Savings Medicare Beneficiaries Need for Health Expenses: Some Couples Could Need as Much as $350,000 by Paul Fronstin, Jack VanDerhei :: SSRN

February 9, 2017

This paper examines the amount of savings Medicare beneficiaries are projected to need to cover program deductibles, premiums and other health expenses in retirement. For the purposes of this study, health expenses include premiums for Medicare Parts B and D, premiums for Medigap Plan F, and out-of-pocket spending for outpatient prescription drugs. Data come from a variety of sources and are used in a Monte Carlo simulation model that simulates 100,000 observations, allowing for the uncertainty related to individual mortality and rates of return on assets in retirement.

  • In 2016, a 65-year-old man would need $72,000 in savings and a 65-year-old woman would need $93,000 if each had a goal of having a 50 percent chance of having enough savings to cover health care expenses in retirement.
  • If they wanted a 90 percent chance of having enough savings, the man would need $127,000 and the woman would need $143,000.
  • A couple with median prescription drug expenses would need $165,000 if they had a goal of having a 50 percent chance of having enough savings to cover health care expenses in retirement. If they wanted a 90 percent chance of having enough savings, they would need $265,000.
  • For a couple with drug expenses at the 90th percentile throughout retirement who wanted a 90 percent chance of having enough money saved for health care expenses in retirement by age 65, targeted savings would be $349,000 in 2016.
  • From 2015 to 2016, projected savings targets increased between 0 percent and 6 percent. In contrast, savings targets declined between 2011 and 2014, but then they increased from 2014 to 2015 as well. Despite the increase in savings targets since 2014, the 2016 savings targets continue to be lower than they were in 2012 almost across the board. It is important to note that many individuals are likely to need more than the amounts cited in this report.

This analysis does not factor in the savings needed to cover long-term care expenses and other expenses not covered by Medicare, nor does it take into account the fact that many individuals retire prior to becoming eligible for Medicare. However, some workers will need to save less than what is reported if they choose to work past age 65, thereby postponing enrollment in Medicare Parts B and D if they receive health benefits as active workers.

Source: Savings Medicare Beneficiaries Need for Health Expenses: Some Couples Could Need as Much as $350,000 by Paul Fronstin, Jack VanDerhei :: SSRN


Concentrating on the Fall of the Labor Share by David H. Autor, David Dorn, Lawrence F. Katz, Christina Patterson, John Van Reenen :: SSRN

February 7, 2017

The recent fall of labor’s share of GDP in numerous countries is well-documented, but its causes are poorly understood. We sketch a “superstar firm” model where industries are increasingly characterized by “winner take most” competition, leading a small number of highly profitable (and low labor share) firms to command growing market share. Building on Autor et al. (2017), we evaluate and confirm two core claims of the superstar firm hypothesis: the concentration of sales among firms within industries has risen across much of the private sector; and industries with larger increases in concentration exhibit a larger decline in labor’s share.

Source: Concentrating on the Fall of the Labor Share by David H. Autor, David Dorn, Lawrence F. Katz, Christina Patterson, John Van Reenen :: SSRN


What Happens When Doctors Only Take Cash | Time.com

January 30, 2017

Sometimes called direct pay, and closely related to concierge care, this sort of business model was once seen as the perquisite of rich folks and medical tourists from foreign lands. But nowadays many of the people seeking cash-based care are middle-class Americans with high-deductible insurance plans. For a patient with an $11,000 family deductible, for example, it might make more sense to seek out a cash-based center like the Premier Medical Imaging facility in Minneapolis, which offers a basic MRI for $499, than to cough up the several thousand dollars that the same procedure generally costs at a traditional hospital. Cash payments don’t count toward a patient’s deductible, but for some it’s worth the gamble.

Source: What Happens When Doctors Only Take Cash | Time.com


Saving and Wealth Inequality by Mariacristina De Nardi, Giulio Fella :: SSRN

January 21, 2017

Why are some people rich while others are poor? To what extent can governments affect inequality? Which instruments should they use? Answering these questions requires understanding why people save. Dynamic quantitative models of wealth inequality can help us understand and quantify the determinants of the outcomes that we observe in the data and to evaluate the consequences of policy reform. This paper surveys the savings mechanisms generated by the transmission of bequests and human capital, by preference heterogeneity, by rates of returns heterogeneity, by entrepreneurship, by richer earnings processes, and by medical expenses. It concludes that the transmission of bequests and human capital, entrepreneurship, and medical expense risk are crucial determinants of savings and wealth inequality.

Source: Saving and Wealth Inequality by Mariacristina De Nardi, Giulio Fella :: SSRN


The Interaction between Consumption and Health in Retirement by John Karl Scholz, Ananth Seshadri :: SSRN

November 16, 2016

We study the interaction between consumption and health in retirement. Our main contribution is the estimation of a consumption Euler equation taking health into consideration. The Euler equation is derived from a model of consumption in retirement with three important building blocks of health: health shocks, health as an investment and health as a provider of utility. We estimate the Euler equation using data from the Health and Retirement Study (HRS) and Consumption and Activities Mail Survey (CAMS). The estimates suggest that health is an important determinant of utility. We use the estimated model to study the empirical significance of the three building blocks of health. We find that health shocks play an important role in slowing down the decline of consumption with age in retirement. We also find that including health into the utility function could help explain the heterogeneous consumption-age profiles related to health. Finally, we find that health investments, such as physical exercise, have a significant effect on the evolutions of both health and consumption in retirement.

Source: The Interaction between Consumption and Health in Retirement by John Karl Scholz, Ananth Seshadri :: SSRN


Best Marijuana Taxes Yet: California’s Proposition 64 by Pat Oglesby :: SSRN

October 29, 2016

Two devastating traps threaten taxes on newly legalized marijuana. One is the quicksand of inflexibility, leading to impotence during a whirlwind of market change. Static laws and price-based taxes lead into that trap.The trap other is playing favorites by favoring medical users, opening an abyss of tax evasion by recreational users pretending to be sick. California’s Proposition 64, on the ballot in November, avoids those traps better than the marijuana initiatives in Arizona, Massachusetts, Maine, and Nevada.It takes lessons from failed initiatives in California, Ohio, and Oregon, and laws on the books in Alaska, Colorado, Oregon, and Washington.

Source: Best Marijuana Taxes Yet: California’s Proposition 64 by Pat Oglesby :: SSRN


The Once and Future Cadillac Tax | Bill of Health

October 16, 2015

The National War Labor Board was still cautious of this benefit becoming unreasonable and put a limit on the amount of health insurance that could be tax-free in their 1943 decision. The Board ruled that tax-free health insurance expenditures must be less than five percent of annual salary.

This limit on the amount of money that an employer can spend on health insurance was not present in the 1954 law that cemented the tax treatment of health insurance. As noted earlier, the share of health insurance as a percent of income was much less than five percent. The policy makers of the time did not have a reason to believe that medical costs would rise to what they are today. Except they should have. The federal investment in medical technology has been had been growing at 10 times the rate of wage growth for the previous two decades.

Source: The Once and Future Cadillac Tax | Bill of Health