Tuesday, January 7, 2014

Means Testing for Oldsters ... Medicaid, Social Security, Medicare and the 50 Year War on Poverty

Tomorrow marks the 50th anniversary of President Lyndon Johnson's declaration of America's War on Poverty.

And for many oldsters, that 'War' in large part has been won. Now we have to figure out a way to pay for what we've done to future generations of Americans and do our part to help pave the way for their old age security as well.

So how about more restrictive eligibility requirements and even realistic means testing of benefits for oldsters?

The reality is that the funds to pay these promised benefits are not there, and the population is getting older -- much older -- as Baby Boomers are retiring in record numbers, leaving fewer people working and able to pay these promised but unfunded benefits.

Medicaid (yes, Medicaid) is one such program ripe for revision and in need of eligibility tightening. But while we're at it, let's address Social Security and Medicare as well.

And let's also focus on personal financial education as we rebuild a self reliant American society of individuals who are also interested in, and have the means to, take care of our fellow citizens in need of our assistance.

With respect to means testing, consider what Millionaires on Medicaid has to say in part:

"Expanding Medicaid coverage to an estimated nine million more Americans—as mandated by the Affordable Care Act—reinforces the idea that Medicaid only serves the poor. That perception is not accurate. And it distracts from a looming budgetary threat to the program: long-term care.

More than two-thirds of annual spending on long-term care for the elderly is paid by state and federal governments, $60 billion of which flows from Medicaid. With 10,000 baby boomers reaching retirement age every day for the next 19 years, the Congressional Budget Office projects that spending on long-term care will more than double by 2050—to 3% of GDP from 1.3%.

We might accept these rising costs if benefits flowed only to the elderly poor, as originally intended. But that is not the case. Significant long-term care benefits flow to individuals in the top 20% of retirement earnings, enabled by Medicaid's generous asset-exclusion limits.

In many states, an elderly person may own a home valued at $802,000, plus home furnishings, jewelry and an automobile of uncapped value while receiving long-term Medicaid support. In addition, they are allowed to have various life-insurance policies, retirement accounts with unlimited assets, $115,920 in assets for a spouse, income from Social Security, and a defined-benefit pension plan. By most standards, such a household would be considered wealthy.

Despite these generous rules, some individuals even game the system further by arranging complex asset transfers or insurance transactions that sidestep congressional efforts to curb fraud.

The rules wouldn't matter if wealthy individuals shunned Medicaid long-term care benefits. But with Medicaid crowding out private alternatives, many don't. In fact, 15% of elderly individuals in the middle-income quintile, 8% in the upper-middle quintile, and 5% in the top quintile receive Medicaid benefits.

Even these numbers don't capture the burden wealthy individuals place on Medicaid because they live much longer than the poor. Beneficiaries in the top income quintile receive, on average, double the lifetime payouts of those that are less well-off. And because Medicaid lowers reimbursement rates to providers and restricts benefits to contain costs, the poor are tied to lower-quality care and enjoy far less provider flexibility. . . .

The current Medicaid long-term care program is neither equitable nor fiscally sustainable. If we want Medicaid to cover those who truly need it, we must design an efficient system that leans more heavily on private-sector innovation—such as life-care annuities—and relies on responsible household planning to finance the care of wealthier American retirees."

Now we know that Medicaid is not just a government program for the poor. The fact is that too many unneedy oldsters are receiving Medicaid benefits today.
So let's take a minute and celebrate the victory in the War on Poverty for most oldsters today in comparison with oldsters of 50 years ago. It's a good news story.

The real winners in the 'War on Poverty' says this about the tremendous change in the lives of the old folks since the middle 1960's:

"In his first State of the Union address, 50 years ago this week, President Lyndon Johnson committed the federal government to a War on Poverty. And ever since, Americans have been arguing about whether the subsequent spending of trillions in public money has been worthwhile. But there’s one group for whom the answer seems close to a definite “yes”: People over age 65, who are far less likely to be living in poverty than they were 50 years ago.
LBJ declared ‘war’; retirees were the winners.

This week’s anniversary of LBJ’s war declaration, which falls on Wednesday, has led to a new wave of point-counterpoint punditry on whether the War on Poverty has been “won” or “lost.”

Annie Lowrey of the New York Times kicked off the discussion with a front-page article that ran over the weekend. Lowrey’s piece noted that the U.S. poverty rate has fallen only four percentage points, to 15% from 19%, since 1964, and that 46 million Americans still live under the poverty line.

But toward the end of her article, Lowrey notes:  “The poverty rate among older Americans fell to just 9% in 2012 from 35% in 1959.” (That data comes from the Census Bureau’s database on income and poverty, which defines “older” as age 65 and up.) That’s a stunning change, a drop of almost 75%, and it’s all the more remarkable when you consider that the percentage of Americans who belong to that age group has been growing steadily over the past half-century, from around 9% in 1960 to almost 14% today.

Before Johnson spearheaded the ‘Great Society’ initiatives, older people were much more likely than the average American to be poor; today, they’re much less so. Many of today’s retirees, of course, escaped poverty predominantly on their own, saving and investing their way to security. But as a group, older Americans have also benefited enormously from federal programs for retirees.

Social Security predated the War on Poverty, but under Johnson, Congress increased benefits substantially; by 1968, that change had helped the nation shave 10 percentage points off the elderly poverty rate, according to a recent report by Ron Haskins of the Brookings Institution. Even more significant: In 1965, Congress created Medicare, which essentially converted many of the health-care expenses of retirees into a public responsibility.

These programs, of course, aren’t usually what people have in mind when they criticize the War on Poverty. They’re talking about what we colloquially call welfare programs –food stamps, Medicaid, early-childhood education and job-training efforts, as well as long-term unemployment benefits. . . . As Congress once again takes up the question of how much federal spending is too much, it’s worth remembering: Spending on all of those programs combined is dwarfed by spending on Social Security and Medicare."

Summing Up

It's time to find a way to pay for the benefits of oldsters.

Means testing for entitlement programs for the elderly, as well as education about the need for appropriate levels of individualized saving and investing while working, are the answers.

And financial literacy and truth telling about our demographics and need for fundamental change are absolutely essential ingredients of a worthwhile and necessary national discussion going forward.

Today our politicians don't like to even mention these elephants in the room as a topic of conversation, and We the People have been too willing for far too long to ignore the growing issues of affordability, too.

But now inescapable demographics and an aging society are taking over (all over the world, too), and the Baby Boom generation is leaving the work force in record numbers. That means fewer workers per retiree, and that spells trouble for Medicaid, Social Security and Medicare in the future unless we address these issues in earnest.

Of course, economic growth is the best solution and for that private sector investment and global competitiveness is a must.

So is energy independence, which is within our grasp if the politicians in power will allow it to happen.

In other words, as always, the future is very much up to us. 

So let's lead the way and do the right thing for future generations.

That's the real American Way, and that's my take.

Thanks. Bob.

1 comment:

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