The Centers for Medicare & Medicaid Services (CMS) has put out a 153-page letter that provides instructions and information for insurance companies as they design their Medicare Advantage plans for 2012.  Details and costs for 2012 Medicare Advantage plans must be submitted to CMS by June 6, 2011.

CMS is cutting payments to Advantage plans, but will also give the plans more money if they receive from 3 to 5 stars. The five-star rating system measures plans’ performance on a range of areas from customer satisfaction to keeping members healthy.

Because of this give and take (or take and give) CMS says actual Medicare Advantage per-capita payment will go up 1.6%. With all the talk of CMS slashing payments to Medicare Advantage plans this is good news for the insurance companies and people enrolled in Advantage plans.  And it may mean the Medicare Advantage market won’t be faced with large shocks in the form of higher premiums or plan cancellations for 2012.

In Arizona, Medicare advantage enrollment is very high among Medicare beneficiaries, particularly in Mariopa county (44%), Pinal (49%), and Pima county (45%).

In 2012, plans that have 4-star or 5-star quality ratings will get higher payments than other plans. CMS has also decided to give 3-star rated plans a bonus -though smaller than 4 and 5 star plans will receive.  Expanding bonus payments to 3 star plans is good for Arizona because most of our plans get 3 stars.  Only Cigna in Maricopa county gets 4 stars.

In 2012, Medicare will allow people to drop a lower-rated plan to enroll in a 5-star Advantage plan at any time during the year.  This does not affect people in Arizona, as we have no 5 star-rated plans.

Advantage plans that propose to increase premiums or co-pays by 10% or more will get special attention from CMS.

I have read many articles about Republican plans to cut Social Security, but I thought they would happen down the road, if at all.  It turns out that cuts to Social Security are in the works for this year – and they will affect people who are currently on Social Security.

I was reading the Time Goes By blog which is written by a retiree who worked for many years as a journalist.  I think she goes by the name “Crabby Old Lady”.

Here is some of the post:

The House budget for fiscal year 2011, passed in the wee hours of Saturday morning, calls for about a $1.7 billion cut to Social Security. But wait.

If you have been following Time Goes By posts about the program over the years, you know that Social Security is self-funded, including administrative costs. So what gives? How come Congress can cut those administrative costs?

Here is how: Social Security and SSI benefits are mandatory spending, meaning they are authorized by permanent law. They can be changed under certain circumstances, but that is not what is at risk right now.

Administrative costs, which have remained at about one percent of revenue for many years while providing excellent service, are discretionary spending. This means they are subject to the annual appropriations process (the budget) and Congress can change the amount every year affecting the number of employees and therefore, level of service.

Right now, because the government has lacked a budget for FY2011, administrative costs are frozen at 2010 levels – $11.5 billion – and the House budget cut of $1.7 billion, passed over the weekend, would leave only $9.8 billion.

The National Committee to Preserve Social Security and Medicare (NCPSSM), in a 18 February letter to Congress, pointed out what this cut means to the program:

“It means having to wait longer to get an appointment to file for benefits. It means not receiving a decision in a timely manner. It means getting a busy signal when you call an office or the Agency’s toll-free 800 number telephone service.

“It means not having your change of address or direct deposit information processed in a timely fashion.

“And finally, it means significant employee furloughs or even office closures, resulting in even greater degradations of service to America’s seniors.”
If the federal government shuts down, non-essential employees cannot go to work. Last week, both the president and House Minority Leader Nancy Pelosi said Social Security checks would be delayed, and that would almost immediately affect those of us (about half of Social Security recipients) who receive our Social Security direct deposits or checks on the second Wednesday of the month (9 March).

If your monthly budget is as tight as mine, that is a disaster. Sure, I can eat, but some people won’t. And depending on how long a shutdown lasted I, like many others, couldn’t pay some bills on time. The 1995 “Newt Gingrich shutdown” lasted five days and Congress is much more polarized this time.

So in preparation, I’m arranging to transfer some money from elsewhere into my checking account. What about you?

How does your Social Security account compare to investing your money in annuities? Here is an article from BankRate.com that includes a detailed financial analysis that puts Social Security investment in a positive light.

Annuities vs. Social Security

By Jennie L. Phipps · Bankrate.com

Thursday, February 3, 2011

My right-brained, accountant husband stayed home yesterday because it snowed. We started talking about the number of people who attack Social Security as an inefficient retirement fund and insist they could do much better on their own.

Just for the heck of it — because he loves math and me — my hubby unearthed his most recent annual Social Security statement and plugged the numbers into a spreadsheet to test how his accumulated Social Security compares to a conservative investment of the same amount of money outside Social Security. He was surprised to learn that Social Security isn’t such a bad deal after all. Hubby listed his taxable wages beginning in 1963 on the spreadsheet. In the second column, he put the annual percentage of Social Security deducted from his wages — it’s changed over time, from 3.32 percent the first year he paid in to 6.2 percent last year. He calculated his annual contributions and his employers’ annual contributions based on his wages. Then he totaled the contributions.

Next, he assumed that Uncle Sam would invest the money in 30-year Treasuries, and he plugged in interest on the accumulated money based on the Treasury rates, calculating a purchase every six months and reflecting the actual change in rates. Finally, he added up the annual totals and a grand total.

He took that grand total and plugged it into ImmediateAnnuties.com and got a monthly payout for a single male, age 66. He compared that number to what Social Security says he’d get at 66.

According to ImmediateAnnuities.com, he would be able to take his total accumulated savings and purchase an annuity worth $3,427 paid monthly beginning at age 66 for the rest of his life. If he wanted to share the money with me, he could get a joint-lives payout that would pay $2,828 until we both died. There are no inflation adjustments during that time, and when both of us die, the insurance company gets to keep what’s left.

By comparison, Social Security will pay my husband $2,415 monthly beginning at age 66. If I didn’t have my own Social Security, I could claim half of his — $1,207 — for a family total of $3,622. That’s $794 more than the private annuity would pay us. Plus, the Social Security money is indexed for inflation. When one of us dies, the other gets the highest amount of the two payments. When both of us die, the government keeps anything that’s left.

By my lights, Social Security is clearly the better deal.

The Bush administration wanted to partially dismantle Social Security and let people invest at least some of their contributions in the stock market. I haven’t heard much about that plan since the market went south in 2008. But some regular posters here still suggest that they could do better on their own. And maybe they could. But Social Security is a program designed to protect all of us, including those of us who don’t have what it takes to save and invest money on our own. I think that’s a retirement planning blessing.