Archive | November, 2011

Reporting value of employer-provided health benefits on W-2 effective January 2012 … Is taxation of health benefits far behind?

30 Nov

Starting in 2012 employers will be required to report the  cost of employer-provided health care benefits in box 12 of your form W-2.  The amount will use code “DD”.

The amount shown on the W-2 is for information purposes and is not taxable . .  . for now.  However, do not lose site of the fact that the tax-free status of health benefits is the single largest revenue loser for the federal government.  The Simpson-Bowles Commission recommended a gradual phase out of this tax break.

Employer Provided Health Care Insurance: Exclusion capped at 75th percentile of premium levels in 2014, with cap frozen in nominal terms through 2018 and phased out by 2038; Excise tax (on high cost plans) reduced to 12%.

Given the failure of the super committee of Congress to accomplish anything, this employee tax benefit is a prime target for dealing with the federal deficit.  A change is unlikely to come all at once and it may be income sensitive, but it is hard to see how this plum will be left on the tree for much longer.

Lipitor goes generic, but you can receive the brand for only a $4.00 co-pay, check with your doctor and health plan.

29 Nov
A non-working animation of atorvastatin (Lipitor)

On Wednesday November 30, a generic version of Lipitor the popular cholesterol lowering drug becomes available. This will substantially lower the cost of taking this drug.

It also means that many health plans will require patients to switch to the generic version of the drug or pay a considerably higher co-payment. Some plans may allow a transition period and the manufacturer of Lipitor is offering a co-pay deal.

If you are taking Lipitor, now is the time to check with your doctor and your health plan or pharmacy benefit manager (PBM) about the new generic version. This is true for Medicare beneficiaries as well.

For the next six months due to the Pfizer rebate structure, Lipitor will be less expensive than the generic. PBMs normally steer folks to generics but this case will be the exception. Many PBMs have such a pricing arrangement with Pfizer. So where does that leave the patient? The PBM may save money via the Pfizer rebate, but will the patient pay the brand co-pay or generic co-pay? And what about plan provisions that require the use of a generic when available? During this six month period using a generic may save the patient money, but cost the plan more. Best to check with your plan, your employer or your PBM.

For example, from Businessweek:

UnitedHealthcare has 9.5 million individuals, according to the company.  After Nov. 30, the insurer’s customer will pay about $30 to $35 for brand-name Lipitor, compared with $50 to $60 for the generic, Mason (a UHC spokeman) said.

After six months, the co-pay on the copycats will drop to about $15 as more generic competitors begin selling the pills, said Lynne High, a UnitedHealth spokeswoman. The co-pay for Lipitor at that point will depend on Pfizer’s pricing, she said.

Such a change in co-pays may not be so easy in employer plans with fixed co-pays for brand and generic drugs and requirements that a generic be used when available.

The generic version will look different, some inactive ingredients may be different, but the chemical make up is the same as the brand version.

In some states, such as New Jersey, unless the doctors checks otherwise on the prescription order, the pharmacy will dispense a generic when available.

In an effort to keep you using Lipitor, you can receive a one month prescription for $4.00 even if you have private coverage paying a portion of the cost (but not Medicare or Medicaid). 

Here is the link to Lipitor For You

Related articles


Barney Frank retires; another example of why we need term limits

28 Nov
Representative Barney Frank, co-architect of t...

Massachusetts Rep. Barney Frank, the ranking member of the House Financial Services Committee, will not seek reelection in 2012, his office has confirmed. Frank is a 16-term Democrat who last year helped pass the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Mr  Frank is 71 and was first elected in 1980; he made a career out of politics and it is hard to imagine that the people in multiple generations knew enough about his politics to affectively evaluate his sixteen terms in Congress. In most of his bids for reelection  he didn’t even have to campaign. Mr Frank is one of many such career politicians in both parties who overstay their welcome.

Mr Frank has a unique distinction however. While no one person can be blamed for the financial crisis and housing bubble, Mr Frank deserves a lot of the credit via pushing for sub prime mortgages, pressuring the federal mortgage agencies and most recently the ill conceived Dodd-Frank legislation.  One can only wonder if his constituents  even knew of these efforts or the unintended consequences.  He is not alone of course, politicians of both parties should be held accountable for similar social engineering disasters.

No matter, he is retiring with his federal pension and related benefits. His thirty-two year career as a “public servant” is over. However, it should have ended much sooner because we should be limiting the terms for members of Congress. Power corrupts and a long stay in Congress creates a lot of power and little accountability .

Sign the term limit petition by clicking on the link at the top of the page. 

Why your retirement budget should include ongoing savings

25 Nov
ceramic piggy bank
Feed me, feed me

If you listen to the experts they will tell you that because expenses are lower and you no longer need to save, you can live on less in retirement.

About that saving thing … sure you are no longer saving for retirement, but that does not mean you no longer need an emergency fund with the ability to replenish it as needed. In other words, save again.

Here is my true story. Earlier this year my wife’s medical problems resulted in $1,000 in out-of-pocket costs. A few months ago I backed into a mailbox ripping the mirror off my car. That clearly was not planned, nor was my stupidity but it cost me $700 (yup, for the motor in a side mirror). My wife’s car needed new brakes, $430 and yes, that can be expected, unwelcome but routine. Here is the kicker and one I can legitimately claim as unanticipated. The famous October snow storm in the northeast devastated trees in my yard to the tune of $4,000 to get them trimmed and broken branches removed.

Let’s see, that is $6,130 in unanticipated, not budgeted expenses in the first ten months of my second year of retirement.  What to do, what to do?

Well, I’m lucky I do have savings to pay for this and when planning for retirement I budgeted ongoing savings for just such situations. I didn’t listen to the experts on this one. I am also lucky because I have a pension and do not rely on the accumulation of assets such as with a 401(k) plan. That is not typical.

What if I was relying on my 401(k) plan withdrawing at a certain rate for living expenses, but now I suddenly had to use an additional $6,000 in my second year of retirement. That snowstorm and my bad driving just put my future income stream at risk because depletion of my pool of money is accelerated. I may run out of money before I run out.

Assume you were earning $70,000 a year while working and you diligently figured that to cover all your expenses in retirement you need $65,000 (ignore taxes for this illustration).   An unexpected large expense throws your plans in a tizzy.   Let’s say you do have a pension, but no savings.  An unexpected expense probably means you whip out the credit card or otherwise take a loan. Either way your expenses have gone up and your living standard on your fixed income has gone down.

I hope there is a lesson here. Your retirement budget must include some ongoing savings. If you don’t need them,  great.  After a few years you’ll have extra money for a nice vacation. If you do have an emergency, it won’t impact your living standard.

Happy Thanksgiving

24 Nov
American cultural icons, apple pie, baseball, ...

Even in these difficult times, all Americans have cause for giving thanks.  Even our poor are rich when compared with the poor in many parts of the world. No living American has experienced war on their doorstep.  As dysfunctional as our government may be at the moment, our citizens are still able to occupy here and there without fear of torture or disappearing into the night.  Always remember, as bad as things may be, there is always someone who is worse off than you.

Give thanks today and think of those less fortunate no matter where they are.

Happy Thanksgiving!



Pass the gravy please.

Gartman on disparity between rich and poor. Can you still be successful in America?

23 Nov
"View in Wall Street from Corner of Broad...

The following comment from the Gartman letter in response to a reporter’s question on income inequality has gained a lot of attention.  You can argue that this response is a bit simple in content and comes across as a bit arrogant.  However, I think it is hard to argue with his fundamental position.  The dream for America has always been to better ones self, to become successful and wealthy if you will (although that should not be the primary goal in anyone’s life in my view)?

The dream has also been one based on opportunity.  How did we get from providing opportunity to criticizing success? The income disparity does need to be addressed, but that has nothing to do with tearing down the successful in America. We should be focused on building up the middle class and addressing those policies and laws that hamper middle-income growth. To do that we must take a global view and we must foster less dependency on programs that encourage mediocrity, entitlement mentality and complacency.

From the Gartman Letter:

After the meeting we were interviewed by a reporter who asked us a most pointed, left-of-centre question: “Mr. Gartman, what about the growing disparity between the rich and poor in the US, and the increasing dichotomy between what those at the top earn and those at the bottom? What of income disparity? How do you feel about that?”

We know that our answer caught the reported wholly off guard, for he was, rather obviously, expecting us to reply something like this: “Well, that is indeed a problem, and perhaps something should be done about it, for after all, don’t the young people in the Occupying Wall Street groups have at least this on their side.” We would have none of it and we caught this journalist wholly off guard when we answered.

“We celebrate income disparity and we applaud the growing margins between the bottom 20% of American society and the upper 20% for it is evidence of what has made America a great country. It is the chance to have a huge income… to make something of one’s self; to begin a business and become a millionaire legally and on one’s own that separates the US from most other nations of the world. Do we feel bad for the growing gap between the rich and the poor in the US? Of course not; we celebrate it, for we were poor once and we are reasonably wealthy now. We did it on our own, by the sheet dint of will, tenacity, street smarts and the like. That is why immigrants come to the US: to join the disparate income earners at the upper levels of society and to leave poverty behind. Income inequality? Give us a break?

God bless income disparity and those who have succeeded, and shame upon the OWS crowd who take us to task for our success and wallow in their own failure. Income disparity? Feh! What we despise is government that imposes rules that prohibit or make it difficult to make even more money; to employ even more people; to give even more sums to the charities of our choice. That is what we despise… oh, and next question please.” There were no further questions; there was a bit of applause from those standing around however. We took solace in that fact.

The following is a comment appearing on with regard to the Gartman comment:

Eva Pereira, Forbes Staff

Oh that explains it…so these groups of people joining the OWS movement across the country are just the cry-babies of capitalism. Lazy fools, unwilling to hard like Mr. Gartman has! Everyone look away now!  Nothing more to see. These are the sort of delusional, self-aggrandizing beliefs that got us into this mess in the first place.  To start with, let’s dispel the myth that anyone makes it on their own.  If you live in this country, then you benefit from the societal framework provided: an educated workforce, a police force to keep your streets and neighborhoods safe, a capable justice system that protects your rights as a citizen, roads, highways and public transport, etc.  The list goes on, but the point is, society provides the framework that makes it possible for the individual to succeed.  It’s disingenuous for him to say that he made it alone.  What’s worse, is by cheering the increasing fragmentation of society, he’s essentially shutting the door behind him!  The truth about economic inequality is that the more extreme it becomes, the less mobility there is for others.  Travel to any third world country, and you’ll see what I mean.  The poor have no hope, no political representation and no rights for that matter. God bless America for keeping people like Mr. Gartman in check.You know this isn’t fair, you work too hard.

Do you believe that the door to opportunity is shut in America?  Do you believe that the societal framework does not support all Americans? Do you believe that the poor in America have no hope or political representation and no rights?  In fact, America spends most of it money on supporting the poor and low income. Is America analogous to a third world country?

This isn't fair, you work too hard

Ok, no one makes it on their own. So, then why do some people make it and some people don’t?  Why do some people start in the same place and end up quite differently in life?  There are many reasons of course, but they are not found in criticizing the tortoise or the ant.

Democrats Urge Obama to Protect Contraceptive Coverage in Health Plans

21 Nov
Diana DeGette

"Free" Free at last!

The title of this post is actually the headline from a Sunday New York Times article on November 20th.   I find it incredible that as Rome burns our politicians, in this case apparently Democratic politicians, find their cause celeb is the “free” coverage by insurance of birth control pills.  I am trying to restrain myself at the stupidity of all this. 

Why in the world do birth control pills have to be “free?”  One exception may be within Medicaid where it makes sense to make this investment for people who likely truly need the help, but for the general population, give me a break. 

According to the one quote below millions of working women need coverage.  Get it “working women” need someone else to pay for their pills.  Apparently it is alright for them to pay 20% of the cost for open heart surgery, or treatment for breast cancer, but not 20% of the cost of a $35 prescription.   Many health plans have for years provided coverage for contraceptives with either modest co-pays or coinsurance, but that is now insufficient, it has to be free.

And you thought there was hope for us managing health care costs; not while this mentality persists there isn’t.

Quotes from the NYT article:

When the administration announced the requirement for contraceptive coverage, it said the decision was “based on science.”

House members have sent a letter to Mr. Obama urging him not to widen the exemption. Such a change, they said, would keep contraception out of reach for millions of women.

Representative Diana DeGette, Democrat of Colorado, said the broad exemption was “an outrageous idea.”

“Millions of women work for colleges, hospitals and health care systems that are nominally religious, but these folks use birth control and need coverage,” said Ms. DeGette, a leader of the Congressional Pro-Choice Caucus.

Based on science? . . . exactly what science tells us that people can’t afford to pay the cost or some part of the cost of a low-cost, voluntarily prescription drug?  Why is something that costs $15 to $50 a month out of the reach of millions of women when millions of (working} women already have such coverage with nominal co-pays or coinsurance?

Exactly what can a working women afford to spend $15 to $50 per month on; perhaps a few lattes, a trip or two to get their nails done, makeup, an extra pair of shoes, their hair?  No I am not being condescending or simply a smart ass, I am trying to point out that $1 spent on some important health care item is the same $1 spent on something not so important but that is not paid for by someone else.  We would think it ludicrous to say a manicure is covered by insurance, yet we don’t expect a person to make the choice between the manicure and a birth control prescription because “insurance should pay for the later.”  The prescription should be “free!”   As I have already said, we are not talking about the poor who cannot afford either. 

When I Googled(r) to find the current cost of oral contraceptives I often found something like this:

The initial physical exam in your healthcare provider’s office could range from $20 to $200. The monthly fee for each supply of pills ranges from $5 to $30 or more, depending on your medical coverage


Costs for generic birth control prescriptions change from pharmacy to pharmacy and also depend on your insurance plan, if it covers birth control. Often, insurance co-pays will be less for generics than for brand names. For example, you might pay $10 instead of $20 or $30. Some insurance plans will only pay for generics.

Get it, they don’t understand what the cost of something is, it depends on your insurance.  Here is a clue; the co-payment you pay is not the cost.

According to the Planned Parenthood website oral contraceptives cost between $15 and $50 per month.  “One popular birth control pill costs $48.07 per month for the brand name, or $27.99 for the generic.”

What hope does America have for controlling health care costs? Very little as long as we think we can cover it all and that the real cost of health care is only the portion we are expected to pay, which apparently is shrinking by the day.

Threatening politicians if they cut Medicare, it’s not only the elite who influence for self interest at our collective peril. What would you do to rein in Medicare costs?

20 Nov
WI: Then-Senator Barack Obama and AFSCME membe...

Lobbying by any other name

Twenty-six year old history majors are protesting on Wall Street, the influence of the wealthy is decried, lobbyists are bedeviled and yet when a politician even thinks of trying to fix problems that were caused by the promises of past politicians and the actions of us all, they are targeted and threatened with unemployment.  

We are shocked at influence peddlers for one group and then do exactly the same thing in the name of seniors, or teachers or public employees.  The answer is not that one group of the other is bad or good, deserving or not, it is that we are unable to grasp the concept that everything we do is connected.  There are consequences, unintended or not, to the promises we make, the policies we establish, the money we borrow, the decisions we make.

In the quest to deal with the deficit, both Medicare and Social Security must be addressed.  They are the two largest components of federal spending and growing.  To ignore that is irresponsible and yet we have groups like the AARP and the unions listed below who choose to ignore the realities of our spending and inability to fulfill unrealistic promises.  You simply cannot look at one element of spending in isolation and expect to solve a spending problem as desirable as that spending may be.

Take a look at this report from Capsules the KHN Blog 

TV Spots Target Three Republicans On Medicare Cuts

By Karl Eisenhower

November 16th, 2011, 4:16 PM

The AFSCME and SEIU trade unions, along with the liberal advocacy group Americans United for Change, are warning Sen. Dean Heller, R-Nev., Sen. Scott Brown, R-Mass. and Rep. Denny Rehberg, R-Mont., that votes in favor of Medicare and Medicaid budget cuts will be unpopular with seniors.

The groups launched ads today featuring the voice of a woman who sounds as though she’s old enough to be eligible for Medicare.  The script of each version is the same, with only the name of the targeted member of Congress changing.  Heller and Brown are seeking reelection, and Rehberg is running for the Senate against Democratic incumbent Jon Tester.

The ad targeting Sen. Brown, embedded below, is running only in the Boston market, and only on cable television.  The Heller ad is running on broadcast stations in Reno, and the Rehberg ad is running on broadcast stations in Billings and Missoula.  All three spots will run through the end of this week.

A transcript follows:

If you vote to cut Medicare, Sen. Brown, I will remember it every time I visit my doctor. I’ll remember you cut Medicare and Medicaid every time I fill a prescription. I’ll remember you cut Medicare if I fall or get hurt. I’ll remember you chose protecting millionaires over protecting my health. My friends will remember it too –- all of them. Call Senator Heller. Tell him to protect Medicare and Medicaid.

Here is a quote from the Americans United for Change website:

For decades, seniors have relied on Medicare being a guaranteed benefit and those less fortunate have depended on Medicaid to provide long-term care and coverage for children. These programs need to be strengthened to ensure they remain available for future generations, which means not gutting and decimating benefits, leaving low-income children, seniors, and people with disabilities out in the cold. The key to making Medicare sustainable is reining in costs, not dumping more expenses onto seniors. We are working to set the right priorities for an economically secure future while continuing to protect health care coverage for those who can least afford it.

They are right, the key to making Medicare sustainable is reining in costs.  Ok, now just tell us how or more important, who will receive less when those costs are reined in?  Here is a check list of possibilities:

 [] doctors [] hospitals [] drug companies [] patients [] high-tech equipment manufacturers [] nursing homes 

The Affordable Care Act already claims to have saved over $400 billion in Medicare costs, plus raising an additional $100 billion plus from new taxes on the wealthy and employers.  The Act contains 160 programs and projects designed to lower costs over time and all this is still not enough.  Doctors are supposed to see their payments cut  27% in January 2012, but that will never happen. 

So, let’s have suggestions for “reining in costs!”

Public employee unions; Ohio voters shoot themselves in the foot; Mr. Spock, why didn’t you vote? Madam Secretary, have you read your job description?

18 Nov

Some public employees may have gained a victory, but the people of Ohio voted themselves a big loss.

I am not against unions or collective bargaining; I participated in both for many years. Unions serve a valuable and necessary purpose. In fact, I currently work with a union, but to have a fair collective bargaining process both parties must represent their respective interests trying to achieve mutually beneficial goals. That is rarely the case when unions bargain with politicians who are largely dependent on the unions for their jobs. Public employee unions are not the same as other unions.

Many states and cities have gotten themselves to the brink of bankruptcy as labor costs and pension liabilities consume their budgets. That didn’t happen as a result of effective bargaining by government officials. The fact is that collective bargaining in the traditional sense does not work with public employees and their unions and bureaucrats and politicians because no one looks out for the interests of the group with the most at stake; taxpayers. (apparently in Ohio taxpayers don’t even look out for their own interests.)

I am the only logical person around?

In Ohio the unions spent $30 million (of member dues) to defeat legislation limiting collective bargaining for state workers. Ohio unions were still able to negotiate for wages and working conditions. There is no victory for anyone. Where is Mr Spock when you need him? Voters in Ohio threw out all logic with their vote and rather were swayed by some misdirected emotional attachment to firefighters, police officers and teachers. Public employees deserve a fair compensation package, but regardless of the job they do or service they perform, that package must be affordable to the citizens who foot the bill today and into future. It was only the most costly and the most subject to abuse issues that were off the table, mainly pensions and other benefits.

The voter who holds the view that “teachers are underpaid or first responders risk their lives and deserve every penny they get” without regard to economic reality or the total concept of public employment, has no right to complain about taxes or loss of other government services. Attempting to manage public labor costs is not an effort to hold down the middle class; rather it protects the vast middle class dependent on government services.

Even while the OWS crowd blames their woes on the one percent, in many states and cities far more damage is being done by public employee union contracts and the politicians who supported them. Mr. Spock would support the logic of politicians trying to fix long-term problems not overturn their efforts or vote them out of office.

In the meantime our Secretary of Labor makes it clear where the sympathies of the Obama administration reside. How inappropriate is it for a cabinet member to be so one-sided. Read this statement carefully. It hits all the right emotional buttons and mixes the attributes of public and private collective bargaining as if they were the same. Such political pandering is reprehensible.Guess what, government entities are not businesses and don’t operate as if they are, that is the difference.

Official portrait of Secretary of Labor Hilda ...

Ah, sweet victory!

News Release
OPA News Release: [11/09/2011]
Contact Name: Carl Fillichio
Phone Number:
Release Number:

Statement by Secretary of Labor Hilda L. Solis on Ohio labor law vote
WASHINGTON — Secretary of Labor Hilda L. Solis today issued the following statement on the Nov. 8 Ohio labor referendum, in which a majority of voters rejected a state law limiting collective bargaining:

“Last night, Ohio voters delivered a bona fide victory for public sector workers everywhere.

“After months of advocacy and organizing, the people of Ohio have defeated a law that would have silenced the middle class and curtailed the collective bargaining rights of thousands of teachers, firefighters and police officers. Ohio has made it clear: these dedicated public servants still need a seat at the table to demand fairness, dignity and respect — especially in tough economic times. Through their unions, they have a voice in their workplace, in their future and, most importantly, in our future.

“In my time as labor secretary, I’ve seen firsthand time and time again how unions make remarkable contributions to the strength and prosperity of our nation. In workplaces across the country, collective bargaining is helping businesses improve their bottom line, providing tax payers with high-quality services, making workplaces safer and more productive, and ensuring that all Americans have the opportunity to make it into the middle class.

“I am proud to join everyone in Ohio and across the country in celebrating the voice of workers, which can only be guaranteed when they have the right to organize and bargain collectively. Congratulations to all who contributed their time, passion and dedication to achieve this incredible feat for working families.”

While Ohio voters were shooting themselves in the left foot on this issue they couldn’t resist taking aim at their right as well. They overwhelming approved a (meaningless) referendum rejecting the Obamacare mandate to carry health insurance. Hey folks, you may not like the Affordable Care Act or Obama, but the logic and reality is that you cannot have affordable health care if you allow people to game the system, jump in and out of coverage as they need it and dare I say it, not “pay their fair share” in premiums even if they don’t use health care. Everyone has to be in the pool.

Ohio voters, and I suspect many others, seem to think you can deal with selected issues in isolation without extended consequences, you can’t!

The wealth gap … not what you think. Fixing Social Security without hurting anyone

17 Nov

From an article in Money Watch:

According to a recent analysis by the Pew Research Center, the gap in wealth between Americans over age 65 and under age 35 has widened considerably since the 1980s; the median wealth of this older American age group is now 47 times the median household wealth of the younger group, up from a ratio of just 10 to 1 in 1984.

What was that you said AARP, “don’t touch my Social Security or Medicare!”

Nobody is going to cut anyone’s benefits, but they must change what happens in the future. Here are ideas to save tons of money with virtually no one being harmed.

Medicare & Social Security Deficits Chart

First, adjust the COLA as has been suggested to a chained inflation calculation starting in 2012. [no benefits are cut, however they may rise slightly less than under today's formula and I do mean slightly.]

Second, beginning in 2025 new Social Security beneficiaries do not receive a COLA during the first five years following the start of benefits with a possible exception of some kind for those receiving disability before age 65. [there would be time for people to save and plan for this period of fixed income]

Third, effective 2025 anyone receiving the maximum Social Security benefit at the time they begin benefits (highest income group) will be eligible for a COLA every other year during their retirement with no catchup for skipped years. [This is both fair and realistic]

Even though these ideas do not save cash immediately, they greatly reduce future liabilities thereby extending the period of solvency without additional revenue.

Remember, at one point incoming taxes were more than sufficient to pay benefits with the surplus buying Treasury bonds. Today incoming taxes are not sufficient to pay benefits and interest on the previously purchased bonds must be used. Unless we do something down the road, the bonds will have to be redeemed to pay benefits and finally when there are no bonds to pay interest or redeem, incoming payroll taxes will be sufficient to pay only a portion of promised benefits.

Why wouldn’t we want to fix this now?

Perhaps seniors giving up a little they never had in their pockets will leave a little in the pockets of the Americans hoping to be seniors some day.

P. S. Those interest payments on the bonds held in the Social Security Trust and the cash to redeem those bonds comes out of another area of the federal budget and contribute to the deficit. As I have noted before, the money given to Treasury by the Social Security Trust (your payroll taxes) to purchase bonds has already been spent by the government. The money to pay interest on the bonds comes from … well, thin air and wishful thinking … Feel like Greek or Italian takeout tonight?

Pass this along to AARP and you Congressman and Senator

Teachers are underpaid, teachers are overpaid, what’s your perspective?

16 Nov

Are teachers underpaid, overpaid or is their bowl of porridge just right?  Take a position and I can find you statistics to support it. The fact is you can’t realistically find other jobs fully comparable to a classroom teacher. After all, what job in industry has to put up with a parent who thinks her C student belongs in an AP course? What other job virtually requires you to buy your own supplies?

People don’t go into teaching to get rich and people wouldn’t keep going into teaching if they were not adequately compensated; that’s total compensation, not just pay. I’d like a job with eight weeks off in the summer, snow days, and a week off here and there during the year. I wouldn’t like a job managing a few dozen kids for hours on end or reading a couple of hundred eighth grader’s attempts at prose while watching Desperate Housewives.

Is a pension better than a 401(k) plan, you betcha. Is paying little or nothing for health insurance better than paying 25-30% of the premium, again affirmative. Is individual job security through tenure better than employment at will, it kinda is. Are government backed health benefits in retirement at any age retirement is permitted better than “you are on your own” before age 65, I’m guessing it is.

Let’s run some numbers. Say you are a teacher earning $60,000 a year. You work 180 days a year or a total of 1440 hours. That means you earn $41.66 an hour (yes I know, you actually work more hours, but so do people in the private sector if they want to keep their job and advance). Now let’s look at a training manager in a large company also earning $60,000. She works 264 days a year less 10 days vacation and say 8 holidays. That’s a total of 1968 hours meaning she earns $30.48 an hour or 36.6% less than the teacher. Or to put it another way, the corporate trainer would need base pay of $81,960 to be even with the teacher plus about an additional 15-20% to be even in total compensation and benefits.

Now look at the reality of pensions. It’s true most teachers pay a significant portion of their pension. However, that is comparable to the 6% to 8% of pay private sector workers must contribute to get a full employer match on a 401(k) plan.  A teacher earning $60,000 likely will have a pension of 70% of pay at full retirement age. To equal that pension initially, the worker with a 401(k) plan needs about $585,000 (to buy an annuity) and that does not provide a survivor benefit or inflation adjustment.  The typical teacher pension provides both. Many teachers also have a 403b plan to supplement their pensions.

But you know what, none of the above matters. What matters is what is affordable to the people footing the bill. In the private sector that is the business owner or shareholders. In the public sector it is taxpayers. You can argue all you want about who is over or under paid, what job is unique or more valued than another, but what matters is the ability to pay for the expense that is created.

Public employees are clearly at a disadvantage because there are limits on public spending and taxing (or there should be) and that is the essence of the problem.  The debate and crisis we are seeing today is a result of politicians and union leaders forgetting that fact and now faced with high costs and tremendous long-term liabilities which fall squarely on the shoulders of taxpayers.

Making the argument that teachers, police officers and firefighters “deserve” more is quite irrelevant, as irrelevant as the AARP saying seniors earned their untouchable Social Security and Medicare benefits.  

The head of the NJ teachers union earns $250,000 a year, the President of the United States earns $400,000 and according to the Bureau of Labor Statistics latest data, the average salary of a registered nurse in the United States is $67,720. The average teacher salary varies widely by state, but appears to be around $55,000. In some higher income states it is $60,000 or more.

So, are teachers overpaid?  Pick your facts.

Why does Congress get a free pass on insider trading?

15 Nov
A sleeping bag. A corner of the black sleeping...

Where should I put this thing?

Every time I hear the words occupy Wall Street I chuckle to myself, not that there is anything really funny, just pathetic. Sure there are many problems to be addressed, but they are not on Wall Street or Oakland or Seattle.

I can tell you where to protest without even naming a location. Remember the flap over insider trading, some guy just went to jail for four years and Martha Stewart served a few months for the same thing, it’s not a good thing, it’s illegal, well almost.

Did you know that members of Congress and their staffs are not covered by insider trading laws? They can and do use information they learn about in closed-door meetings, in legislative discussions and other non public venues to enrich themselves.

Not only can they act on this information they can tell others like the person who may be managing their blind trust.

In addition, Congress has for years ignored legislative initiatives to correct this travesty. Hey it’s no secret, I heard about it in detail on NPR and the Wall Street Journal and other publications have raised the issue repeatedly. I guess we need tents and sleeping bags to make a point.

Do you think anyone occupying someplace reads this blog … Or the newspaper?

How does a public servant for decades accumulate multi-millions of dollars?

The Early Retiree Reimbursement Program (ERRP); a word of caution about sharing savings with retirees

15 Nov

Employers who provide retiree health insurance received a windfall under the Affordable Care Act via the ERRP program which reimburses them for a portion of the expenses incurred by early retirees (pre-65).  Employers can use these funds in a variety of ways as long as they benefit the plan.  The idea is to help keep this coverage in effect at least until 2014 when the exchanges go into effect under PPACA.  Some employers are using a portion of the refund to keep 2012 premiums lower for the enrolled retirees, but is this a good idea? Perhaps it is not the best way to share this temporary payment.

Read more in this article I prepared for Health Insurance Illuminated.  

Note: The referenced blog post was written before HHS announced that the Medicare Part B premium for 2012 would be $99.90. That represents an average annual increase of only 1.2% since the last premium change several years ago and is far below the past five-year rate of increase in Medicare costs as reported in the Medicare Trustees in their 2011 annual report. The increase is also much lower than projected annual cost increases for 2012 and beyond.

  • Early Retiree Reimbursement Program (ERRP) – here comes the money, but what is the fair way to use it? (
  • More money for the Early Retiree Reimbursement Program (ERRP) S.1088 – not likely. (

Raising Medicare eligibility age above 65; where are the savings?

14 Nov

The special congressional committee is looking for ways to reduce the deficit. That really means taking more of your money and giving you less for it, but that’s ok if it is in our long-term best interest … it is, right?

One idea that keeps surfacing is raising the Medicare eligibility age to 67 or some other number above 65. That is supposed to save money, a good thing I guess. But remember, saved money has to come from someplace. In this case it will come from individuals, employers and guess what, it will still come from the federal government as well.

That is because many, if not most, of the new young elderly will be getting their health care through the government subsidized exchanges and depending on their income will receive a substantial subsidy toward the premiums. Is that what we call taketh with one hand and giveth with the other?

Let’s assume you are 66 with an income (perhaps Social Security) equal to 133% of the poverty level, that’s about $14,483 for a single person in 2011. Your cost for health insurance is capped at 3% of income so your premium above $434 a year is paid for by the government. What do you think the premium will be for a 66-year-old? Well today the full cost of Medicare Part B alone is about $400 per month; add to that hospital and drug coverage and you get a total cost in excess of $10,000 a year of which in this example, $9,566 will be paid for by the government. Of course smaller subsidies apply on incomes up to 400% of the poverty level, but you get the idea, costs go from Medicare to PPACA, while the risk goes to the insurers and all their policyholders.

Now you know where the savings come from.

It’s not just about millionaires

13 Nov

If you would like to read an excellent article about the realities of our deficit and dealing with it, I highly recommend:

It’s Not Just Millionaires” in the New York Times (can’t believe I just wrote that).

← Older Entries