MOODY'S REVIEW
JANUARY 1998
COMMENTARY ON INVESTMENT AND PLANNING ISSUES
ERROLD F. MOODY JR. BSCE, LLB, MBA, PhD
MASTER OF SCIENCE IN FINANCIAL PLANNING
REGISTERED INVESTMENT ADVISER
WWW.EFMOODY.COM
ALTERNATIVE MINIMUM TAX: This
"flat" tax was enacted to make people who use a lot of deductions- particularly
tax shelters- to pay at least a certain amount of tax. But the limits have
not been adjusted by inflation and therefore a lot more "regular" taxpayers
may find themselves in a tax bind. When you add in the recent non refundable
child and tuition credits, two preference items not allowed under the current
AMT, you might see the problem. Only 414,000 taxpayers paid the AMT in 1995,
according to the IRS.
But according to the Congressional Joint Committee on Taxation, that number could grow to 6.2 million by 2005, assuming inflation at 3% annually. The JCT estimates that by 2005 a family of four with an income of $58,300 in 1996 dollars will be subject to the AMT.
And if you fall into that trap, you can kiss off your personal property tax deductions, your state and local tax deductions, and the deductibility of interest on a home equity line of credit and apply a flat 26% rate on your taxable income up to $175,000 (28 percent over $175,000) with only one $45,000 exemption ($33,750 for single taxpayers).
LONG TERM CARE: Here is something you won't hear about from Money Mag or just about anyplace else. When reviewing a proposal on long term care that someone had sent me- primarily because they were concerned about home health care- I noted that the policy provided coverage for $100.00 per day. But with caps for each person she may have needed. Say what? For example, they would only pay $25 per hour for a RN, LPN, chemotherapy specialist, etc. and anything over that the patient paid. You don't get RN's for $25 an hour out here- or most anywhere else. So if a nurse charged $50.00 an hour for two hours, the patient would still have to pay $50 out of pocket. Hardly great coverage and certainly not what the agent inferred (or even recognized for that matter). The only ethical way this policy could be sold would be to have agents tell prospective clients exactly what costs they would pay themselves since they unquestionably believe that they would actually be getting $100/day coverage. Never happen. It would stop sales if the truth be known. Just another reason why you never buy insurance from (just) an insurance agent. Let's be careful out there.
ASSOCIATION FOR DEATH EDUCATION & COUNSELING: 638 Prospect Ave., Hartford, CT 06105. ADEC is dedicated to improving the quality of death education and death related counseling and caregiving. Phone: 860-586-7503
CPI: Greenspan said prices, particularly in the service industry, have probably been "mismeasured." They are likely to have risen more slowly than the Consumer Price Index would suggest, indicating faster- than-measured productivity growth. Greenspan noted that measuring price increases is an "extraordinarily complex" problem when the nature of products and services are changing so rapidly. The prices of computers and medical care were particularly difficult to measure. Additionally, the preponderance of services in the economy also makes it harder to gauge inflation.
SOCIAL SECURITY: While the politicians congratulated themselves on balancing the budget (joke- the economy did it), they never did address the inherent problem with Social Security- which is still going to run out of money. From the Associated Press:
In 1996, social security paid benefits of $347.1 billion to almost 44 million retired and disabled workers or survivors. About 144 million workers-3.3 per each beneficiary- contributed taxes to pay for all that. Right now there is excess money flowing into the till and the trust fund increased by $70.9 billion to $567 billion. These extra funds will increase till about 2012, and then it hits the fan. From 2012 to 2019, social security will have to spend the interest earned on the accounts to pay off benefits to the estimated 70 million baby boomers expected to retire about then. By 2019, social security will have to start paying down from the principal. By 2029, the reserves will be gone. Only about 2 retirees will be paying payroll taxes for each recipient at that time.
So what will happen? Well, social security will always be available to the poor/low income. Those people making "too much" at retirement will pay higher tax on what they do get, or they won't get anything at all.
Social Security was originally designed to help the poor. That's what it will end up doing again.
FLOODS: The Federal Emergency Management Association (FEMA) reports that homeowners in designated flood plains are 27 times more likely to experience a flood than have a fire during their 30-year mortgage. Almost a third of its flood claims come from homeowners outside of high-risk areas. Many homeowners don't buy flood insurance because the believe they are covered under their homeowners policies. That's because they never bother to read the policy and probably bought it from a golfing buddy who never read one what they bought.
The basic homeowners policy will cover you if a pipe bursts or a hurricane takes off your roof and rain blows into your home. Extra coverage can cover for sewer backups. But they don't cover for "rising water". The government, through the National Flood Insurance Program (NFIP), which was created in 1968 to protect property in Special Flood Hazard Areas (SFHAs), is the only entity selling flood insurance. Such policies cover
1. Overflow of inland or tidal waters.
2. Unusual or rapid accumulation or run-off of surface waters from any source.
3. Mudslides, caused by flooding, comparable to a river of liquid and flowing mud.
4. Collapse or destabilization of land along the shore of a lake or other body of water, resulting from erosion, waves or currents exceeding normal, cyclical levels.
You can only buy the insurance if your community is a member of the National Flood Insurance Program (about 18,600 member communities out of a total of 22,000 communities in the US.)
Even if you don't buy insurance, you might be covered under federal assistance though major disaster zones- but only once. If a flood happens again and you're not covered, too bad. Even if an emergency is called, the average grant is only $2,500
If you live in a flood hazard area, you are apt to be forced to get flood insurance when you apply for a mortgage. It's a requirement for federally insured mortgages and is now being required by some private lenders.
It isn't necessarily that expensive. For around $100 annually, a homeowner can get $20,000 of home coverage and $5,000 for contents. In high flood areas however, the cost is higher at about $300 a year and homeowners can get structure coverage of $250,000 and contents of $100,000.
FEMA rules require a 30-day waiting period after you've applied and paid the premium before the policy becomes effective. The only way to eliminate the waiting period is to buy the insurance "in connection with making, increasing, extending or renewing of a loan," according to FEMA.
DEFINITION OF A FINANCIAL PLANNER: Someone who couldn't get a job as a bank teller.
MAJOR DEPRESSION: Affects 2.2 million (about 1.1% of the adult population). Marked by acute episodes of depressed mood or irritability with altered sleep or appetite, loss of energy, hopelessness, impaired concentration.
CHILDREN: According to the Stand for Children:
23,000 children could live on less than the salary of one executive in show business.
One in seven U.S. children belongs to a working family without health insurance.
One in three uninsured children with recurring ear infections goes untreated.
One in four children under age two is not fully immunized against preventable diseases.
About 8,500 children are reported abused or neglected each day.
MEDICARE INSURANCE RIPOFF: Life Insurance Co. of Georgia will pay $3 million in punitive damages to an 87- year-old Alabama woman who, for three years. spent a third of her income on a Medicare supplement policy that she didn't need because she was eligible for Medicaid. The Alabama Supreme Court indicated that the home service agents were poorly trained in the products they were selling. One agent said his training could be summed up in three words: "Get the money."
HEARING: If you have these problems, you may want to get your hearing checked
PETS: The average amount an owner will spend on a pet before deciding on additional treatment or euthanasia is $576 according to a survey of small pet veterinarians. Also look in the near future for a lot of pet HMO'.s The current ones leave a lot to be desired in terms of complete care, but with so many people in love with their animals and with the cost of care going up astronomically, it's time is here.
EDUCATION TAX CREDITS: The credits take effect next year and are designed for families with middle incomes. The credits offset the amount you pay for tuition and eligible fees (after deducting any grants) at qualified institutions- trade schools, community colleges and four-year schools. You don't get credits for room and board (Education IRA's provide that capability, but you can't use all these credits/IRA's in the same tax years). Singles get a full tax credit if their adjusted gross income is under $40,000. It's pro rated between $40K and $50K and $0 after $50K. MFJ's have full credit at $80,000 and a phaseout to $100,000.
But by lowering your taxes, these credits raise your after-tax income. Under current law, the higher your income, the less student aid you're going to get.
Roughly half your tax credit could be offset by reduced student aid from other sources. Also any reduction in your eligibility for aid will affect federal, state and private-college programs. Upcoming federal regulations will specify just how these tax credits will work.
The new credits will raise your after-tax income in 1998, so student aid won't be affected until the 1999-2000 school year.
The new education IRA, effective next year, lets you save an annual $500 in after-tax dollars for every child under 18, accumulate the money tax deferred, then withdraw it tax-free for higher education.
ALZHEIMERS LIFE SPAN: (Brookdale) The life span of the average Alzheimers patient is from 4 to 7 years, plus or minus at either end.
MEDICARE SUBSIDY: (Business Week) Here is a strange twist- but not necessarily for the middle class that is used to subsidizing the rich. According to economists at Dartmouth and Stanford who compared the life time costs of Medicare against the flow of benefits, they found that retirees received a substantial benefit from today's workers- not unlike Social Security. Benefits for a couple that retired at age 65 in 1990 will exceed what they paid in by $33,600 on a present value basis. Most surprisingly they noted that below average wage earners actually subsidized the more wealthy to the tune of $8,600 even though the wealthy paid more in taxes. That's simply because the more wealthy live longer and use more Medicare services.
ALZHEIMERS: (Brookdale Center on Aging) Alzheimers disease is a form of dementia, a global neurological impairment characterized by slowly progressive and irreversible deterioration of the cognitive functions- speech, abstract through, emotion, memory- and hence the ability to take care of oneself, to identify time and place, to relate socially to others, to think and speak and act in a clear and reasonable way.
If you are 65 years of age, you have a 10% probability of developing Alzheimers with the next year. At 75, the odds go to 40%. In your 80's, the odds increase to 50%.
The initial danger signs include
And I'll repeat this every few months. Simply getting old and forgetting where you put the keys is NOT a sign of dementia or Alzheimers. It's when you forget what the keys are FOR is the real problem. Also don't confuse "simple" depression. One study stated that up to 20% of the elderly over age 65 suffer some degree of depression.
Much material in the next couple issues will be from When Your Loved One Has Alzheimers- A Caregivers Guide, David Carroll based on methods by the Brookdale Center on Aging.
ALZHEIMERS PHYSICIANS: Dr. David Kammet suggests you seek the following credentials/background when you need someone to treat an Alzheimers patient.
They need academic affiliations, either board certified or on the staff of hospitals where they are obliged to be involved in teaching. Someone in contact with recent medical literature. Someone who knows the latest breaking developments in the field. Avoid doctors who are overly optimistic and promise the world; and avoid doctors who throw up their hands and tell you there's no hope, that it's all "fait accompli".
"And after the preliminary diagnosis is made, a good doctor should concentrate on the caregivers (emphasis mine). The doctor should see that their needs are met, both emotional and physical. The biggest thing here is encouragement. Letting the caregiver know that she is doing a good job. Also, caregivers need to vent. They need to get out their misplaced feelings and their guilts. Alzheimers patients lose their inhibitions and say the most terrible things to caregivers. Insults, nasty accusations, terrible stabs and slurs. This can make family members who are giving their all very depressed. The caregiver must consequently be reminded that the patient is sick and that it is Alzheimers that is speaking so antagonistically, not the person".
I included that excellent quote because caregivers have a terrible time keeping their own self worth, whether it be a patient for Alzheimers or other debilitating disease. If this isn't relevant to you directly, recognize your parents, friends, neighbors and other loved ones ARE impacted by this as you read this. Try to help them. If you are involved with an Alzheimers patient, try to find this book
LONG TERM CARE RESPONSIBILITY: (AARP) "The responsibility and risk of preparing for retirement is shifting from social organizations to the individual. The idea that an employer or a government is going to assume full responsibility for retirement income, and health and long-term care is steadily declining. At the same time, the notion that the individual has to make choices, plan ahead, and save is gaining ground. This is a controversial development, one not often greeted warmly, but a reality nonetheless for all industrialized nations."
This issues is, obviously, not new, but it's about time that AARP made it known to its members- the requirement for individual responsibility.
VITAMIN D: (National Institute on Aging under its Sites Testing Osteoporosis Prevention/Intervention) the study of persons age 65+ showed that "dietary supplementation with calcium and vitamin D moderately reduced bone loss measured in the femoral neck, spine and total body over the three-year study period, and reduced the incidence of nonvertebral fractures."
SIMPLE: The Simple 401(K) allows employees a $6,000 contribution. If you are a small business owner, that might be O.K. if your salary is under $40,000 since the plans are not based on percentages. Otherwise, the "old" SEP-IRA allows employers up to a $24,000 contribution and are not required to make contributions. And if the salaries are above that, employers might consider a profit sharing Keogh and a money purchase Keogh (called a paired plan) where the total can reach $30,000. And there are even variations to even those.
ANTICIPATORY GRIEF: Probably a new definition for many of you, but for caregivers- they have known about it for a long time. It is the grieving a caregiver acknowledges well before their loved one dies or "deteriorates beyond comprehensibility". There are several ways it is done per the Brookdale Center.
Therefore by the time the end comes, most of the sorrow and pain would have been exhausted and the time of healing a little shorter.
So, do caregivers pay attention and help themselves? Unfortunately, no. A survey in the late 80's noted that 75% of caregivers at home with a demented person took care of the loved one for seven days a week without a break. Only 9.7% of such caregivers seek help from the many service organizations available to them. They MUST call their local Area Agency on Aging.. But martyrdom does prevail with many stating that they- and only they- can properly look after the loved one- "even though their efforts may be carried out in an atmosphere of resentment, martyrdom and exhaustion. This is clearly a biased and self defeating appraisal."
THE ELDERLY AND PRIVATE HEALTH INSURANCE COVERAGE: (GAO) Coverage fell from 79.5% in 1980 to 70.5% in 1995. While "most Americans under 65 continue to have private health insurance- 164 million people in 1995- nearly 21 mil. more would have had private health insurance if coverage had remained at the 1980 level." Unfortunately, this is consistent with statistics with the working population- in 1995, over 40 million Americans- 17.3% of those under 65-"lacked any health insurance coverage," compared to 11.8% in 1980. Even worse, the proportion of the population under 65 enrolled in Medicaid (the state program for the very poor) grew from "an estimated 8.2%" in 1980 to 12.5% in 1995. The report noted that decline in private coverage between 1980 and 1995 has occurred in "nearly all demographic, income and employment groups."
S&P FUTURES: The Chicago Mercantile Exchange (CME) is now offering a contract called the E-Mini S&P 500 futures contract. It's worth about $48,000 or about 10% of the current $500,000 contract which was the smallest the public could buy. Investors will be able to buy or sell a contract for as little as $2,100. But don't buy these unless you at least understand diversification. If not, you are a "player" in a game where you don't even know the rules and you are probably going to get screwed.
ILLEGAL FINANCIAL PLANNERS: Literally every comprehensive fee only financial planner in the State of California (includes numerous CFP's, CPA's and literally all NAPFA members) are acting illegally and unethically by not complying with Insurance law- and they know it. Blake Campbell, assistant Commissioner for the Department of Corporations, noted that "if insurance products are being dealt with and they are not registered to do so, we can take regulatory or enforcement action." But why in the world do you want to deal with an illegal planner in the first place??????? If you insist on using reps that aggressively avoid compliance with the law, don't expect to be treated ethically and competently. I'll say it again- read my "Who Can You Trust" before ever using anyone as an advisor. Call or Email if you need a copy.
MEDICARE HOSPITAL DISCHARGE PLANNING: (HHS IG) A study by June Gibbs Brown) found that "some hospitals which own nursing homes discharge patients sooner to their own facilities and those patients stay in the facilities longer, increasing Medicare reimbursement." With regard to hospital-owned home health agencies, no significant difference was found in the length of hospital stays; but the report documents beneficiaries referred to a hospital-owned home health agency "did get services for a longer period of time." Beneficiary satisfaction with care received at hospital-owned facilities, however, was high. Specifically, beneficiaries discharged to hospital-owned nursing homes were found to have average hospital stays of 6.8 days, a significantly shorter period as compared to the 8.9 days for beneficiaries discharged to a nursing home independent of the hospital. Similarly, the length of nursing home stays for seniors in hospital-owned facilities averaged 37 days, the IG says, while in independent entities the average stay was 29 days. "This
supports the concern that hospitals are shifting patients from acute care reimbursed under a lump sum prospective payment, to post-acute care in nursing homes, which is reimbursed on a cost basis, thus maximizing Medicare reimbursement." Why all the hubub, bub? Because Medicare is running out of money due to the efforts of hospitals and home health care agencies to increase revenue at the taxpayers expense.
EUROPEAN TAXES: (Eurostat) Taxes and social-security contributions consumed a record 42.4% of the European Union's GDP last year. Sweden was the highest at 55.2%. Ireland, Spain and Britain taxed less than 36%.
FRAUD: Donald Bickerstaff made millions at age 38 and skipped the country with most of it. He had a nice looking WEB site- prettier than this one. More handsome than me. Far more wealthier clients than I have. Of course, most of his were stupid. Harsh? Of course. He had no designations/advanced degrees in planning but was a (according to an FBI agent) "gregarious investment counselor who won his clients confidence with smooth talk and quick answers". If anyone had checked, they would have found that he had been fined by the NASD and the California Department of Corporations barred him from acting as an Investment Advisor- both in 1995. Pru had fired him in 1991 for forgery and falsifying ledger statements. A prosecutor noted that "a lot of people who get taken by these investment counselors are not willing to take the time to do their own work. I think the less hands-on effort you make in regard with your investments, the more risk you are going to run that fraud will happen". Bill McDonald, chief enforcement officer for the Department noted that "there are thousands and thousand of financial planners who are ripping off people every day. It's an emerging problem that the public has got to understand. If you are not within the regulatory umbrella, you can con people every day and we won't know about it until somebody complains." He said that people just have to be more careful with their money.
Invariably, every person I have seen in arbitration or who has lost money simply comes up with the same convenient rationalization- "but I thought I could trust him". One elderly woman lost $732,000 to Bickerstaff. She said, "why didn't somebody alert us about him? But she and almost all other investors had done literally NO review of competency/background/education or anything else. That's simply being stupid. (Harsh? Maybe investing $5,000 without a review is "acceptable". Losing $700,000 is stupid!") Read my article "Who Can You Trust" before ever using anyone as an advisor- INCLUDING yourself. It's far more involved than calling the NASD/SEC/Department of Corporations. If you are not willing to read this, at least please do not breed.
And as December 21, 1997, Bickerstaff pleaded guilty to 40 counts of fraud.
INDIVIDUAL PLANNERS: A study by DALBAR found that consumers didn't consider a written financial plan to be particularly important to them, but were most
interested in the "person" of the financial advisor. They did, however, assume that their advisor was working from a written plan. The clear result of the survey and related focus groups was that a written financial plan delivered WITHOUT an advisor fails to provide clients
with a satisfactory degree of comfort. It takes an advisor to assist and motivate the client to take action.
DYING: Of the 80% who die in a hospital, 70% had been put on and then removed from life saving measures that were found to be useless, infectious and painful. You do NOT want to die in a hospital.
MUTUAL FUND ASSETS: (FED Board of NY) Households in 1995 held 10% of their net financial wealth in mutual funds shares and 3% directly through pension funds. At the end of 1995, net assets of mutual funds were 60% as large as the assets held by commercial banks.
MAJOR HOUSEHOLD FINANCIAL ASSETS (in billions)
| Asset type | 1986 | 1995 |
| Deposits (check, time savings) | 2,650 | 3,258 |
| Pension reserves | 2,265 | 5,510 |
| Life Insurance | 264 | 542 |
| Money Market Shares | 229 | 452 |
| Total Securities which consist of
Corporate Securities Mutual Funds |
2,497
1,435 334 |
7,416
4,313 1,265 |
| Mutual Funds as a % of total securities | 13 | 17 |
| Mutual fund assets as a % of net financial wealth. | 7 | 10 |
Yet, the public's perception is that mutual funds hold most of the U.S. equities. Wrong. At the end of 1995, they held 16% of the capitalization of the municipal bond market, 12% of the corporate equity market, 7% of the corporate and foreign bond market and 5% of the U.S. Treasury and agency securities market.
401(k) CONTRIBUTIONS: (Watson Wyatt Worldwide) A study found that employees who received customized communications about the 401(k) plan contributed 2% more than employees who did not. If an employer made a matching contribution from 25% to 100%, the results were similar (as would be expected when employees are getting "free" money). As study of 40 year olds with 25% matching contributions and no communications contributed 3% at the $25,000 salary level and 4.5% at the $75,000 level. With a 100% matching contribution and not communications, the rate was 5% at the $25.000 level and 6.5% at the $75,000 level.
MORE 401(K): Dalbar Inc said in a study of 1,143 employees saving for retirement that they wanted more investment options- particularly in foreign funds. 46% wanted to see an unlimited amount of changes in the frequency of changing funds. Unfortunately, they might not have a clue as to what is really going on. First of all, many U.S. funds have foreign exposure already and therefore partial diversification already exists. More importantly, many foreign funds had a relatively high degree of correlation so the asset allocation might be limited in any case. True, the Asia meltdown showed a negative correlation- but also negative returns. As to the requirement of "market timing"- doesn't work.
HEALTH CARE: The biggest impediment to our nation's ability to provide affordable health care for everyone does not come from Medicare, or from any government program. It is our increasingly market-driven health system. From 1970 to 1993, the cost of health care -- both public and private -- increased by more than 13 percent a year. Meanwhile, the number of uninsured Americans has risen to 41 million. The number of seniors who get their Medicare coverage through HMOs has more than trebled in the last 12 years and continues to grow by 25% per year.
SCHIZOPHRENIA: (NIHM) Affects about 2.7 million people (about 1.5% of the U.S. adult population. Typically includes imaginary voices or delusions as will as serious progressive impairment of social or occupations functioning.
MANIC DEPRESSION: Also called bipolar disorder affects 1.8 million(1%). It is a cyclic illness involving episodes or mania and usually episodes of depression. Mania usually involves a minimum of one week period of elation, grandiosity or extreme irritability accompanied by a decreased need for sleep, pressured sleep, racing thoughts, increased directed activity and excessively risky pleasure seeking
OBSESSIVE COMPULSIVE DISORDER: Affects 1.1 million (0.6%) and involves obsessions or compulsions. Obsessions are recurrent and persistent unpleasant thoughts that go beyond the level of appropriate worries. Compulsions are repetitive behaviors or mental acts that the individual feels are necessary as a way of preventing distress or heading off a terrible act.
PANIC ATTACKS: Affects about 730,000 (0.4%) and are recurrent attacks reflecting a rapid onset of panic, anger or discomfort. Associated with symptoms of a racing heart, sweating, chest pain, dizziness, shortness of breath, and fear of dying, going crazy or having a heart attack.
So why the comment??? Because a lot of people do not recognize the problems-OR REFUSE TO- and the problems escalate. Long time readers know I focus on the debilitating aspects of DEPRESSION. Recognize the symptoms and get treated. Left alone, depression can kill.
HOME HEALTH CARE: The costs for home health care have almost decimated the Medicare and Medicaid budgets. Studies have shown that the "more government spends on services people want instead of nursing home care which they dread, the more people come "out of the woodwork" to seek public assistance." So government spending actually goes up in an effort to help people stay out of nursing homes since the patients don't bother to buy long term care which inevitably arises. "Evaluations of community care programs...tend to show not only that expansion of community care has little effect on nursing home use, but that it raises, rather than lowers, total expenditures." (Caring for the Disabled Elderly: Who Will Pay?, The Brookings Institution) And, quite obviously, more Medicare expenditures causes more fraud (which already consumes 40% of Medicare's home care dollars).
Health Care Trends Report- "Expenditures for the home health benefit, the fastest growing component of Medicare, increased from $2.6 billion in 1989 to $16 billion in 1995, and are expected to increase to $31.3 billion by 2002. This constitutes 3% of total Medicare spending in 1989 and 10% in 1995.... Increased utilization appears to be the driving force behind Medicare home health spending growth. Between 1989 and 1994, the number of home health users per 1,000 beneficiaries increased from 50 to 97, or 94%, and the number of visits per user increased from 27 to 70, or 159%. In contrast, payments per visit increased by only 2%."
National Medical Expenditure Survey Research Findings- "The percentage of nursing home patients receiving Medicaid jumps to 78.6% for full-year residents, and falls to 53.1% and 57.9% for admissions and discharges respectively. In other words, the more expensive, long-term patients tend to be on Medicaid, whereas the cheaper, short-term patients pay privately or have Medicare coverage."
LONG TERM CARE: (American Health Planning Association) About 75% of LTC is given by family members, and...one-half of the patients so helped are bedbound or incontinent or both."
ALZHEIMERS: (The Economic Burden of Alzheimer's Disease Care) "Informal care costs are almost three times the cost of formal care for persons with Alzheimer's disease in the community. Although these costs represent an imputed value rather than a dollar expenditure, if unpaid caregivers were not available, caregiving services would probably be purchased from paid providers, or else demented persons now cared for in the community would be placed in institutions. The changing nature of family composition and the increasing labor force participation of women will result in fewer available caregivers for elderly persons in the future. Therefore, more of these imputed costs may become actual expenditures."
So once again I please with you to do your planning and find some way to pay for private long term care.
MORE CAREGIVING: (Alzheimer's Association) "Half (49 percent) of family caregivers agreed that their caregiver duties cause stress within their immediate families, and 48 percent feel they do not have enough time for themselves. Most caregivers have been caring for their loved ones for an average of four years and more than one third (34 percent) fear they may not be able to care for them much longer. These family and personal stresses worsen as the loved one's condition becomes more severe. Caregivers of those with moderate to severe Alzheimer's disease were more likely than caregivers of those with mild Alzheimer's to describe their duties as 'frustrating' (90 percent), 'draining' (87 percent) and 'painful' (87 percent)."
AMERICAN ACADEMY OF HOSPICE & PALLIATIVE MEDICINE: The international organization of physicians dedicated to the advancement of palliative medicine in the management of patients with terminal illness. Includes information on Certification in Hospice and Palliative Medicine administered by the American Board of Hospice and Palliative Medicine. 800-371-2349
ELDERLY NEGLECT: (University of Maryland School of Social Work) "More than half of home care clients said they had been victims of abuse or neglect by personal care aides. The researchers found personal care aides had little training and low pay, leading to a high potential for abuse of home care clients. An anonymous study was conducted of 158 personal care clients of all ages. The most common forms of abuse reported were theft, verbal abuse and neglect."
The Challenges and Opportunities of an Aging America noted that "over 1,000,000 older Americans are physically, financially, and emotionally abused by their relatives or loved ones annually." 1.5 million elders abused annually.
From David Cutler and Louise Sheiner- "The marginal source of community care for the institutionalized elderly appears to be support from children or other helpers, rather than living alone. Almost all of the elderly in nursing homes would have lived with children or others had they been in the community. In addition, as the ease of acquiring Medicaid increases or Medicaid payments become more generous, fewer elderly receive substantial day to day help from their children."
New York Times- "The Federal agency that oversees Medicare points to the program's tiny overhead as proof it is well administered. But recent reports suggest that Medicare's administrative costs are shockingly low, below 2 percent of costs, because Medicare is shockingly unsupervised. The amount of fraud and waste is huge, and supervision of the quality of medical care provided recipients is largely non existent...In recent weeks, Federal auditors have estimated that $23 billion in Medicare payments last year- about one dollar in every seven- was due to fraud or mistakes. In Medicare's home health program, which spends about $20 billion a year treating about four million elderly people, fraud and waste account for perhaps 40 percent of expenditures."
Mark Litow- "Medicaid and Medicare are often cited for their administrative costs of 5% and 2%, respectively. In comparison, private insurance reports an industry cost average of between 12% and 20%... [but] in an 'apples to apples' comparison, government spends more than half again as much (66% more) to provide a dollar of Medicare and Medicaid benefits as private insurance spends to provide a dollar of health insurance benefits....
"Medicaid also causes the private [nursing home] price to be higher than it would be in the absence of Medicaid demand and overall supply restrictions." (Christine E. Bishop)
FINANCIAL STRIFE: Also noted from the above study was that 49% who suffer from stress and 31% from anxiety and 25% from depression say it is caused by "financial concerns". Second was "family problems".
MUTUAL FUNDS: (Morningstar) 29% of capital gains distributions by diversified U.S. Stock funds comes from Short Term Gains (less than 12 months). Under the new law, that could really be detrimental tax wise due to the lowered capital gains rate. So I think you will see some changes.
RECESSION: (Fed Board of St Louis) The slope of the yield curve is a dominant predictor of recessions at horizons beyond three months. The explanation is that "long term rates decline will before an anticipated recession in order to equalize holding period returns during the recession and recovery. The slope of the yield curve is likely to signal a recession well before the actual onset of a recession. Empirically, it appears that the yield curve slope, lagged nine months, is the best recession predictor.
NURSING HOME MEDICATION: The government pays about $1,000 per year per nursing home patient for drugs. But a recent study says that up to 20% of nursing home patients are receiving inappropriate medications. The problem may not be the homes per se but the fact that pharmacists are having trouble getting a patient's full prescription records so they can determine if there will be a conflict with the various medications. They noted that inappropriate medicines can lead to falls, constipation, delirium, depression and incontinence.
EDUCATION INTEREST DEDUCTIONS: A deduction may be taken on the interest on college loans during the first 60 months in which interest payments were required. The maximum deduction is $1000 in 1998 and increases by $500 a year to a max of $2,500 in 2001. Eligibility is phased out for single filers with AGI between $40,000 and $50,000 and for MFJ between $60,000 and $75,000.
LIVING LONGER AND BETTER: (Parade) The healthier you are for your entire life, the longer you live and in MUCH better condition. Literally everyone knows that but few are paying that much attention. It's like reading. Everyone knows they should do it but few really practice the"art".anyway, Parade's study noted the following
As a comment to the last item- I have managed care. One thing that is always clear with any problem that I have. It only costs $15 for me to see a doctor for whatever ails me. AT $80 to $125, I wouldn't probably go. But at $15, it would be STUPID not to take a short trip to try and head off any problems. That's one big reason managed care is far ahead of the standard fee service. It's preventative medicine- but only if the patient recognizes its value and uses it accordingly.
Other statistics- 26% smoke (a lot higher than I expected); 39% do not get annual checkups (not necessary at younger ages and not necessarily required if you are a very active person. However every two years is probably needed).
The top ten health problems
1. Arthritis which affects 25% of those surveyed. Women suffer more (30% vs 20%)
2. High Blood pressure which affects 23%.
3. Depression which affected 14% in the last year. More women than men admitted to being affected (17% vs 10%)
4. Asthma affects 9%
5. Cancer affects 8% (other than skin cancer)
6. Heart disease affected 7% with 8% of women and 7% of the men affected. Also remember that heart attacks and stroked will kill about 50% of all women but many do NOT recognize its significance to them
7. Diabetes- 6%
8. Anxiety disorder- 5% with more women (7%) than men affected (4%).
9. Skin Cancer- 4%
10. Alcoholism- 4%
More women pay attention to their health but definitely indicate more problems with heartburn, arthritic pain, allergy, acne, depression, bronchitis and urinary tract problems. (Probably a lot of it has to do with taking care of a lot of men who do not take care of themselves). Women also go to a doctor more often- undoubtedly one of the reasons why they live longer. A corresponding clue is that 70% of women examine their breasts while only 28% of men examine their testicles.
VITAMIN E: (National Institute of Aging) "The death rate from all causes was 34 percent lower in older people taking Vitamin E supplements, according to research." Other research shows that it clearly slows the onset of Alzheimers.
ERROLD F. MOODY JR.
BSCE, LLB, MBA, MSFP, PhD 2295 W. Ave 133
San Leandro, CA 94577
Phone & Fax 510 352-4127