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From the monthly archives: December 2008

We are pleased to present below all posts archived in 'December 2008'. If you still can't find what you are looking for, try using the search box.

Part D Enrollment Deadline Tomorrow!

O.K., so you've put off looking at your Part D prescription drug coverage (even though you know you should) and now the Part D deadline is looming. Whether you're a new enrollee or someone who's already's still NOT too late to take some time to review your options!  Current beneficiaries need to evaluate your current plan to ensure your prescriptions remain covered next year and at what cost.  When evaluating plans consider the three C's: 
Coverage - Does the plan cover your medicine, brand names or generics? What is the plan's coverage gap (doughnut hole)? Do you need more comprehensive coverage next year? Cost - What is the plan's monthly premium? Does the plan have a deductible? How does the plan handle co-payments? Convenience - Is your pharmacy in the plan's network?  Does the plan have a mail-order option?
The National Committee's Frequently Asked Question Booklet provides more detailed answers to many Part D questions.  You can see it on our website. For new beneficiaries, it's especially critical that you not let the daunting task of evaluating your prescription drug needs and the myriad of diverse plans delay your decision to enroll in Part D.  For every year of delay, you will be penalized.  Here's one example of how the enrollment penalty works: John was first eligible to enroll in Medicare Part D during the Initial Enrollment Period that began on November 15, 2008 . Despite his eligibility for drug coverage, John did not enroll in Part D. 
John waits until Nov 2009 to enroll for 2010 coverage (1 year)
  • At enrollment, national average premium is $30
  • His penalty added to each month's premium is 1 percent of $30 x 12 months = $3.60
John waits until Nov 2013 to enroll for 2014 coverage (5 years)  
  • At enrollment, national average premium is $40
  • His penalty added to each month's premium is 1 percent of $40 x 60 months = $24
John waits until Nov 2018 to enroll for 2019 coverage (10 years)  
  • At enrollment, national average premium is $53
  • His penalty added to each month's premium is 1 percent of $53 x 120 months = $64
  • His premium payment is now doubled because of the penalty
  • If he enrolls in a plan with a $30 premium, his payment is tripled because of the penalty
CMS also provides a drug plan finder tool on its website.  About now you're probably asking "Why does it have to be so difficult?"  We don't believe it should!  The National Committee believes Part D needs immediate changes to:   
  • Allow seniors to get prescription drugs directly from Medicare while requiring Medicare to negotiate the lowest prices for seniors, just like the VA.
  • Eliminate the lifetime penalty for seniors until this confusing plan is overhauled.
  • Eliminate government subsidies to insurance companies which would free up funds to close the costly coverage gap to seniors, known as the "donut hole".

Finding the Right Retirement Mix

Chances are you've heard of retirement's "three-legged stool"-- Social Security, Employer-sponsored pensions, and Individual savings.  But in these days of plummeting 401K balances, dismal personal savings rates, and disappearing employer-backed pensions, many Americans are now teetering on just a leg or two.   The head of one mutual-fund industry group, the Investment Company Institute, says "this is a very dangerous moment for the future of America's retirement system".  Specifically, he's worried about the future of 401K's given their dismal performance during the economic crisis and hopes to discourage lawmakers from making any radical changes to our current 401K system.  But what we found especially interesting was this recent comment made at a National Press Club news conference by ICI's President/CEO, Paul Schott Stevens:
"The first step in bolstering America's retirement security is to put Social Security on a sound financial footing. Social Security is the foundation of our system for retirement income. It is important to all, and especially to those least able to save on their own. For the lowest-paid workers, Social Security benefits are projected to replace up to two-thirds of their working income...So Job One is to ensure Social Security meets its promises. I'm not here today to endorse any specific plan. But I will tell you one plan that the mutual fund industry has and will continue to oppose: We do not--I repeat, do not--advocate privatizing or personal accounts for Social Security. The system should remain what our grandparents knew it to be: a universal, employment-based, progressive safety net for all Americans."
We couldn't agree more and are encouraged to see that at least one investment industry group understands the critical role Social Security plays in the retirement of millions of Americans.  Social Security continues to be the one stable retirement income seniors can count on each month regardless of what's happening on Wall Street. The program should remain the social safety net it was created to be and as Stevens correctly pointed out personal accounts are not the answer.  So what is being proposed? The Wall Street Journal has highlighted many of the alternate retirement plans surfacing after the Wall Street crises.  
"It's no wonder, that proposals are proliferating to overhaul 401(k)s. Some individuals are pushing initiatives to simplify retirement-savings plans in ways designed to appeal to small businesses -- many of which do not provide a plan. A few even go so far as to suggest that the 401(k) itself be retired or returned to the supplementary role it was intended to serve. They favor creating a new system that would cover everyone."
 Some are new ideas, some have been around for years.  One proposal would create a government-sponsored Universal 401(k) plan open to all. Another is called Super Simple, modeled after a pension system scheduled to go into effect in the United Kingdom in 2012. Another plan is a government-sponsored Guaranteed Retirement Account, which would provide a guaranteed rate of return of 3%, on top of inflation.   So many plans, so many proposals, so little time for those ready to retire.

Medicare Reform = Health Care Reform

"I'm counting the days until I qualify for Medicare."  It's a common refrain from millions of older, uninsured adults anxious to reach eligibility for government sponsored healthcare coverage. Yet, the financial burden of unchecked health care costs system-wide has strained the successful program, leading to growing out-of-pocket fees, cost shifting to seniors and a financial drain on an already challenged economy. Health care reform will be one of the early challenges facing the Obama administration.  So, how will this debate impact seniors in Medicare?  We've released six policy papers analyzing the health care debate and its importance to Medicare beneficiaries:             By 2025, over one-half of the average senior's Social Security benefit check will be consumed by Medicare out-of-pocket costs.             Health care coverage for the average family increased 30% between 2001and 2005 yet income increased just 3% over the same period.             All Americans, not just seniors, the disabled and low-income, should have the option of buying a government run health insurance plan.             Computers can improve health care services yet only 17% of doctors use electronic health records and only 4% use electronic prescribing.             The current physician payment system should be replaced to reward doctors for high quality, cost efficient care while providing seniors access to a full range of medical services.             Better information about treatment options, coupled with incentives for doctors to use that information, could reduce health care spending while improving health outcomes.  We hope these summaries will help seniors understand just how important the upcoming health care debate will be to their future health security.

Social Security is NOT a Ponzi Scheme

FDR once said, "Repetition does not transform a lie into the truth".  Even so, in their coverage of Bernard Madoff's con of his investors, some business bloggers and journalists who should know better continue to equate Social Security with a Ponzi scheme. So we'll say it again... Social Security isn't a Ponzi scheme. It's a pay-as-you-go social insurance system with very clear distinctions from the Madoff scheme or any other investment ruse.  We've written about this many times.  Our own Social Security advisor and columnist, Mary Jane Yarrington, usually gets questions from her readers after yet another Ponzi scheme viral email campaign makes the rounds.  Here's a portion of her most recent response to a reader's question: 
"Anyone who tells you Social Security is a Ponzi scheme either doesn't understand what a Ponzi scheme is or their mother's didn't teach them not to fib. This myth is a favorite of conservatives who just hate the idea of social insurance in general. The Social Security Administration has a good history describing why this is nonsense. Social Security is not a Ponzi scheme. Social Security is a pay-as-you-go system with the contributions of today's workers going to today's retirees or into the reserve to pay benefits to future retirees. The ratio of workers to retirees has changed over time, but unless this nation allows the system to be abolished, there will never be a time of no workers paying into the system. The most recent report of the Social Security Board of Trustees forecasts that even with no changes in the system, reserves will last through 2041 and even after that, 75% of promised benefits could be paid with incoming payroll taxes.  And don't give any credence to the nonsensical comparison that in 1940 there were 40 workers to each retiree and today it is only three to one. Of course, there were fewer beneficiaries. 1940 was the first year a benefit was paid so millions of then-retired workers didn't have the opportunity to contribute payroll taxes and earn benefits. Many of those ineligible for benefits in 1940 then relied on public assistance or their children to survive their retirement years. Hardly the "good old days" those who hate Social Security should be so eager for us to return to."
So when someone describes Social Security as a Ponzi scheme please take just a moment to consider this person's understanding of economics or better yet, his agenda.  If you have any questions about Social Security, National Committee's Senior Policy Analyst Mary Jane Yarrington can be reached via Ask Mary Jane.

Putting the "Social" back in Social Security

Kudos to sociology professor Michael Messner at USC and the Los Angeles Times for a wonderful oped this month reminding readers what Social Security is really all about.  
"Social Security is not an individual retirement account. The genius of Social Security -- and what makes it so civilized -- is its social nature: It says to each and every one of us that we will take care of each other. Changing the system so that people pay into it fairly across the income spectrum is an important start of putting the "social" back in Social Security."  
For Messner, like millions of Americans, the preservation of Social Security isn't just an academic or theoretical issue: 
"My college roommate's parents both died when he was still in high school. Social Security survivors benefits helped him finish college. My sister, Terry, after decades of working and paying in to Social Security, was diagnosed in her 50s with early onset Alzheimer's. Her job delivering home meals to senior citizens paid modestly and included no pension program. Her only asset was her home, and Social Security disability has helped her remain solvent.  My 84-year-old mother, twice widowed, is partly supported by a monthly Social Security retirement check thanks to her years of clerical work in county administration."
We highly recommend you read the entire article and we're glad to give professor Messner and the Los Angeles Times  a "Networthy Award" for outstanding coverage of elder issues on the net.
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