Lawmakers are working on the biggest changes to U.S. retirement savings in more than a decade, exploring several proposals that could make it easier for small companies to offer 401(k) plans and for workers to guarantee themselves an annual income after they retire.
The efforts start with a bipartisan Senate bill and House Republicans’ plan to make retirement and savings a crucial part of their push for tax legislation this summer and fall. It isn’t clear which, if any, measures are likely to survive the legislative process, but the broad interest in encouraging savings gives lawmakers a chance at passing something this year.
Among the proposals Congress may consider are a new type of savings account that is more open-ended than current vehicles, ways to encourage savings that can be tapped in an emergency and the repeal of a provision that prevents people over age 70 ½ from contributing to Individual Retirement Accounts.
Within 401(k)s, proposals include requiring plans to disclose to employees the monthly annuity income their savings would support. Other measures would encourage small employers to use automatic enrollment and make it easier for employers of all sizes to automatically raise employees’ savings rates beyond 10% of income—a cap that now restricts some plans.
The proposals could face obstacles in a divided Congress in an election year. Still, if passed, the measures would amount to the most significant alterations to 401(k) plans since 2006, when Congress made it easier for employers to enroll workers automatically and invest their money in funds that shift focus from stocks to bonds as people age.
“It is something that could actually move the needle on retirement security,” said Michael Kreps, a principal at Groom Law Group, who represents financial services companies and 401(k) plan sponsors.
The discussions are starting with a bill known as the Retirement Enhancement and Savings Act, or RESA, that hasn’t advanced amid a slim congressional election-year calendar and partisan tensions over tax policy. However, the bill has attracted support from financial-services companies and AARP, the advocacy group for older Americans, which says “RESA is an important step to improving retirement policy.”
In the Senate, RESA is sponsored by the Finance Committee’s chairman, Orrin Hatch (R., Utah), and its top Democrat, Ron Wyden of Oregon. RESA won unanimous approval from the committee in 2016, but it hasn’t advanced beyond that stage.
Among the provisions in RESA is one that would allow small employers to band together to offer 401(k)-type plans. By joining a so-called multiple-employer plan, or MEP, small companies can spread plan administrative costs over more participants, lowering fees. The arrangement is now available, but only to employers with an affiliation or connection, such as members of the same industry trade association. RESA would eliminate that restriction.
The bill would also encourage 401(k)-style plans to offer annuities, which help participants transform their balances into lifetime income streams. Although commonly offered by traditional pension plans, annuities aren’t often used in 401(k) plans, in part due to concerns about fees but also because employers worry about liability if they choose an insurance company that later fails to pay claims.
To encourage more plan sponsors to take the plunge, the bill gives those that follow certain procedures some protection from future lawsuits when selecting an annuity provider. It also expands a tax credit available to small companies to offset the costs of starting a new retirement plan. The annual credit amount would increase from $500 to as much as $5,000 for three years.
On Tuesday, a bipartisan group of senators introduced separate legislation that would shift some of the fiduciary responsibility from small employers that band together in multiple-employer plans to the financial services firms that administer the MEPs. The legislation would remove disincentives to small businesses to offer 401(k) plans that automatically enroll workers and allow employers to automatically enroll workers into emergency savings accounts. (Employees would be free to opt out.) It would also give workers the option to choose to save a portion of their tax refund before it is issued.
Retirement and savings incentives will make up one of three bills in the “Tax Reform 2.0” package House Republicans are assembling, said Rep. Kevin Brady (R., Texas), chairman of the Ways and Means Committee. Mr. Brady and other committee members discussed the savings initiative Tuesday with President Donald Trump, according to Rep. Jim Renacci (R-Ohio), who attended the meeting.
The centerpiece of the House GOP tax package is an extension of last year’s tax cuts beyond their 2025 expiration date; that is unlikely to draw enough Democratic votes to become law. But Mr. Brady said he hoped the new retirement bill will attract bipartisan support .
Rep. Richard Neal (D., Mass.), the top Democrat on Ways and Means, said he backs tax provisions that would make it easier for people to set money aside—though he emphasized that Republicans should have placed on higher priority on that than tax-rate cuts last year.
Mr. Brady said any new ability for people to tap into tax-preferred savings would be “very limited.”
“You want that money to stay in there and grow,” he said. ”But we also know that one of the hesitations is that they worry that they put it in and it is locked away, whether they need braces or there’s an emergency.”
House Republicans, as they did on the larger tax law last year, haven’t included Democrats in their talks, said Rep. Suzan DelBene (D., Wash.)
“While I would like to see Democrats and Republicans work together to address struggling pension programs and ensure seniors can live in dignity, House Republicans again show no interest in bipartisan collaboration,” she said in a statement.
It takes only a glance at a hospital bill or at the myriad choices you may have for health care coverage to get a sense of the bewildering complexity of health care financing in the United States. That complexity doesn’t just exact a cognitive cost. It also comes with administrative costs that are largely hidden from view but that we all pay.
Because they’re not directly related to patient care, we rarely think about administrative costs. They’re high.
A widely cited study published in The New England Journal of Medicine used data from 1999 to estimate that about 30 percent of American health care expenditures were the result of administration, about twice what it is in Canada. If the figures hold today, they mean that out of the average of about $19,000 that U.S. workers and their employers pay for family coverage each year, $5,700 goes toward administrative costs.
Such costs aren’t all bad. Some are tied up in things we may want, such as creating a quality improvement program. Others are for things we may dislike — for example, figuring out which of our claims to accept or reject or sending us bills. Others are just necessary, like processing payments; hiring and managing doctors and other employees; or maintaining information systems.
That New England Journal of Medicine study is still the only one on administrative costs that encompasses the entire health system. Many other more recent studies examine important portions of it, however. The story remains the same: Like the overall cost of the U.S. health system, its administrative cost alone is No. 1 in the world.
Using data from 2010 and 2011, one study, published in Health Affairs, compared hospital administrative costs in the United States with those in seven other places: Canada, England, Scotland, Wales, France, Germany and the Netherlands.
At just over 25 percent of total spending on hospital care (or 1.4 percent of total United States economic output), American hospital administrative costs exceed those of all the other places. The Netherlands was second in hospital administrative costs: almost 20 percent of hospital spending and 0.8 percent of that country’s G.D.P.
At the low end were Canada and Scotland, which both spend about 12 percent of hospital expenditures on administration, or about half a percent of G.D.P.
Hospitals are not the only source of high administrative spending in the United States. Physician practices also devote a large proportion of revenue to administration. By one estimate, for every 10 physicians providing care, almost seven additional people are engaged in billing-related activities.
It is no surprise then that a majority of American doctors say that generating bills and collecting payments is a major problem. Canadian practices spend only 27 percent of what U.S. ones do on dealing with payers like Medicare or private insurers.
Another study in Health Affairs surveyed physicians and physician practice administrators about billing tasks. It found that doctors spend about three hours per week dealing with billing-related matters. For each doctor, a further 19 hours per week are spent by medical support workers. And 36 hours per week of administrators’ time is consumed in this way. Added together, this time costs an additional $68,000 per year per physician (in 2006). Because these are administrative costs, that’s above and beyond the cost associated with direct provision of medical care.
In JAMA, scholars from Harvard and Duke examined the billing-related costs in an academic medical center. Their study essentially followed bills through the system to see how much time different types of medical workers spent in generating and processing them.
At the low end, such activities accounted for only 3 percent of revenue for surgical procedures, perhaps because surgery is itself so expensive. At the high end, 25 percent of emergency department visit revenue went toward billing costs. Primary care visits were in the middle, with billing functions accounting for 15 percent of revenue, or about $100,000 per year per primary care provider.
“The extraordinary costs we see are not because of administrative slack or because health care leaders don’t try to economize,” said Kevin Schulman, a co-author of the study and a professor of medicine at Duke. “The high administrative costs are functions of the system’s complexity.”
Costs related to billing appear to be growing. A literature review by Elsa Pearson, a policy analyst with the Boston University School of Public Health, found that in 2009 they accounted for about 14 percent of total health expenditures. By 2012, the figure was closer to 17 percent.
One obvious source of complexity of the American health system is its multiplicity of payers. A typical hospital has to contend not just with several public health programs, like Medicare and Medicaid, but also with many private insurers, each with its own set of procedures and forms (whether electronic or paper) for billing and collecting payment. By one estimate, 80 percent of the billing-related costs in the United States are because of contending with this added complexity.
“One can have choice without costly complexity,” said Barak Richman, a co-author of the JAMA study and a professor of law at Duke. “Switzerland and Germany, for example, have lower administrative costs than the U.S. but exhibit a robust choice of health insurers.”
An additional source of costs for health care providers is chasing patients for their portion of bills, the part not covered by insurance. With deductibles and co-payments on the rise, more patients are facing cost sharing that they may not be able to pay, possibly leading to rising costs for providers, or the collection agencies they work with, in trying to get them to do so.
Using data from Athenahealth, the Harvard health economist Michael Chernew computed the proportion of doctors’ bills that were paid by patients. For relatively small bills, those under $75, over 90 percent were paid within a year. For larger ones, over $200, that rate fell to 67 percent.
“It’s a mistake to think that billing issues only reflect complex interactions between providers and insurers,” Mr. Chernew said. “As patients are required to pay more money out of pocket, providers devote more resources to collecting it.”
A distinguishing feature of the American health system is that it offers a lot of choice, including among health plans. Because insurers and public programs have not coordinated on a set of standards for pricing, billing and collection — whatever the benefits of choice — one of the consequences is high administrative burden. And that’s another reason for high American health care prices.
For most working Americans, the savings vehicle of choice is a 401(k).
But a flood of retirement savings dollars moving from these employer-sponsored plans to IRAs suggests that retirees or workers nearing the end of their careers favor individual retirement accounts when it's time to tap the cash they've amassed.
Older Americans are driving the trend, shifting their savings to take advantage of IRAs' more flexible withdrawal options, as well as some other perks that make the accounts more attractive than 401(k)s as people enter their golden years. These one-time savers need to start accessing the money to pay living expenses and to generate a steady income stream once they stop collecting a paycheck.
In the five years ended in 2017, 96 percent of the $2 trillion in IRA contributions came from rollovers, according to Cerulli Associates, a retirement consulting and research firm. And between the end of last year and 2022, the money invested in IRAs is expected to grow at a faster pace than 401(k)s, with IRA assets jumping 37 percent to $12.6 trillion. That compares to an estimated 20 percent rise in 401(k) assets to $6.6 trillion.
To be sure, the mushrooming assets in IRAs are due partly to the fact that for years Americans have been advised by brokerages, wealth management firms and financial advisers to take their money with them and move the money into an IRA when they leave a job or stop working. Many Americans also aren't aware that they can keep their 401(k) even after leaving the company.
IRA assets are also rising rapidly because the account balances being rolled over are sizable, as most 401(k) accounts "represent a career's worth of savings," says Jessica Sclafani, director of retirement practice at Cerulli.
Last year, for example, nearly $200 billion in assets was rolled over from 401(k) plans to the IRAs of investors between the ages of 60 and 69, with an average rollover balance of nearly $204,000, Cerulli data show. Americans older than 60 account for 70% of all IRA assets.
"They are big accounts," Sclafani says.
Retirement plan experts cite key reasons why IRAs are a better place to hold retirement assets:
More flexible withdrawal options Having a sizable nest egg is one thing. Being able to get at your cash quickly and easily is another. On that score, IRAs have the edge. "IRAs offer more flexible (withdrawal) options," says Sclafani.
The most common distribution option at a 401(k) plan, for example, is a lump sum, which creates an all-or-nothing choice for the account holder. Having to yank out all your money means it can't keep growing in the account along with the market. IRAs, however, allow withdrawals at any time and in amounts the account holder chooses.
"401(k) participants are worried they won't be able to access their savings, whereas IRAs don't have those limitations," says Sclafani, adding that the 401(k) distribution limits are "at odds with the concept of re-creating a regular paycheck" in retirement.
Both IRA and 401(K) participants can take money from their plans after age 59 1/2 without tax penalties from the Internal Revenue Service.
More investment options The average large 401(k) plan offers 29 investment options, according to a March study by BrightScope and the Investment Company Institute. By contrast, IRAs typically offer far more.
An investor, for example, that rolls over an account to an IRA at a mutual fund company, online brokerage or investment advisory firm will have hundreds, if not thousands, of funds to choose from. The menu will include a wider range of options, including stocks and bonds, as well as foreign-based investments.
"Some 401(k) plans may not offer more than one international fund, or may not offer international bond funds," explains Marguerita Cheng, CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland.
More access to advice IRAs set up at mutual fund firms such as Fidelity Investments, a discount brokerage such as Charles Schwab or a financial advisory firm in your hometown can give you access to professional investment advice. And that's critical, as the so-called "drawdown" phase – or withdrawal years – is "far more complex" than the wealth-building years, Cerulli research shows. In fact, the firm's research revealed that many people need guidance with "what to do with their proverbial 'pile of money' at retirement."
Still, experts say don't bolt from your 401(k) plan without reviewing the features of your employer's plan, as it could fit your needs and could even offer perks unavailable in an IRA.
Jim Keenehan, senior consultant of retirement plans at AFS 401(k) Retirement Services, ticks off a few benefits of keeping your former employer's 401(k):
Often, the investment options within a 401(k) are cheaper. "Companies are able to pool employees' money together to access lower-cost funds than their retail counterparts," Keenehan say.
Less is more
Sure, having more funds to choose from in an IRA may sound appealing. But "too many options can be overwhelming," he says. A menu of 20 funds offered in a 401(k), he argues, makes it easier for investors to build a portfolio with the right mix of assets.
"Don't assume you can only get advice in an IRA," Keenehan says. "401(k) plan sponsors can hire a quality, fiduciary advisor that provides advice and guidance as part of an overall financial wellness program."
Staying put in a 401(k) might also be a smart move for employees with holdings of company stock that has appreciated greatly in value, Cheng adds. The reason: the account holder can take advantage of a federal tax rule (known as NUA, or net unrealized appreciation) that can result in big tax savings when the shares are eventually sold.
July 10, 2018 - CMS has proposed a new rule that would eliminate a state’s authority to divert Medicaid payments away from providers. The rule is intended to ensure beneficiaries have adequate access to healthcare services through direct state-to-provider payments.
In 2014, CMS allowed state governments to divert Medicaid payments from providers to specific third parties, such as in-home personal care workers. States can also divert provider payments related to court-ordered wage holdings, child support orders, and other state-issued legal judgements.
The new rule would suspend this policy. CMS believes providers were either unfairly punished or were completely blindsided by unfamiliar payment diversion rules. The agency also believes that the payment diversions violated a part of the Social Security Act which guarantees states can only make Medicaid payments to providers.
“This proposed rule is intended to ensure that providers receive their complete payment, and any circumstances in which a state does divert part of a provider’s payment must be clearly allowed under the law,” said Tim Hill, Acting Director for the Center for Medicaid and CHIP Services.
The agency will seek a regulatory impact analysis (RIA) as required by law, since the rule could affect the US economy in excess of $100 million. In one example, CMS estimates that home healthcare workers may collect upwards of $71 million in union dues from diverted provider payments.
Medicaid spending in the US exceeds $500 billion, but CMS is still unsure how direct-to-provider payments would impact the majority of Medicaid stakeholders.
“The potential direct financial impact to providers of this policy change could be affected by many factors, such as the nature and amounts of the types of payments currently being reassigned and decisions made by homecare providers after a final policy takes effect about whether or not to resume payments to third parties for these types of benefits,” CMS said.
“The Department [HHS] is unable to quantify these direct financial impacts in the absence of specific information about the types and amount of payments being reassigned.”
Currently, CMS is seeking stakeholder comments about new processes or procedures that can improve payment allocation across the Medicaid program.
“We seek comments regarding how we might provide further clarification on the types of payment arrangements that would be permissible assignments of Medicaid payments, such as arrangements where a state government withholds payments under a valid assignment,” CMS said. “Specifically, we invite comments with examples of payment withholding agreements between states and providers that we should address.”
Health plan experts, providers, and actuaries can submit comments through http://www.regulations.gov/ and by direct or overnight mail.
ITHACA, N.Y. — Most nursing homes had fewer nurses and caretaking staff than they had reported to the government for years, according to new federal data, bolstering the long-held suspicions of many families that staffing levels were often inadequate.
The records for the first time reveal frequent and significant fluctuations in day-to-day staffing, with particularly large shortfalls on weekends. On the worst staffed days at an average facility, the new data show, on-duty personnel cared for nearly twice as many residents as they did when the staffing roster was fullest.
The data, analyzed by Kaiser Health News, come from daily payroll records Medicare only recently began gathering and publishing from more than 14,000 nursing homes, as required by the Affordable Care Act of 2010. Medicare previously had been rating each facility’s staffing levels based on the homes’ own unverified reports, making it possible to game the system.
The payroll records provide the strongest evidence that over the last decade, the government’s five-star rating system for nursing homes often exaggerated staffing levels and rarely identified the periods of thin staffing that were common. Medicare is now relying on the new data to evaluate staffing, but the revamped star ratings still mask the erratic levels of people working from day to day.
At the Beechtree Center for Rehabilitation & Nursing here, Jay Vandemark, 47, who had a stroke last year, said he often roams the halls looking for an aide not already swamped with work when he needs help putting on his shirt.
Especially on weekends, he said, “It’s almost like a ghost town.”
Nearly 1.4 million people are cared for in skilled nursing facilities in the United States. When nursing homes are short of staff, nurses and aides scramble to deliver meals, ferry bedbound residents to the bathroom and answer calls for pain medication. Essential medical tasks such as repositioning a patient to avert bedsores can be overlooked when workers are overburdened, sometimes leading to avoidable hospitalizations.
“Volatility means there are gaps in care,” said David Stevenson, an associate professor of health policy at Vanderbilt University School of Medicine in Nashville, Tenn. “It’s not like the day-to-day life of nursing home residents and their needs vary substantially on a weekend and a weekday. They need to get dressed, to bathe and to eat every single day.”
David Gifford, a senior vice president at the American Health Care Association, a nursing home trade group, disagreed, saying there are legitimate reasons staffing varies. On weekends, for instance, there are fewer activities for residents and more family members around, he said.
“While staffing is important, what really matters is what the overall outcomes are,” he said.
While Medicare does not set a minimum resident-to-staff ratio, it does require the presence of a registered nurse for eight hours a day and a licensed nurse at all times.
The payroll records show that even facilities that Medicare rated positively for staffing levels on its Nursing Home Compare website, including Beechtree, were short nurses and aides on some days. On its best staffed days, Beechtree had one aide for every eight residents, while on its lowest staffed days, there was only one aide for 18 residents. Nursing levels also varied.
The Centers for Medicare & Medicaid Services, the federal agency that oversees nursing home inspections, said in a statement that it “is concerned and taking steps to address fluctuations in staffing levels” that have emerged from the new data. This month, it said it would lower ratings for nursing homes that had gone seven or more days without a registered nurse.
Beechtree’s payroll records showed similar staffing levels to those it had reported before. David Camerota, chief operating officer of Upstate Services Group, the for-profit chain that owns Beechtree, said in a statement that the facility has enough nurses and aides to properly care for its 120 residents. But, he said, like other nursing homes, Beechtree is in “a constant battle” to recruit and retain employees even as it has increased pay to be more competitive.
Mr. Camerota wrote that weekend staffing is a special challenge as employees are guaranteed every other weekend off. “This impacts our ability to have as many staff as we would really like to have,” he wrote.
New rating method is still flawed In April, the government started using daily payroll reports to calculate average staffing ratings, replacing the old method, which relied on homes to report staffing for the two weeks before an inspection. The homes sometimes anticipated when an inspection would happen and could staff up before it.
The new records show that on at least one day during the last three months of 2017 — the most recent period for which data were available — a quarter of facilities reported no registered nurses at work.
The Centers for Medicare & Medicaid Services discouraged comparison of staffing under the two methods and said no one should expect them to “exactly match.” The agency said the methods measure different time periods and have different criteria for how to record hours that nurses worked. The nursing home industry also objected, with Mr. Gifford saying it was like comparing Fahrenheit and Celsius temperatures.
But several prominent researchers said the contrast was not only fair but also warranted, since Medicare is using the new data for the same purpose as the old: to rate nursing homes on its website. “It’s a worthwhile comparison,” said David Grabowski, a professor of health care policy at Harvard Medical School.
Of the more than 14,000 nursing homes submitting payroll records, seven in 10 had lower staffing using the new method, with a 12 percent average decrease, the data show. And as numerous studies have found, homes with lower staffing tended to have more health code violations — another crucial measure of quality.
Even with more reliable data, Medicare’s five-star rating system still has shortcomings. Medicare still assigns stars by comparing a home to other facilities, essentially grading on a curve. As a result, many homes have kept their rating even though their payroll records showed lower staffing than before. Also, Medicare did not rate more than 1,000 facilities, either because of data anomalies or because they were too new to have a staffing history.
There is no consensus on optimal staffing levels. Medicare has rebuffed requests to set specific minimums, declaring in 2016 that it preferred that facilities “make thoughtful, informed staffing plans” based on the needs of residents.
Still, since 2014, health inspectors have cited one of every eight nursing homes for having too few nurses, federal records show.
With nurse assistants earning an average of just $13.23 an hour in 2017, nursing homes compete for workers not just with better paying employers like hospitals, but also with retailers. Understaffing leads predictably to higher turnover.
“They get burned out and they quit,” said Adam Chandler, whose mother lived at Beachtree until her death earlier this year. “It’s been constant turmoil, and it never ends.”
Medicare’s payroll records for the nursing homes showed that there were, on average, 11 percent fewer nurses providing direct care on weekends and 8 percent fewer aides. Staffing levels fluctuated substantially during the week as well, when an aide at a typical home might have to care for as few as nine residents or as many as 14.
A family council forms Beechtree actually gets its best Medicare rating in the category of staffing, with four stars. (Its inspection citations and the frequency of declines in residents’ health dragged its overall star rating down to two of five.)
To Stan Hugo, a retired math teacher whose wife, Donna, 80, lives at Beechtree, staffing levels have long seemed inadequate. In 2017, he and a handful of other residents and family members became so dissatisfied that they formed a council to scrutinize the home’s operation. Medicare requires nursing home administrators to listen to such councils’ grievances and recommendations.
Sandy Ferreira, who makes health care decisions for Effie Hamilton, a blind resident, said Ms. Hamilton broke her arm falling out of bed and has been hospitalized for dehydration and septic shock.
“Almost every problem we’ve had on the floor is one that could have been alleviated with enough and well-trained staff,” Mrs. Ferreira said.
Beechtree declined to discuss individual residents, but said it had investigated these complaints and did not find inadequate staffing on those days. Mr. Camerota also said that Medicare does not count assistants it hires to handle the simplest duties like making beds.
In recent months, Mr. Camerota said, Beechtree “has made major strides in listening to and addressing concerns related to staffing at the facility.”
Mr. Hugo agreed that Beechtree has increased daytime staffing during the week under the prodding of his council. On nights and weekends, he said, it still remained too low.
His wife has Alzheimer’s, uses a wheelchair and no longer talks. She enjoys music, and Mr. Hugo placed earphones on her head so she could listen to her favorite singers as he spoon-fed her lunch in the dining room on a recent Sunday.
As he does each day he visits, he counted each nursing assistant he saw tending residents, took a photograph of the official staffing log in the lobby and compared it to what he had observed. While he fed his wife, he noted two aides for the 40 residents on the floor — half what Medicare says is average at Beechtree.
“Weekends are terrible,” he said. While he’s regularly there overseeing his wife’s care, he wondered: “What about all these other residents? They don’t have people who come in.”
This article was produced in collaboration with Kaiser Health News, an editorially independent program of the Kaiser Family Foundation. The author is a reporter for Kaiser Health News.
A version of this article appears in print on July 8, 2018, on Page A1 of the New York edition with the headline: Nursing Homes Routinely Mask Low Staff Levels.