Thursday, March 29, 2012

Some surprising numbers.

The NY Times recently published a story about retirement in America which contained some surprising numbers. "The Center for Retirement Research at Boston College — the nation’s leading research group on this issue — estimates that 51 percent of households are at risk of not having enough to maintain their living standards after retirement....There’s a crisis situation because near-retirees lost 25 percent of their assets in the financial crisis,” said Teresa Ghilarducci, a retirement expert at the New School. “It looks like most middle-class Americans will become poor or near-poor retirees.”

" Thirty-six percent of American workers age 55 to 64 say they have less than $25,000 in retirement savings, according to a survey by the Employee Benefit Research Institute. (The number is 52 percent for workers age 45 to 54.) Rock-bottom interest rates have squeezed older Americans who rely on interest from their bond or retirement accounts, and many companies, viewing them as too costly, have eliminated or frozen the traditional pensions that guarantee retirees a solid monthly stipend. Today only 17 percent of workers have such defined-benefit pensions, while 39 percent have 401(k)’s; some in those two groups have both, but an unfortunate 53 percent of all workers have neither." [Emphasis mine.]

States like Florida and Arizona whose economies rely--at least in part--on a continuing supply of retirees with dreams and disposable income, should be looking down the track and planning for the time when the flow of retirees is significantly slower.

"Many Americans... retire at 65 na├»vely thinking they can live comfortably just on Social Security and the $100,000 or so they have in a 401(k). If these people follow the advice of financial planners, she said, they will draw 4 percent each year from their 401(k)’s, translating to $4,000 a year. When that is added to the average amount retirees receive in Social Security — $14,700 a year — it translates to $18,700 a year or just over $1,550 a month (or around $33,000 for a couple when both receive benefits)."

" Workers with traditional pensions were generally in far better shape than those with 401(k)’s, because pensioners receive a defined monthly benefit for life. In even worse shape, he said, are the majority of workers who have neither a pension nor a 401(k) plan at work. Many Americans with 401(k)’s do not save enough, many empty their accounts for living expenses when they lose their jobs, and many, Mr. VanDerhei said, skew their accounts too much toward equities, often in their own companies’ stock — bitter medicine when the stock market plunged. And some workers drain their 401(k) accounts to help pay for college for their children; indeed, the soaring cost of college prevents many parents from even saving for retirement." [Emphasis mine.]

Quick quiz: What does a year at a private college or university cost? How about at a public college?

You might not be surprised to learn that a recent story on the NBC Nightly News placed the average cost of a year at a private college at $36,000. Those of you who attended SUNY or some other public college might be surprised to learn that it now costs an average of $21,000 per year to attend a public college in the USA.

Of course, there's always a community college. Continuing cuts in their support have led to a situation recently reported by the Huffington Post: "After millions of dollars in budget cuts over the last few years, Santa Monica College says that help is on the way -- thanks to a controversial new plan to shore up their budget."

"The community college will price units for the most sought-after classes at five times the current cost, effectively allowing rich students to get first dibs on enrollment." [Emphasis mine.]

"Starting this summer and winter semesters, the college will form a separate nonprofit foundation that will offer core courses at about $600 each, or about $200 per unit, the Associated Press reports. Regular courses are currently priced at $108 each, or $36 per unit."

So much for equality of educational opportunity. As I said in a previous post, if you can afford it you can buy your way to the front of the line. That's the American way.

Sunday, March 25, 2012

3 important days, beginning tomorrow.

As we get older our thoughts, unfortunately, turn increasingly toward health care. That's why the next 3 days are important to retirees. The Supreme Court is about to hear oral arguments concerning America's health care law.

Retirees would be mistaken to conclude that since the law is primarily about those below Medicare age it is of no concern to them. Everything about our health care system has an effect on Medicare recipients, either directly or indirectly.

We spend a lot of time in our country worrying about our projected deficits. If we could find a way to scale our health care costs back to a level the rest of the industrialized world has achieved, our deficit worries would vanish.

Fareed Zakaria has recently done a CNN special looking at how other nations have handled their health care problems. He has also written a piece about health care in the March 26 issue of Time Magazine. Unfortunately, the full article is not available on the web unless you are a Time subscriber. The first part, however, is all we need and it can be found by clicking here.

Zakaria's comments about Switzerland are interesting:

"The centerpiece of the case against Obamacare is the requirement that everyone buy some kind of health insurance or face stiff penalties - the so-called individual mandate. It is a way of moving toward universal coverage without a government-run or single-payer system. It might surprise Americans to learn that another advanced industrial country, one with a totally private health care system, made precisely the same choice nearly 20 years ago: Switzerland. The lessons from Switzerland and other countries can’t resolve the constitutional issues, but they suggest the inevitability of some version of Obamacare."

"Switzerland is not your typical European welfare-state society. It is extremely business-friendly and has always gone its own way, shunning the euro and charting its own course on health care. The country ranks higher than the U.S. on the Heritage Foundation’s Index of Economic Freedom."

"Twenty years ago, Switzerland had a system very similar to America’s - private insurers, private providers - with very similar problems. People didn’t buy insurance but ended up in emergency rooms, insurers screened out people with pre-existing conditions, and costs were rising fast. The country came to the conclusion that to make health care work, everyone had to buy insurance. So the Swiss passed an individual mandate and reformed their system along lines very similar to Obamacare. The reform law passed by referendum, narrowly."

"The result two decades later: quality of care remains very high, everyone has access, and costs have moderated. Switzerland spends 11% of its GDP on health care, compared with 17% in the U.S. Its 8 million people have health care that is not tied to their employers, they can choose among many plans, and they can switch plans every year. Overall satisfaction with the system is high."

"The most striking aspect of America’s medical system remains how much of an outlier it is in the advanced industrial world. No other nation spends more than 12% of its total economy on health care. We do worse than most other countries on almost every measure of health outcomes: healthy-life expectancy, infant mortality and - crucially - patient satisfaction. Put simply, we have the most expensive, least efficient system of any rich country on the planet. Costs remain high on every level. Recently, the International Federation of Health Plans released a report comparing the prices in various countries of 23 medical services, from a routine checkup to an MRI to a dose of Lipitor. The U.S. had the highest costs in 22 of the 23 cases. An MRI costs $1,080 here; it costs $281 in France...."

"The Swiss ... found that if you’re going to have an insurance model, you need a general one in which everyone is covered. Otherwise, healthy people don’t buy insurance and sick ones get gamed out of it. Catastrophic insurance - covering trauma and serious illnesses - isn’t a solution, because it’s chronically ill patients, just 5% of the total, who account for 50% of American health care costs...."

It continues to amaze me that Americans have not been able to solve a problem that is so important to our well-being, especially when we have the experiences of all the other industrialized nations to draw upon as a laboratory.

By the way, if you're interested in our previous discussions of other health care systems, they can be found in the June, 2011 posts.

Monday, March 19, 2012

Is equal opportunity unamerican?

We like to pat ourselves on the back and say that we're the "land of opportunity." Even someone born in a log cabin can become president. Translation: We have no legal prohibition against a poor kid from the ghetto streets becoming president, or even just becoming rich.

Does that poor kid have an equal opportunity when compared with a child born into a wealthy family who can afford private schooling? Not even close.

I began to think about this a few weeks ago while writing about the schools of Finland. (See What does Finland know that we don't? and Finland: A bit more...). While writing these posts, Mitt Romney made a statement along the lines of "President Obama wants equal outcomes while I want equal opportunity." I began to think about whether Americans (both Republicans and Democrats) really want equality of opportunity.

Let's begin with education. In Finland, the world's model for an educational system that really works, there are no private schools. Every school, whether rural or urban has exactly the same resources. Any Finnish child who qualifies academically may attend college for free. Every student has an equal educational opportunity. Some will do better than others, but the starting line is the same for everyone rich or poor.

In America the educational starting line is different for rich and poor. It is impossible to argue that the child of wealth in New York City whose parents can afford the $40,000/year for private schooling has an equal educational opportunity compared with the poor child attending one of NYC's worst public schools. Checked college costs lately? Sure, there is financial aid, but most of it these days comes in the form of loans. College is quickly becoming available only for those who can afford it.

Does every public school in NYS have equal educational resources? Take a trip to Long Island--where most of the semi-finalists in the Intel Science Talent Search come from--and compare the science labs in their high schools with those in even our best WNY school districts.

The American model could be called "If you can afford it, you can buy your way to the front of the line." NYS provides the resources for a "basic" public education, then it allows taxpayers in wealthier districts to add to those basic resources while many rural districts must make do with the "basic" allotment.

Would Americans be willing to consider a system like Finland's? It's not likely. In 1994 and 1995, I served as president of the NY State Association for Computers & Technologies in Education, and was deeply involved with the introduction of computers into the state's schools. Parents from a well-to-do suburb of Buffalo complained loudly about the introduction of computer labs into their schools. Why? Because they could afford to provide a computer in their home and wanted their children to have an advantage over those families who could not afford a computer.

If you can afford it, you can buy your way to the front of the line. That's the American way.

Friday, March 2, 2012

Equality of Opportunity? Not even close.

New York can be proud that over 100 of the 300 semi-finalists in the Intel Science Competition come from our state. When you break out the data, it turns out that most of these students come from suburban districts in which state aid is a much smaller share of the budget than would be the case in rural districts.

Cuts in state education aid do not fall equally on all districts and students. If the local taxpayers are capable of shouldering a heavier tax burden, a cut of 5 or 10% in state aid gets shrugged off. In most rural districts, the same percentage cut is devastating.

Elizabeth Ruddy, a senior at Madrid-Waddington HS in northern NY, stole the show at a recent small city and rural schools advocacy day in Albany. Here's a video of her giving her speech a few weeks earlier at a rally in her home region. It's worth five minutes of your time.