.

Additional Reductions In Medicare Spending Growth Will Likely Require Shifting Costs To Beneficiaries

Source: Michael E. Chernew, Health Affairs, Vol. 32 no. 5, May 2013
(subscription required)

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.

The distributional effects of the Social Security windfall elimination provision

Source: Jeffrey R. Brown, Scott J. Weisbenner, Journal of Pension Economics and Finance, FirstView Article, Published online: 24 April 2013
(subscription required)

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.

Shrouded Costs of Government: The Political Economy of State and Local Public Pensions

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.

Insuring the Future—Findings from the Commonwealth Fund Biennial Health Insurance Survey, 2012

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.
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Can Incentives for Long-Term Care Insurance Reduce Medicaid Spending?

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.