The first quarter of 2012 is upon us and it has been rather unusual on a couple of fronts. First the weather has been warmer than normal. Secondly, the Dow Jones Industrial Average had the best Quarter 1 return since 1998. At the end is some information from Wikipedia about how Palm Sunday is celebrated around the world, I found it interesting.
Vanguard
In a television interview earlier this week, Federal Reserve Chairman Ben Bernanke said that the economy has made strides over the past few months, but that housing and unemployment remain a threat to a full recovery. Economic indicators this week were a mixed bag. The U.S. economy expanded in the fourth quarter. Consumer confidence fell slightly. Consumers are spending more, and businesses are investing—but at a slower pace. For the week ended March 30, the S&P 500 Index rose 0.8% to 1,408 (for a year-to-date total return—including price change plus dividends—of about 12.6%). The yield on the 10-year U.S. Treasury note fell 2 basis points to 2.23% (for a year-to-date increase of 34 basis points).
Quarter 1 Review
The biggest concern during the quarter was the price of oil and the Iranian oil issue. So far this has not had a significant impact on our economy and it appears that many world leaders are trying to keep it that way. It is important to listen for the clues from leaders around the world on this issue.
Two concerns existed when the quarter began which seem to have faded. These were the economic recovery and Europe. Our economy remains on a slow recovery and it will for quite awhile. The European crisis seems to have blown over once people realized that it was time to bring it to closure.
So what happens in quarter 2? I sure wish I knew the answer. My plan is to take some profits and get more conservative in some accounts during April since we have gotten a gain during the quarter which normally would occur during the entire year. I like the saying of a bird in the hand is worth 2 in the bush.
Palm Sunday Celebrations Around the World - Wikipedia
It is customary in many churches for the worshippers to receive fresh palm leaves on Palm Sunday. In parts of the world where this has historically been impractical, substitute traditions have arisen.
In Lebanon, Syria, Jordan and Israel, Palm Sunday – known as Shaa’nini in Arabic- is perhaps the best-attended service in the Christian Calendar, among the Orthodox, Catholic (Latin rite and Eastern rite), Maronite and Anglican Churches, perhaps because it is notably a family occasion. On this day, children attend church with branches from olive and palm trees. Also, there will be carefully woven crosses and other symbols made from palm fronds and roses. There will normally be a procession at the beginning of the service and at some point, the priest will take an olive branch and splash holy water on the faithful.
In Latvia, Palm Sunday is called "Pussy Willow Sunday", and pussy willows – symbolizing new life – are blessed and distributed to the faithful.[9] Children are often woken that morning with ritualistic swats of a willow branch. People also catch and spank each other with the branches, a ritual often consummating in sexual intercourse.
India
Flowers (in this instance marigolds) strewn about the sanctuary in an Oriental Orthodox church in Mumbai, India on Palm SundayIn the South Indian state of Kerala, (and in Indian Orthodox,Church of South India(CSI), Syro-Malankara Catholic Church, and Syrian Orthodox Church (Jacobite) congregations elsewhere in India and throughout the West), flowers are strewn about into the sanctuary on Palm Sunday during the reading of the Gospel at the words uttered by the crowd welcoming Jesus, "Hosanna! Blessed is he who is come and is to come in the name of the Lord God." These words are read to the congregation thrice. The congregation then repeats, "Hosanna!" and the flowers are scattered. This echoes pre-Christian Hindu celebrations in which flowers are strewn on festive occasions; however, this also echoes the honour shown to Jesus upon his entry into Jerusalem. Indian Orthodoxy traces its roots to the arrival in India of St. Thomas the Apostle in AD 52 (according to tradition) and his evangelism among both the Brahmans of the Malabar Coast and the ancient Jewish community there. Its rites and ceremonies are both Hindu and Jewish, as well as Levantine Christian, in origin.
In Elche, Spain, the location of the biggest palm grove in Europe, there is a tradition of tying and covering palm leaves to whiten them away from sunlight and then drying and braiding them in elaborate shapes.
A Spanish rhyming proverb states: Domingo de Ramos, quien no estrena algo, se le caen las manos ("On Palm Sunday, the hands drop off of those who fail to wear something new").
All the parishes of Malta and Gozo on Palm Sunday (in Maltese Ħadd il-Palm) bless the palm leaves and the olive leaves. Those parishes that have the statues of Good Friday bless the olive tree they put on the statues of "Jesus prays in the Olive Garden" (Ġesù fl-Ort) and the "Betrayal of Judas" (il-Bewsa ta' Ġuda). Also, many people take a small branch of olive to their homes because they say the blessed olive branch keeps away disease and the evil eye (l-għajn ħażina or is-seħta).
In the Saxon regions of the Netherlands, crosses are decorated with candy and bread, made in the form of a rooster. In the diocese of Groningen-Leeuwarden, a great procession with oil lamps is held the night before Palm Sunday in honour of the Sorrowful Mother of Warfhuizen.
Many Polish towns and villages (the best known are Lipnica Murowana in Małopolska and Łyse in Podlasie) organize artificial palm competitions. The biggest of those reach above 30 meters in length; for example, the highest palm in 2008 was 33.39 meters high.
In Romania, Palm Sunday is known as Duminica Floriilor.
In Bulgaria, Palm Sunday is known as Tsvetnitsa or Vrabnitsa. People with flower-related names, (for example Tzviatko, Margarita,Ralitza, Lilia, Violeta, Yavor, Zdravko, Zjumbjul, Nevena, Temenuzhka,Rosa etc.) celebrate this day as their "name day".
In the Philippines, some places re-enact of Jesus' triumphal entry. The Catholic priest rides a horse and is surrounded by the congregation, bearing palms. Sometimes women spread large cloths or aprons along the procession route.
Palm branches, called palaspas, are taken home after being blessed in the Mass and are hung beside, on or above doorways and windows in front of their houses. Although the real objective of placing the leaves in front of houses is to welcome Jesus Christ, some Filipinos say the palm leaves turn away evil spirits.
In Finland, it is popular for children to dress up as Easter witches and go door to door in neighborhoods for coins and candy. It is an old Karelian custom called Virpominen.
Friday, March 30, 2012
Saturday, March 24, 2012
Steps to Retirement
The topic for this week are some simple steps to take to get ready to retire. At the end are some quotes on retirement for your enjoyment.
Vanguard Info
News on the housing market was a hot property this week, though results were mixed. While home sales and starts declined last month, their improvement over the last few years seems to show that the housing market—the core of the last financial crisis—may be digging itself out of a 7-year hole. Meanwhile, an important gauge of future economic activity rose for the 5th consecutive month. For the week ended March 23, the S&P 500 Index fell 0.5% to 1,397.11 (for a year-to-date total return—including price change plus dividends—of about 11.6%). The yield on the 10-year U.S. Treasury note fell 6 basis points to 2.25% (for a year-to-date increase of 36 basis points).
Steps to Retirement
Some steps to take to get ready for retirement:
1) Save 10% of your income from each paycheck
2) Pay off your home mortgage to reduce expenses when retirement starts
3) Get a new car and have it paid off to have lower repair costs when retirement starts
4) Invest for growth not income
5) Calculate current annual living expenses
6) Guess when you want to retire
7) Calculate retirement annual income from Social Security, Pensions, etc. at this retirement age.
8) Calculate the difference between income and expense
9) Determine the amount of savings needed by multiplying the answer in step 8 by at least 20
10) If you do not have enough retirement savings call me and develop a plan
Retirement Quotes
Preparation for old age should begin not later than one's teens. A life which is empty of purpose until 65 will not suddenly become filled on retirement.
Arthur E. Morgan
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give.
William A. Ward
The best time to start thinking about your retirement is before the boss does.
Source Unknown
Vanguard Info
News on the housing market was a hot property this week, though results were mixed. While home sales and starts declined last month, their improvement over the last few years seems to show that the housing market—the core of the last financial crisis—may be digging itself out of a 7-year hole. Meanwhile, an important gauge of future economic activity rose for the 5th consecutive month. For the week ended March 23, the S&P 500 Index fell 0.5% to 1,397.11 (for a year-to-date total return—including price change plus dividends—of about 11.6%). The yield on the 10-year U.S. Treasury note fell 6 basis points to 2.25% (for a year-to-date increase of 36 basis points).
Steps to Retirement
Some steps to take to get ready for retirement:
1) Save 10% of your income from each paycheck
2) Pay off your home mortgage to reduce expenses when retirement starts
3) Get a new car and have it paid off to have lower repair costs when retirement starts
4) Invest for growth not income
5) Calculate current annual living expenses
6) Guess when you want to retire
7) Calculate retirement annual income from Social Security, Pensions, etc. at this retirement age.
8) Calculate the difference between income and expense
9) Determine the amount of savings needed by multiplying the answer in step 8 by at least 20
10) If you do not have enough retirement savings call me and develop a plan
Retirement Quotes
Preparation for old age should begin not later than one's teens. A life which is empty of purpose until 65 will not suddenly become filled on retirement.
Arthur E. Morgan
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give.
William A. Ward
The best time to start thinking about your retirement is before the boss does.
Source Unknown
Monday, March 19, 2012
Economist Projection
hope you are surviving March Madness and Saint Patrick's Day. We have a Saint Patrick's Day tradition in our house to serve a meal that is entirely green. Perhaps you have a similar tradition. At the end is some information that I found about Saint Patrick's Day and the culture of your friends in Ireland. The beginning paragraph is from Vanguard. The middle section is some economic projections for your consideration that show things are pretty good except for Europe.
Vanguard
Hopes that the recovery is gaining strength were bolstered by encouraging retail sales data. Although warmer-than-usual weather across much of the nation may have triggered some earlier-than-usual spring spending, investors took heart that a stronger recovery may be finally blooming. For the week ended March 16, the S&P 500 Index rose 2.4% to 1,404 (for a year-to-date total return—including price change plus dividends—of about 12.2%). The yield on the 10-year U.S. Treasury note rose 27 basis points to 2.31% (for a year-to-date increase of 42 basis points).
Economist Projections - ECBI
According to the Electroindustry Business Confidence Index (EBCI) developed
by NEMA, Rosslyn, VA, USA,the current North American conditions jumped sharply in February, rising more than 18 points to 72.5, its highest level in more than six years. The survey’s measure of the degree of change in current North American conditions rose to its highest mark in almost two years, rising to +0.7 in February from +0.1 in January 2012.
The ECBI tracks economic conditions in North America, Latin America, Europe, and Asia Pacific regions. An economic reading above 50 indicates expansion. The index is calculated for the current economic condition and the condition in the future 6 months out. Here are the numbers for each region:
North America: Current = 72.5, Future = 75.0
Latin America: Current = 57.7, Future = 67.9
Europe: Current = 37.6, Future = 34.4
Asia Pacific: Current = 50, Future = 71.9
Bottom Line: All regions except for Europe are experiencing good economic conditions with the future projected to be better.
Saint Patrick's Day - Irish Perspective
Many people will be eating Irish food such as Irish Stew and Corned Beef and cabbage on St. Patrick's Day. Corned Beef is not an Irish dish. It is what Americans think the Irish eat. A more traditional meal would be ham and cabbage or bacon and cabbage. Some say that in Ireland on St. Patrick's Day the traditional green beer is prominent. However, in Ireland, many years ago, St. Patrick's Day is considered a holy day and Pubs were not open for business. There were no parades, no drinking or wearing green. Green was considered an unlucky color.
St. Patrick's Day Pinch - School children have started a little tradition of their own. They pinch classmates who don't wear green on this holiday. Wearing green is strictly a U.S. custom, as the color green is not popular in Ireland. Green is connected to the old green flag and a time when Ireland was not free. Green is also a color connected with hope and nature.
Some Irish Superstitions:
Moon, moon tell unto me,
When my true love I shall see?
What fine clothes am I to wear?
How many children will I bear?
For if my love comes not to me,
Dark and dismal my life will be.
This verse, recited by a maiden as she gathered special herbs by the light of the first full moon of the new year, could reveal a future husband and cause the girl to have a true dream about the man--if she first complied with certain requirements. With a black-handled knife she had to cut out three pieces of earth, bring them home, tie them in her left stocking, and secure the bundle with her right garter. The completed package then had to be placed upon her pillow.
When yawning, make the sign of the cross instantly over your mouth, or the evil spirit will make a rush down and take up his abode with you.
It is unlucky to offer your right hand in salutation, for thee is an old say, "A curse with the left hand to those we hate, but the right hand to those we honor."
If the palm of your hand itches you will be getting money; if the elbow, you will be changing beds.
Breaking a mirror brought seven years of bad luck, while two people washing hands in the same basin at the same time courted disaster.
Vanguard
Hopes that the recovery is gaining strength were bolstered by encouraging retail sales data. Although warmer-than-usual weather across much of the nation may have triggered some earlier-than-usual spring spending, investors took heart that a stronger recovery may be finally blooming. For the week ended March 16, the S&P 500 Index rose 2.4% to 1,404 (for a year-to-date total return—including price change plus dividends—of about 12.2%). The yield on the 10-year U.S. Treasury note rose 27 basis points to 2.31% (for a year-to-date increase of 42 basis points).
Economist Projections - ECBI
According to the Electroindustry Business Confidence Index (EBCI) developed
by NEMA, Rosslyn, VA, USA,the current North American conditions jumped sharply in February, rising more than 18 points to 72.5, its highest level in more than six years. The survey’s measure of the degree of change in current North American conditions rose to its highest mark in almost two years, rising to +0.7 in February from +0.1 in January 2012.
The ECBI tracks economic conditions in North America, Latin America, Europe, and Asia Pacific regions. An economic reading above 50 indicates expansion. The index is calculated for the current economic condition and the condition in the future 6 months out. Here are the numbers for each region:
North America: Current = 72.5, Future = 75.0
Latin America: Current = 57.7, Future = 67.9
Europe: Current = 37.6, Future = 34.4
Asia Pacific: Current = 50, Future = 71.9
Bottom Line: All regions except for Europe are experiencing good economic conditions with the future projected to be better.
Saint Patrick's Day - Irish Perspective
Many people will be eating Irish food such as Irish Stew and Corned Beef and cabbage on St. Patrick's Day. Corned Beef is not an Irish dish. It is what Americans think the Irish eat. A more traditional meal would be ham and cabbage or bacon and cabbage. Some say that in Ireland on St. Patrick's Day the traditional green beer is prominent. However, in Ireland, many years ago, St. Patrick's Day is considered a holy day and Pubs were not open for business. There were no parades, no drinking or wearing green. Green was considered an unlucky color.
St. Patrick's Day Pinch - School children have started a little tradition of their own. They pinch classmates who don't wear green on this holiday. Wearing green is strictly a U.S. custom, as the color green is not popular in Ireland. Green is connected to the old green flag and a time when Ireland was not free. Green is also a color connected with hope and nature.
Some Irish Superstitions:
Moon, moon tell unto me,
When my true love I shall see?
What fine clothes am I to wear?
How many children will I bear?
For if my love comes not to me,
Dark and dismal my life will be.
This verse, recited by a maiden as she gathered special herbs by the light of the first full moon of the new year, could reveal a future husband and cause the girl to have a true dream about the man--if she first complied with certain requirements. With a black-handled knife she had to cut out three pieces of earth, bring them home, tie them in her left stocking, and secure the bundle with her right garter. The completed package then had to be placed upon her pillow.
When yawning, make the sign of the cross instantly over your mouth, or the evil spirit will make a rush down and take up his abode with you.
It is unlucky to offer your right hand in salutation, for thee is an old say, "A curse with the left hand to those we hate, but the right hand to those we honor."
If the palm of your hand itches you will be getting money; if the elbow, you will be changing beds.
Breaking a mirror brought seven years of bad luck, while two people washing hands in the same basin at the same time courted disaster.
Sunday, March 4, 2012
Living to 100? That Will Be $3.5 Million
I found this article that talks about the income needs in retirement. The dollar amount is not the important part of the article as the amount of money that someone will spend depends upon a lot of different variables. It is an article that tries to quantify the dollar amount on average retirement money needs. It is important to understand how the expenses change with time.
The bottom line is that you need to be prepared for retirement especially for health care costs that are rising faster than inflation. It is important to optimize Social Security and pension benefits that tends to grow at the rate of inflation or less.
_____________________________-
Living to 100? That Will Be $3.5 Million
By Jonnelle Marte and Linda Lacina | SmartMoney – Mon, Feb 27, 2012 11:30 AM EST
Here's to your long life -- and the heaps of cash it will require.
The average American who lives to the ripe old age of 100 will spend $3.5 million in his or her lifetime, according to an analysis of data from the Bureau of Labor Statistics. A good chunk of that bill, more than $1.5 million, will have been racked by your 50th birthday. The next 30 or so years -- the average 50-year-old today can expect to live until 81 -- will run another $1.4 million. And the lucky few who make it to 100 will need an additional $630,000. Experts say these high costs of living often come as a shock to retirees, many of whom expect to dramatically cut back on their living expenses as they get older and stick to a fixed budget. "A lot of time people actually end up spending more money in retirement than they may have spent when they were working," says Heidi Schmidt, a wealth manager in Dallas with USAA.
Just where that money goes depends largely on your decade. Most people in their 60s spend a lot of their savings on entertainment -- finally buying that sail boat or splurging on trips to the Caribbean. Those in their 80s, on the other hand, typically swap a good portion of their leisure budget for medical bills.
Of course, not all expenses come down to age, experts say. A healthy octogenarian with wanderlust might have spending habits more in line with people twenty or thirty years younger. And certainly many Americans will spend much less in retirement -- either through careful planning, a good bit of luck or both. Whatever the retirement goals, here's a breakdown of how spending tends to vary through the retirement years.
60's
Housing (mortgage, utilities and decor): $155,500
Furnishings and appliances: $15,000
Entertainment and eating out: $46,700
Transportation: $71,000
In this decade of transitioning into retirement, 60-somethings spend more than older age groups on everything from housing to clothes. Many who retire in their 60s often find themselves with the time -- and savings -- to finally splurge a little on traveling or a big-ticket item like a car. Or to indulge their favorite hobbies: According to the Bureau of Labor Statistics, the average recently retired American spends $2,300 a year on activities like going to the movies, caring for a pet and buying the latest gadgets. That drops to an average of $1,300 after age 75.
70's
Total health care costs: $48,400
Prescription drugs: $8,100
Household repairs: $16,400
Utilities: $33,900
Aging's challenges come with bigger price tags. When people hit their 70s, health care costs begin to spike. Longer life spans and the rise of chronic illnesses have pushed up national health care spending, according to the Kaiser Family Foundation. People in their late 60s and early 70s spend an average $4,900 a year on healthcare, an increase of almost 30% from people in their late 50s and early 60s, according to the Bureau of Labor Statistics. Adding to the burden, health-care costs are expected to grow faster than income over the coming years, according to Kaiser.
80's
Health Insurance: $30,300
Entertainment and eating out: $26,000
Groceries: $26,400
Gasoline: $9,800
Eighty-somethings spend 57% more on health insurance and half as much on entertainment as folks in their 50s. More retirees are saving money in their later years of retirement by moving in with their adult children. A survey by the Pew Research Center released in 2010 found that 21% of adults age 85 and above live in a multi-generational household that includes at least two adult generations or a grandparent. That is up from 17% of people in their late 40s and early 50s.
90's
Nursing home (private room): $87,200
Out-of-pocket long-term care: $14,000
Assisted living: $89,000
Adult day services: $36,400
Health costs grow exponentially from one's 50s to mid-90s. And America's 1.9 million nonagerians depend heavily on Social Security and pensions. But the former source may come up short by the time most baby boomers are in their 90s: the Social Security Administration has already started tapping its trust fund to cover benefits and current projections estimate that Social Security will only have enough funds to cover 75% of scheduled benefits after 2036.
The bottom line is that you need to be prepared for retirement especially for health care costs that are rising faster than inflation. It is important to optimize Social Security and pension benefits that tends to grow at the rate of inflation or less.
_____________________________-
Living to 100? That Will Be $3.5 Million
By Jonnelle Marte and Linda Lacina | SmartMoney – Mon, Feb 27, 2012 11:30 AM EST
Here's to your long life -- and the heaps of cash it will require.
The average American who lives to the ripe old age of 100 will spend $3.5 million in his or her lifetime, according to an analysis of data from the Bureau of Labor Statistics. A good chunk of that bill, more than $1.5 million, will have been racked by your 50th birthday. The next 30 or so years -- the average 50-year-old today can expect to live until 81 -- will run another $1.4 million. And the lucky few who make it to 100 will need an additional $630,000. Experts say these high costs of living often come as a shock to retirees, many of whom expect to dramatically cut back on their living expenses as they get older and stick to a fixed budget. "A lot of time people actually end up spending more money in retirement than they may have spent when they were working," says Heidi Schmidt, a wealth manager in Dallas with USAA.
Just where that money goes depends largely on your decade. Most people in their 60s spend a lot of their savings on entertainment -- finally buying that sail boat or splurging on trips to the Caribbean. Those in their 80s, on the other hand, typically swap a good portion of their leisure budget for medical bills.
Of course, not all expenses come down to age, experts say. A healthy octogenarian with wanderlust might have spending habits more in line with people twenty or thirty years younger. And certainly many Americans will spend much less in retirement -- either through careful planning, a good bit of luck or both. Whatever the retirement goals, here's a breakdown of how spending tends to vary through the retirement years.
60's
Housing (mortgage, utilities and decor): $155,500
Furnishings and appliances: $15,000
Entertainment and eating out: $46,700
Transportation: $71,000
In this decade of transitioning into retirement, 60-somethings spend more than older age groups on everything from housing to clothes. Many who retire in their 60s often find themselves with the time -- and savings -- to finally splurge a little on traveling or a big-ticket item like a car. Or to indulge their favorite hobbies: According to the Bureau of Labor Statistics, the average recently retired American spends $2,300 a year on activities like going to the movies, caring for a pet and buying the latest gadgets. That drops to an average of $1,300 after age 75.
70's
Total health care costs: $48,400
Prescription drugs: $8,100
Household repairs: $16,400
Utilities: $33,900
Aging's challenges come with bigger price tags. When people hit their 70s, health care costs begin to spike. Longer life spans and the rise of chronic illnesses have pushed up national health care spending, according to the Kaiser Family Foundation. People in their late 60s and early 70s spend an average $4,900 a year on healthcare, an increase of almost 30% from people in their late 50s and early 60s, according to the Bureau of Labor Statistics. Adding to the burden, health-care costs are expected to grow faster than income over the coming years, according to Kaiser.
80's
Health Insurance: $30,300
Entertainment and eating out: $26,000
Groceries: $26,400
Gasoline: $9,800
Eighty-somethings spend 57% more on health insurance and half as much on entertainment as folks in their 50s. More retirees are saving money in their later years of retirement by moving in with their adult children. A survey by the Pew Research Center released in 2010 found that 21% of adults age 85 and above live in a multi-generational household that includes at least two adult generations or a grandparent. That is up from 17% of people in their late 40s and early 50s.
90's
Nursing home (private room): $87,200
Out-of-pocket long-term care: $14,000
Assisted living: $89,000
Adult day services: $36,400
Health costs grow exponentially from one's 50s to mid-90s. And America's 1.9 million nonagerians depend heavily on Social Security and pensions. But the former source may come up short by the time most baby boomers are in their 90s: the Social Security Administration has already started tapping its trust fund to cover benefits and current projections estimate that Social Security will only have enough funds to cover 75% of scheduled benefits after 2036.
Medicare Revolution Coming, Wyden-Ryan Bill
Please read this and forward to others. We potentially have the most signficant change coming to the Medicare program since the program was created. We all need to keep track of the Wyden-Ryan Bill that will likely get traction late in 2012. The key concepts are premium support, defined contribution, and competition. My personal view is that it makes a lot of sense.
The overall concept is that Medicare will change from a fee for service program without limit to benefits to defined contribution plan with limits. The amount of support would match the price of the insurance premiums. The end result should be increased competition as insurance companies will compete for this business. As with anything in politic things can change so we need to keep track of Wyden-Ryan.
___________________________________________________________
LA Times article: The Wyden-Ryan proposal brings innovation to the market without dismantling the federal program.
If you were looking for someone to save Medicare, you might think of Sen. Ron Wyden (D-Ore.), a healthcare wonk who helped found his state's chapter of the Gray Panthers advocacy group for senior citizens. You probably wouldn't pick House Budget Committee Chairman Paul D. Ryan (R-Wis.), whose proposal to replace Medicare with vouchers has made him some senior groups' Public Enemy No. 1. Nevertheless, the two have teamed up to offer a bold and politically risky plan that could help slow the rate of growth of premiums and bring more innovation to the health insurance market without dismantling one of the federal government's most popular programs. Lawmakers should give it serious consideration as they look for ways to solve the government's long-term budget problems.
The Wyden-Ryan plan is, simply put, a much better version of Ryan's previous proposal. Starting in 2022, it would give seniors subsidies that they could use to buy insurance through new regional marketplaces called exchanges, similar to the ones created by the 2010 healthcare reform law. But rather than eliminating Medicare for anyone not yet 55 years old, as Ryan proposed, Wyden-Ryan would continue to make the current Medicare program available as an option through the new exchanges. And rather than shifting the risk of rising healthcare costs onto seniors, the plan would guarantee that subsidies would be large enough to buy at least as much coverage and value as Medicare provides. In other words, the government would provide the same kind of defined benefit that Medicare does today, while giving seniors the option to obtain that coverage somewhere else.
Why bother providing a private alternative, if Medicare works? Because its costs are growing unsustainably. It's already one of Washington's costliest programs, and its burgeoning demand for dollars is draining resources from other priorities. It can't survive on its current trajectory. Although the healthcare reform law took numerous steps to rein in Medicare, including a cap on its budget that increases only slightly faster than the economy grows, it didn't do enough to eliminate the incentives in the system to demand too much care and charge too much for it.
The Wyden-Ryan proposal tries to slow the increase in costs by basing the subsidy amount on the cost of the second-least-expensive insurance plan in the exchange, whether it be Medicare or a private plan offering equivalent or better benefits. That would give insurers the same incentive to compete on price that they have in Medicare's prescription drug plan, whose costs have grown more slowly than projected. That sort of competition is absent from or hobbled in Medicare's other coverage areas. To give seniors more incentive to look at low-cost alternatives, the proposal would let them keep the difference between the federal subsidy and their monthly premiums. It also would let them move back to traditional Medicare if they weren't happy with the alternatives.
Wyden-Ryan would also let small businesses offer employees tax-free subsidies to purchase health insurance through exchanges, an innovation that would give workers more choices and more freedom to retain plans if they change jobs. By joining thousands of other shoppers in the exchange, they should also have access to better deals than their employers do in the market for small group policies.
The proposal isn't a silver bullet. It wouldn't address the fraud, inefficiencies and quality problems that contribute to Medicare's rising costs; it leaves much of that work to the healthcare reform law. Competition may not hold down costs as effectively in insurance as in other goods and services because a patient's demand for care may be completely unaffected by price. Someone might shop around for a better price on a hip replacement, but not on emergency treatment. Private insurers may find ways to attract the healthiest seniors to their plans, sticking Medicare with the sickest and most expensive patients. And by shifting some of Medicare's customer base into private plans, the proposal would reduce Medicare's ability to set prices for physician and hospital services well below the rates negotiated by private insurers. On the other hand, Medicare's low rates have led doctors and hospitals to just shift part of their costs onto non-Medicare patients.
The overall concept is that Medicare will change from a fee for service program without limit to benefits to defined contribution plan with limits. The amount of support would match the price of the insurance premiums. The end result should be increased competition as insurance companies will compete for this business. As with anything in politic things can change so we need to keep track of Wyden-Ryan.
___________________________________________________________
LA Times article: The Wyden-Ryan proposal brings innovation to the market without dismantling the federal program.
If you were looking for someone to save Medicare, you might think of Sen. Ron Wyden (D-Ore.), a healthcare wonk who helped found his state's chapter of the Gray Panthers advocacy group for senior citizens. You probably wouldn't pick House Budget Committee Chairman Paul D. Ryan (R-Wis.), whose proposal to replace Medicare with vouchers has made him some senior groups' Public Enemy No. 1. Nevertheless, the two have teamed up to offer a bold and politically risky plan that could help slow the rate of growth of premiums and bring more innovation to the health insurance market without dismantling one of the federal government's most popular programs. Lawmakers should give it serious consideration as they look for ways to solve the government's long-term budget problems.
The Wyden-Ryan plan is, simply put, a much better version of Ryan's previous proposal. Starting in 2022, it would give seniors subsidies that they could use to buy insurance through new regional marketplaces called exchanges, similar to the ones created by the 2010 healthcare reform law. But rather than eliminating Medicare for anyone not yet 55 years old, as Ryan proposed, Wyden-Ryan would continue to make the current Medicare program available as an option through the new exchanges. And rather than shifting the risk of rising healthcare costs onto seniors, the plan would guarantee that subsidies would be large enough to buy at least as much coverage and value as Medicare provides. In other words, the government would provide the same kind of defined benefit that Medicare does today, while giving seniors the option to obtain that coverage somewhere else.
Why bother providing a private alternative, if Medicare works? Because its costs are growing unsustainably. It's already one of Washington's costliest programs, and its burgeoning demand for dollars is draining resources from other priorities. It can't survive on its current trajectory. Although the healthcare reform law took numerous steps to rein in Medicare, including a cap on its budget that increases only slightly faster than the economy grows, it didn't do enough to eliminate the incentives in the system to demand too much care and charge too much for it.
The Wyden-Ryan proposal tries to slow the increase in costs by basing the subsidy amount on the cost of the second-least-expensive insurance plan in the exchange, whether it be Medicare or a private plan offering equivalent or better benefits. That would give insurers the same incentive to compete on price that they have in Medicare's prescription drug plan, whose costs have grown more slowly than projected. That sort of competition is absent from or hobbled in Medicare's other coverage areas. To give seniors more incentive to look at low-cost alternatives, the proposal would let them keep the difference between the federal subsidy and their monthly premiums. It also would let them move back to traditional Medicare if they weren't happy with the alternatives.
Wyden-Ryan would also let small businesses offer employees tax-free subsidies to purchase health insurance through exchanges, an innovation that would give workers more choices and more freedom to retain plans if they change jobs. By joining thousands of other shoppers in the exchange, they should also have access to better deals than their employers do in the market for small group policies.
The proposal isn't a silver bullet. It wouldn't address the fraud, inefficiencies and quality problems that contribute to Medicare's rising costs; it leaves much of that work to the healthcare reform law. Competition may not hold down costs as effectively in insurance as in other goods and services because a patient's demand for care may be completely unaffected by price. Someone might shop around for a better price on a hip replacement, but not on emergency treatment. Private insurers may find ways to attract the healthiest seniors to their plans, sticking Medicare with the sickest and most expensive patients. And by shifting some of Medicare's customer base into private plans, the proposal would reduce Medicare's ability to set prices for physician and hospital services well below the rates negotiated by private insurers. On the other hand, Medicare's low rates have led doctors and hospitals to just shift part of their costs onto non-Medicare patients.
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