Wednesday, December 21, 2011

Is your doctor going to be forced out of Medicare?

You've probably been watching the ongoing dustup in Washington concerning the continuation of the payroll tax cuts. Maybe you've been thinking "Thank goodness it doesn't affect me since I no longer receive a paycheck." Boy, are you wrong!

Included with this bill is a two-month extension of the Medicare "Doc Fix." The "Doc Fix" is a yearly ritual in Congress "...required by a 1990s budget law that failed to control spending but never got repealed. Instead, Congress passes a temporary fix each time, only to grow the size of cuts required next time around." This according to a piece in today's Huffington Post.

If the "Doc Fix" is not passed, Medicare payment to doctors will decrease by 27.4% as of January 1. (Medicare says that it will withhold payments to doctors for the first 10 business days of 2012 in hopes that the "Doc Fix" can be put into place. According to Medicare, any backup beyond 10 days is not possible without crashing its computer systems.)

If you have moved recently, you may have encountered difficulty finding a new doctor. Medicare payments are not lavish, and some doctors have simply refused to see new Medicare patients. If payments decrease by almost 30%, many more doctors are likely to opt out of Medicare.

Almost everyone expects the "Doc Fix" to eventually pass, so why is this happening? It mostly has to do with the inability of Congress to vote on things separately. Instead, they combine something that one side wants into a bill with something they don't want in hopes of using the "want" as leverage.

The current situation is also an example of poor negotiating practices. According to Ezra Klein in today's Washington Post: "Remember what everyone thought was happening here: Mitch McConnell was negotiating with Harry Reid on behalf of Senate and House Republicans. Those negotiations were successful. Almost every Senate Republican voted for the resulting bill. Boehner went to sell that bill to his members. But then the House Republicans rejected it, and we were back at square one."

Everyone who has ever served as a negotiator for their union understands one of the basic rules of negotiating: Don't send someone to the table unless they have the authority to make a deal.

Sunday, December 18, 2011

Your holiday survival kit.

It's time to head out to grandma's house for big holiday gatherings. (Yes, I said "holiday" not "Christmas." I checked my calendar and there appear to be several holidays in the next couple of weeks.)

At any rate, for many of you the lowpoint of your holiday gathering will be the relative--or neighbor--who carries on about the sad state in which public employees--including teachers--have placed the country. It's always fun to respond to their generalized bloviating with those nasty "fact" thingies. Here's a list of previous blog posts which you can print and stuff into your suitcase for just such an opportunity:

Assertion: Public employees earn way more than those in the private sector. 
Facts: "Everybody knows" that public employees earn more than those in the private sector.

Public pay vs private: Truth is in the numbers.

Assertion: Public pensions are bankrupting the states.
Facts: Pensions NOT bankrupting the states!

Sometimes the comments tell the story.

The growing mythology surrounding public employee pensions.

The sky is falling: Not!

Assertion: Teachers earn too much.
Facts: Pay teachers more.

Teacher pay around the world: How we compare.

Teachers earn too much? Really?

Assertion: You're all just jealous of the rich.
Facts: Of the 1%, by the 1%, for the 1%.

Assertion: We spend too much on education as it is.
Facts: A number that's hard to believe.

Assertion: Our schools are failing; unions defend bad teachers; billionaires know best; charter schools are the answer; more effective teachers are the answer.
Facts: 5 myths about education.

Assertion: Tenure means a job for life.
Facts: Tenure DOESN'T mean a job for life.

Assertion: Teachers don't work a full year.
Facts: Teachers don't work a full year?

Assertion: Public sector jobs aren't real jobs.
Facts: Relax teachers, your job isn't real!

Assertion: Bad teachers are the cause of our educational problems.
Facts: The grand coalition against teachers.

The grand coalition against teachers, part 2. 

Let's stop blaming the teachers.

And then a teacher picked up her pen...

Finally, you might want to ask where your antagonist gets their news. Fox? Probably. Here's an interesting piece of research widely reported a little over a month ago:

"A new poll suggests people might be better off watching no news at all than tuning into Fox. Fairleigh Dickinson University surveyed New Jerseyans about the Arab Spring in Egypt and Syria, among other current events, and found that self-identified Fox News viewers were less likely to answer correctly than consumers of other news outlets. Fox viewers even did much worse than those who don’t watch any news....The results — controlled for partisanship, education, and other demographics — imply that there is actually something counterproductive about watching a Fox News program. Meanwhile, newspaper readers and fans of NPR, The Daily Show, and Sunday TV news, did the best overall." [Emphasis mine.]

Don't you just love research?

Tuesday, December 13, 2011

Teachers earn too much? Really?

Well, that's the conclusion reached by a new study published by right-wing thinktank the American Enterprise Institute. To quote AEI: "We estimate that public school teachers receive total compensation roughly 50 percent higher than they would likely receive in private sector jobs." In fact, they conclude that teachers are "overcompensated by 52%."

Many researchers have weighed in to point up serious faults in the methodology of this study. One of them is Jordan Solomon of George Washington University, who attended the presentation of the study. You can find his comments on the methodology in Maureen Downey's "Get Schooled" column in the Atlanta Journal-Constitution. Solomon concluded: " When confronted by an employee for an association representing retired teachers, the presenters admitted that their goal from the outset was to demonstrate that the benefits for teachers were too high. It would appear that Heritage and AEI set out to produce a paper that allowed conservative governors to denigrate teachers and chastise their unions for the “high” salaries and cushy benefits paid to teachers." [Emphasis mine.] Who would have expected it?

Let's pause for a moment and examine pay vs performance in the private sector. Anyone remember Carly Fiorina? Fiorina was the Hewlett Packard CEO who was ousted by her board of directors after a record of failure. She walked away with a $42 million severance package, then ran for governor of California claiming her private sector experience as a "job creator" would put California back on its feet. Sadly, she neglected to mention that while at HP she laid off 18,000 workers. How's that for "pay for performance?"

John Merrow, education correspondent for the "PBS Newshour" writes in the NY Daily News--not usually a teacher-friendly venue--to point out some interesting facts concerning private sector pay and performance.

"The average teacher today earns about $55,000. At least 75 CEOs earn that much in one day, every day, 365 days a year. According to the AFL-CIO’s “Executive PayWatch,” the CEO who ranked No. 75, David Cote of Honeywell, was paid $20,154,012, for a daily rate of $55,216.47".
"Unlike wages for teachers, CEO salaries have been soaring in recent years. Forty years ago, the average public school teacher earned $49,000, adjusted for inflation. That’s a raise of a whopping $150 a year for 40 years, or about one quarter of 1% annually." [Emphasis mine.]

"[The pay for performance model] doesn’t seem to be true on Wall Street and in corporate boardrooms, where the pay of the CEO is often at odds with his company’s performance. Take Cisco’s John Chambers. The website 24/7 Wall Street ranks Chambers as America’s most overpaid CEO, based on his total compensation of $18,871,875 even as the price of Cisco common stock fell 31.4 %."

"In fairness, some teachers are overpaid, because they have “retired on the job” and are just going through the motions until they can retire for real. Of course, there’s a big difference between being overpaid at $55,000 and being overpaid at $20,500,000, which is what Carl Crawford of the Boston Red Sox earned for hitting .255 with just 11 home runs last season. Like the CEO of Honeywell, Crawford earns about $55,000 a day, every day, 365 days a year. "

Merrow points out one other difference: "Teachers spend their own money on supplies for their classrooms. That came to $1.33 billion in school year 2009-10, or $356 per teacher, according to the National School Supply & Equipment Association. I will wager several packs of colored pencils that Dauman, Cote and the other high earners do not drop by Staples to pick up office supplies for their secretaries."

Monday, December 5, 2011

Retirement in America is in trouble.

Back in the "good old days" of a couple or three decades ago, the American retirement system was described as a three-legged stool. One leg was Social Security, while the second was the company pension and the third was individual savings. Together with the security of Medicare, these three legs would provide a reasonable level of comfort and security in our "golden years."

How times have changed! Today's USA Today carries an article titled "Many have little to no savings as retirement looms." Their assessment: "For many Americans, the golden years are quickly taking on a tin-like hue. After a vicious decade of no growth for the stock market, including two 401(k)-eating bear markets and persistently sky-high unemployment, more Americans are finding themselves in their 50s and 60s with practically no money saved for retirement."

What happened? Well, to begin with, about 80% of Americans find one leg of their retirement stool missing: their pension. Pensions disappeared in the private sector when one company after another discovered they could save money by switching to a 401(k) defined contribution plan. Employees thought it sounded great. They would contribute a part of their salary, their employer would match their contribution (up to a point), and they would get to have a say in the management of their retirement funds. What could go wrong?

Well, let's begin with the fact that the average employee is nowhere near the financial wizard they thought themselves to be. The folks who made a career of managing the "old fashioned" defined benefit pension plan really did do a better job of managing money than the average do-it-yourself investor.

USA Today points to an example: :"The people [financial advisor Joel] Redmond encounters most who are lacking sufficient retirement savings weren't necessarily delinquent or negligent. Many had money saved but were wiped out by the sour stock market in the past decade and poor investment strategies, Redmond says."

"That's what happened, in part, to Robert and Connie Cabana of Tampa, who are both in their 60s. Robert built up a sizable 401(k) working as a financial executive at Verizon. Connie was a business assistant for a local irrigation supply company. Connie was laid off four years ago; Robert was let go three years ago."

"But the serious hit to their retirement, which wiped out half their 401(k) savings, resulted from the stock market and an overexposure to risky stocks, they say. Now, 75% of their 401(k) is gone, and they have "very little" left, Robert says."

Then there's the matter that their employers probably never mentioned: To provide the same level of retirement income, those in 401(k)-type plans must accumulate twice as much money as in a traditional defined benefit pension plan. (For a complete explanation of this see "What's so bad about 401(k)-type plans?") 

Nobody bothered to mention that:" A 65-year-old retiree would need to have $1.1 million saved to draw $50,000 a year in inflation-adjusted dollars, assuming 3% inflation and a 5% annual return from investments. That's if the investor is lucky enough to get a 5% return, which, given the flat-line returns of stocks the last decade, might give some pause."

That's a tough order considering that: " More than half of all workers, 56%, say they have less than $25,000 in savings, according to a survey by the Employee Benefit Research Institute." As for retirees: " More than half of retirees, 54%, report they have less than $25,000 saved. That's up dramatically from 2006, when 42% said they had less than that."

What's the meaning of all of this for those of us lucky to be members of the NY State Teachers' Retirement System? Simply this: There is little chance that the traditional pension will make a comeback in the private sector. Those without a pension will more frequently ask why they should pay taxes to provide public employees with a benefit they no longer have any hope of enjoying themselves.

We must stay vigilant--and politically active-- as the retirement "race to the bottom" continues.

Thursday, December 1, 2011

Have grandchildren? Give their parents this book!

Those of us who are grandparents like to think that one of our most important functions is to draw upon our vast array of life experiences in giving advice to our grandchildren.

I used to think this was true, and then I read Thomas Friedman's new book, "That Used to be Us: How America Fell Behind in the World It Invented and How We Can Come Back." He made me realize that the world I grew up in--particularly the world of economics and work--had changed so rapidly and so completely that my experiences could no longer serve as a guide to my grandchildren.

You may recall that Friedman--A NY Times columnist and winner of 3 Pulitzer Prizes-- wrote a book called "The World is Flat." According to Amazon's review: "What Friedman means by "flat" is "connected": the lowering of trade and political barriers and the exponential technical advances of the digital revolution have made it possible to do business, or almost anything else, instantaneously with billions of other people across the planet."

"The World is Flat" was written in 2005. Since then, according to Friedman: "When I wrote The World is Flat, Facebook didn't exist, twitter was a sound, the cloud was in the sky, 4G was a parking place, applications were what you sent to colleges and Skype, for most people, was a typo. That's how much the world has changed in just a few years."

Freidman sees the George Clooney movie, Up in the Air, as a perfect metaphor for the first decade of the 21st century. Clooney plays someone who is always on an airplane because he's hired by companies to handle the firing of their employees who are no longer needed due to advances in technology. Eventually, Clooney is replaced by a young woman who comes up with the idea that it's less expensive to fire people over the internet rather than in person.

He tells about a large law firm which is now downsizing during the current economic difficulties. When Friedman asked the firm's head which lawyers were being fired, he received a surprising response. The firm had added many competent lawyers during the boom times. They did the work assigned to them in a competent and professional manner. They have been let go. The lawyers who stayed were the ones who added something "extra" to their jobs. They figured out how to do their work more efficiently, or how information technology would allow the firm to move into new areas of work.

When I finished the book, I purchased copies for my children. I told my son that there were 3 reasons I was giving him the book: 1) It would help him do his job better and give him an advantage over coworkers who had not read the book. 2) He works with large corporations, and understanding how their worlds were changing would help him keep his job.  3) The world is changing so quickly that if he gives his son career advice based on his experiences, it will be outdated wisdom.

My daughter-in-law was wondering whether their son, who is currently in eighth grade, was being pushed too hard in school. His counselor was recommending several advanced placement classes when planning his high school courses. I told her a story from Friedman.

Friedman's mother-in-law is the board chairman at Grinnell College, which is a small liberal arts college in Iowa. Last year, 10% of Grinnell's applications came from China. Of those 250 Chinese applicants, 50% had perfect 800 scores on the math SAT. Those kids are the people who will be competing with my grandson for jobs in a few years. Friedman's comment is that even Americans in "good" schools aren't getting an education that's good enough when compared with the education that is provided by many other countries.

Let me conclude with a wonderful piece of video. It's Friedman talking about his book at the Aspen Ideas Festival. The video runs for about an hour, but I promise you it is one of the best hours you'll spend. Even if you don't read the book, you'll learn something.

Personally, I think the best gift you can give your grandchildren this Christmas is to give a copy of "That Used to be Us" to their parents. Here's the video: