Shriver Center: February 2008

Adding to the Health Care Crisis: Bush’s Catch-22

2008-02-15T22:38:29Z

The Bush administration recently blocked efforts by Ohio, Louisiana, and Oklahoma to expand health coverage for working families and sent a clear message that other states should not try to expand their health coverage programs either (see Robert Pear, “U.S. Curtailing Bids to Expand Medicaid Rolls,” New York Times, Jan. 4, 2008). Ohio, Louisiana, and Oklahoma sought to make publicly supported insurance available to working families that have been unable to access employer-sponsored or private insurance. The Bush administration’s preferred policy is for these families to rely on employer-sponsored or private insurance for their health care needs. This is a classic and cruel catch-22: a family needs publicly supported insurance because it cannot access private coverage, but that same family is denied publicly supported insurance on the grounds that it should rely instead on private coverage (which it cannot access).

Long-standing federal law has always granted states the freedom to set eligibility levels for Medicaid. However, on December 20, 2007, the Bush administration rejected Ohio’s proposal that would have expanded its Medicaid program. The state proposed increasing the eligibility limit from twice the federal poverty level, or about $41,000 a year for a family of four, to three times the poverty level, or about $62,000 a year.

Officials from both Louisiana and Oklahoma described similar experiences. In May the Oklahoma legislature voted to increase the income eligibility limit to 300 percent of the poverty level, but, according to Mike Fogarty, chief executive of the Oklahoma Health Care Authority, “we got a very clear signal from federal officials that we would not be allowed to go beyond 250 percent.” As Louisiana set out to make a similar expansion, it met the same fate as Ohio. “We found that we have much less flexibility to make changes in Medicaid than we thought,” said J. Ruth Kennedy, deputy director of Louisiana’s Medicaid program.

States are trying to expand choices for families because, for many consumers, the employer-based and private insurance markets are drying up or becoming far too expensive. According to a recent Commonwealth Fund–supported study in the new issue of Health Affairs, researchers found that in 2004 one in six Americans lived in families that spent more than 10 percent of their after-tax income on health care—approximately 18 percent of the nonelderly population, up from 16 percent in 2001. The study also found that, as costs began to rise, employers began either to shift their expenses to workers through higher premiums, deductibles, and copayments or to drop insurance altogether.

Also affected by the rising health care costs are people covered by private policies purchased in the individual market. People with private policies were more likely to bear high financial burdens than those covered by any other type of insurance. Of people with private insurance, 53 percent reported an increase in out-of-pocket health care costs in 2004, up from 39 percent in 2001. The study also showed that one out of every five privately insured middle-income consumers spent more than 10 percent of income on health care.

Interestingly enough, people enrolled in public medical assistance programs face high health care costs compared to their income, but those costs did not increase appreciably between 2001 and 2004. One-sixth of individuals with public coverage, or 6.4 million people, faced high-cost burdens, but that number for the most part did not fluctuate.

Consumers are caught between a federal system for which they do not qualify and a private market they cannot afford. As long as there is no comprehensive health care reform and no change in the Bush administration’s catch-22 position on expanding the publicly supported system, working-class American families will continue to have no viable option for quality, affordable health care.

For more information, contact Melissa Cubria at melissacubria@povertylaw.org or 312.368.1168

Shift to Autoenrollment Plans Lifts 401(k) Participation

2008-02-15T22:37:59Z

The increasing adoption of an automatic enrollment framework for employer-sponsored 401(k) retirement plans promises to overcome persistent problems faced by eligible nonparticipants in traditional 401(k) programs.

By simplifying retirement planning and making employees opt out of, rather than opting in, retirement savings plans, autoenrollment avoids “analysis paralysis” and allows participant inertia to work in favor of a secure financial future. The Shriver Center supports this development and encourages companies to assist employees further by matching contributions and offering financial education programs.

Participants’ reactions to the new plans have been positive. According to a recent survey done by Retirement Made Simpler, a new coalition jointly launched by AARP, the Financial Industry Regulatory Authority, and the Retirement Security Project, 95 percent of nearly 700 adults enrolled in automatic 401(k) programs said that the vehicle made saving for retirement easy, and 85 percent said that it helped them start saving earlier than they originally planned. Only 7 percent of those autoenrolled opted out of the plan. An additional survey by Diversified Investment Advisors found that, out of 223 companies with 1,000 or more workers, 62 percent had implemented autoenrollment, a 7 percent increase from 2006, while a further 33 percent said that they were considering autoenrollment.

Contribution levels for autoenrollment plans typically start at 3 percent of income, according to Internal Revenue Service guidelines, and employees have up to 90 days after enrollment to opt out and receive their money back. Annual contribution levels can then automatically escalate by 1 percent each year, up to the maximum contribution level of 10 percent.

The procedural shift is due in large part to the Pension Protection Act of 2006, a pension overhaul bill that took effect on January 1, 2008, and opened the door for companies to add autoenrollment by easing liability concerns over withholding worker wages.

For more information, contact Dory Rand at doryrand@povertylaw.org or Brian Clappier at brianclappier@povertylaw.org. You may also learn more about developments in retirement planning on the Brookings Institution website, http://www.brookings.edu/topics/retirement.aspx.

IRS Considers New Restrictions on Refund Anticipation Loans

2008-02-15T22:37:35Z

Illinois Offers Resources

With the catastrophic housing market, rising costs of food and energy, and talks about a looming recession, many cash-strapped Americans will be tempted by quick, yet costly, refund anticipation loans during this upcoming tax season. In a recent press conference with the Illinois Department of Financial and Professional Regulation, John Bouman, president of the Shriver Center, said about lenders of such loans, “They take this chance to develop an asset, and they turn it into expensive, bad debt.”

The Internal Revenue Service is considering a proposal to restrict tax preparers from offering refund anticipation loans in connection with the preparation of tax returns, according to American Banker. Anecdotal evidence shows that tax preparers promote tax fraud when they encourage their consumers to inflate their anticipated tax refund in order to secure a larger cash advance.

Although refund anticipation loans represent a fairly low risk to lenders, the loans are offered at interest rates ranging from 40 percent to over 700 percent. An overwhelming majority of loan recipients are the working poor, and lenders of refund anticipation loans strip an average of $1.57 billion each year from recipients of the earned income tax credit, the largest federal poverty assistance program. Refund anticipation loans speed up the refund by only as little as one week when compared to filing online and having the refund directly deposited into a bank account. To learn more, visit http://www.responsiblelending.org/issues/refund/.

More than ever, advocates must be responsible for both educating consumers and proposing policies to protect consumer assets. Advocates can start by writing letters to the IRS during the 90-day comment period. More information on the proposed rules can be found at http://www.irs.gov/pub/irs-drop/reg-136596-07_anprm.pdf.

State advocates can support legislation to institute usury caps, which limit the interest rates that lenders may charge, and state agencies can help by promoting websites that encourage consumers to link to free tax-preparation resources and to file taxes electronically. Brian Hamer, director of the Illinois Department of Revenue, says that e-filing is the best way to go. “It is fast, easy and secure.” See http://myrefund.illinois.gov/ for more information.

The Shriver Center is committed to building the stability of families and working to move individuals from poverty to prosperity through asset building and protection. For more information, contact Dory Rand at doryrand@povertylaw.org or Kelly E. Slay at kellyslay@povertylaw.org

Saving Stimulus Needed

2008-02-15T22:37:08Z

Now that Congress and the White House have agreed on an economic stimulus package to spur spending and try to keep the U.S. economy from going into recession (if it isn’t there already), it’s time to think about ways to encourage more saving and investing in America.

Millions of Americans are barely getting by, living from paycheck to paycheck, or going into debt by using high-cost financial services. One in five families lacks sufficient assets to survive at the federal poverty level for three months if the family loses its income, according to CFED’s 2007–2008 Assets & Opportunity Scorecard.

What messages are workers and families in America hearing every day? Spend, spend, spend. Although continued consumer spending might help the broader economy and some families to stay afloat in the short term, this continued spending craze is not helping families living on the edge to become more financially secure in the long term.

What we need are policies that encourage people to save—for a rainy day, for home ownership, for college, for retirement, and for their children’s future. Most of the current policies that encourage saving and investing primarily benefit those who already have assets. We need policies that also help low-income families save and build wealth.

States and tribal governments can encourage public benefit recipients to use mainstream financial services and begin saving for the future by counting financial education as a welfare work activity, eliminating asset limits that discourage saving, facilitating direct deposit of cash benefits, supporting free tax counseling and preparation programs, and allowing taxpayers to split state refunds. Allowing self-employment as a welfare work activity and supporting car ownership programs expand the range of work options available to low-wage workers.

States, schools, and banks can partner to develop teen bank programs that bring a new generation into the financial mainstream and prepare teens for jobs in the high-tech financial services industry. Savings programs such as Individual Development Accounts, Lifelong Learning Accounts, Family Self-Sufficiency accounts for public housing residents, universal Child Development Accounts, and automatic enrollment into portable retirement accounts help adults and children save for postsecondary education and training, homeownership, small business development, retirement, and other asset goals.

Policies that protect consumers from high-cost financial services such as check cashing, payday loans and consumer installment loans, refund anticipation loans, and predatory mortgage loans allow people to redirect those resources into savings and investments.

Let’s work to implement these policies and encourage people to save, save, save!

For more information, contact Dory Rand at 312.368.2007 or doryrand@povertylaw.org.

Illinois Improves Unemployment Insurance Eligibility Guidelines to Count Most Recent Earnings

2008-02-15T22:35:48Z

Unemployment Insurance (UI) is a time-honored and effective strategy for keeping workers connected to the workforce when they are between jobs due to layoffs and other good cause. Since 1935, UI has provided weekly benefits to eligible unemployed workers. UI temporarily replaces their wages so that such workers and their families do not suffer; at the same time UI requires them to secure their next jobs quickly and helps them do so.

Eligibility for UI benefits requires workers to be “attached to the labor force.” This means that a worker must earn a minimum of $1,600 during a “base period” consisting of four calendar quarters, with at least $440 earned in the worker’s second-highest-earning quarter. Prior to January 1, 2008, UI eligibility disregarded all workers’ most recent wages. Illinois defined its base period as only the first four of the last five completed calendar quarters. This meant that wages for the quarter in which the worker filed for UI were not counted (since the quarter was not completed), nor were wages from the previous quarter (the fifth quarter). This method of counting wages is a holdover from the pre–computer age when wages were recorded manually and getting more recent data was technologically infeasible. But this method denies many workers UI benefits, particularly those workers who are more recent entrants into the workforce; this method affects disproportionately low-wage workers.

Here is an example of how the traditional base period works. A UI claim is filed in June 2008. Wages earned in that quarter (April–June 2008) do not count because that quarter is the “filing quarter.” Wages from the previously completed quarter (January–March 2008) do not count because this quarter is the fifth of the five completed quarters prior to the filing quarter. The base period therefore is the previous four quarters (January–December 2007), the “first four of the five completed quarters” prior to June 2008. The worker must meet wage requirements during this period.

For workers who do not have enough wages earned during the traditional base period but have worked in more recent months prior to filing a UI claim, Illinois now uses the alternate base period (ABP). Illinois defines the ABP as the last four completed quarters immediately preceding the quarter when the worker files for UI. Wages for the quarter when the worker files for UI are still not counted (since that quarter is not a completed quarter), but wages from the previous quarter are counted. Adopting the ABP shortens the base period lag time by a quarter.

Here is an example of how the ABP works. A UI claim is filed in early May 2008 by a worker who worked for six months prior to her layoff. Although she did work during the traditional base period (January–December 2007), she did not earn $1,600 during that time and does not meet the earnings requirement using that base period. But under the ABP, moving the base period forward to include the last three quarters of 2007 and the first quarter of 2008 (April 2007–March 2008), she easily meets the earnings requirements with sufficient earnings in the fourth quarter of 2007 and in the first quarter of 2008.

Workers can apply for UI benefits online (at http://www.ides.state.il.us/) or in person at a local Illinois Department of Employment Security (IDES) office. To find the nearest IDES office call 888.337.7234. Information needed to file for UI benefits include the following:

Social Security number
Names and addresses of past employers and the number of days worked for each
Records showing wages earned, including dismissal wages and vacation pay
Records of any pension payments, including Social Security
Any odd-job or part-time earnings while unemployed
Spouse’s employment status and Social Security number
Names and birth dates of children, including stepchildren, adopted children under 18, disabled children regardless of age, and any child involved in court-ordered custody (bring a copy of the court order)

IDES will process all applications first to see if the traditional base period makes the worker eligible for UI benefits. Being eligible under the traditional base period is advantageous in case a worker experiences a second period of unemployment at a later date since earnings used in a quarter to determine eligibility are not allowed to be used again to determine eligibility for another spell of unemployment. If the IDES computer system does not show that there are enough earnings during the traditional base period, the ABP is used to determine eligibility. If the ABP still does not show that the worker had enough earnings to be eligible for UI benefits (usually due to the lag time in employers reporting wages to IDES), but the worker did actually work and earn enough to be eligible by using the ABP, then IDES takes from the worker an affidavit along with proof (such as pay stubs) of earnings and approves UI benefits to the worker based on the affidavit and evidence. Eligibility is verified either through the IDES computer system (the wages now appear in the IDES computer system after more time has passed and the employer has reported more recent wages) or by contacting the employer directly. While this process sounds complicated, it should appear seamless to workers applying for benefits.

Unemployment Insurance Benefits Handbook can be found online at http://www.ides.state.il.us/uidocs/bis/handbook.pdf. The Shriver Center and a group of allies were instrumental in getting this change in Illinois UI law. For more information, contact Wendy Pollack, director, Women’s Law and Policy Project, at the Shriver Center, 312.263.3830 ext. 238 or wendypollack@povertylaw.org.

Legislative Task Force on Employment Barriers

2008-02-15T22:34:50Z

The Illinois Legislative Taskforce on Employment Barriers for People with Past Criminal Convictions is poised to begin its work. Mandated by resolutions passed in 2006 and 2007 by the Illinois House and Senate, the task force is charged to conduct “a thorough examination of the barriers to employment for people with criminal conviction records and a thorough study of ways in which such barriers could be lowered or eliminated without exposing employers, individuals, the general public, or property to unreasonable risk.”

By late 2007 the majority and minority leaders of the Senate and the House had appointed members to serve on the task force. The legislative members:

Appointed by Senate Pres. Emil Jones: Sen. Kimberly Lightford (Maywood), Sen. Iris Martinez (Chicago), and Sen. Donne Trotter (Chicago).
Appointed by Senate Minority Leader Frank Watson: Sen. Randall Hultgren (Winfield), Sen. John Millner (St. Charles), and Sen. Dan Rutherford (Chenoa).
Appointed by House Speaker Michael Madigan: Rep. Connie Howard (Chicago), Rep. Elaine Nekritz (Northbrook), and Rep. Eddie Washington (Waukegan).
Appointed by House Minority Leader Tom Cross: Rep. Patricia Lindner (Aurora), Rep. Dennis Reboletti (Elmhurst), and Rep. Chapin Rose (Mahomet).

The task force was created under House Joint Resolution 107 of the 94th General Assembly and Senate Joint Resolution 6 and House Joint Resolution 8 of the 95th General Assembly; the chief sponsors were Senator Trotter and Representative Howard. The resolutions passed both houses unanimously—evidencing the importance of the issue to General Assembly members.

As directed by those resolutions, the task force will conduct public hearings, examine the barriers faced by persons with past criminal convictions with respect to obtaining employment, evaluate the recommendations of the Governor’s Statewide Community Safety and Reentry Working Group, and report its findings and recommendations to the governor and the General Assembly by December 31, 2008.

According to the resolutions, the task force’s report shall include the following: an assessment of those collateral consequences of a criminal conviction which impedes employment or persons with past criminal convictions and the experiences of other states in dealing with this problem; an assessment of the preparation for gainful employment provided to those incarcerated in Illinois correctional facilities and the experiences of other states in resolving this problem; an identification of the barriers which impede those with criminal records from obtaining state employment; and recommendations for legislative changes necessary to facilitate the employment of persons with past criminal convictions (facilitating such employment should not expose the employer, an individual, the general public, or property to unreasonable risk).

Advocates for removing the unnecessary barriers to rejoining civil society that hundreds of thousands of Illinois residents with conviction records face pushed for the creation of the task force. In a letter to Senator Trotter and Representative Howard last fall, those advocates stated, “We believe that the time has come for a rational examination of the laws and practices that govern employment of persons with conviction records, and for a major overhaul of those laws and practices with the purpose of allowing many more individuals with records to obtain jobs and put their criminal pasts behind them.” That letter made numerous suggestions to Senator Trotter and Representative Howard about how, in the advocates’ opinion, the task force could best conduct its work, including holding public hearings around the state, making information about the task force available on the General Assembly website, and hearing from the public at large as well as from experts and those involved both directly (employers) and indirectly (licensers, accreditors, insurers, regulators) in hiring decisions. For a full text of those suggestions, see the Taskforce Memo.

For more information, contact Margaret Stapleton (mstapleton@povertylaw.org) or Marie Claire Tran (marieclairetran@povertylaw.org) at the Shriver Center.

2009 Budget Proposed by President Bush

2008-02-15T22:33:18Z

Familiar Themes Headlined by Its Best Feature—It’s the Last One

Earlier this month President Bush announced his blueprint for the federal budget for federal fiscal year 2009, which begins in October 2008. Its dominant themes are the familiar ones of the Bush administration: a growing deficit, a widening gap between the haves and have-nots, increased tax cuts disproportionately benefiting the wealthy, retreat from support for programs that create opportunity or otherwise help low- and middle-income people, and continued cost shifting onto state and local governments.

The Deficit
The Bush administration itself predicts that the budget proposal would balance the budget by 2013, but that prediction relies on the omission of large costs. For example, the budget assumes that in 2012 the relief from the alternative minimum tax (AMT) would expire—meaning that 38 million mostly middle-class households, rather than 4 million, would pay the tax that year. This is extremely unlikely. Bush’s budget also excludes any costs for the two wars or other global antiterror activities after 2012.

A more sober assessment, including a continuation of AMT relief and the most optimistic war spending estimates from the Congressional Budget Office, is that the Bush proposal would yield budget deficits of $118 billion in 2012 and $153 billion in 2013.

Tax Cuts
The heart of the deficit growth throughout the Bush years has been tax cuts, depriving the budget of revenues that would meet spending needs. In this budget proposal President Bush would continue all of the tax cuts of 2001 and 2003 and add new tax cuts on top. This over the next five years is $900 billion in tax cuts, which over the next ten years would grow to $2.4 trillion in tax cuts, not including the continuation of the AMT relief, which would add another $1.3 trillion over ten years.

The top 1 percent of households, which have income over $450,000 a year, would each receive about $1 trillion of this tax relief over ten years, or about $60,000 per year. The top 0.3 percent of households, with income over $1 million a year, would each receive $150,000 in tax relief a year. Together this group would get an amount of tax relief more than the entire amount that the federal government spends on elementary and secondary education and health care for veterans.

The proposal also includes a permanent repeal of the estate tax. That would cost over $550 billion over ten years and would go to the wealthiest 1 percent to 2 percent of American families. The richest families in the country would get tens or even hundreds of millions in tax relief apiece.

Budget Cuts
The budget proposal would cut domestic programs by $23 billion in 2009 and would grow to a total of $474 billion over five years. The cuts hit nearly every area of the domestic budget. Spending would be below 2008 levels even before adjusting for inflation. Here are some specifics (but not a complete list):

The Low-Income Home Energy Assistance Program would be cut $570 million or 22 percent and would be back to the level in 2001, when energy prices were 65 percent lower. This means either reducing payments by almost a quarter or cutting off about one million low-income and elderly people.

Child care funding would be frozen for the seventh straight year. Inflation-adjusted losses in this spending line are 17 percent through 2007, a period during which the population of low-income children grew by 8 percent. The budget proposal itself estimates that 200,000 fewer children would be served in 2009.
Cuts in the Section 8 housing choice voucher program would mean that 100,000 fewer low-income households would receive help to afford housing.
The Centers for Disease Control and Prevention allocation would be cut by $453 million, including sharp cuts in programs to detect and control infectious diseases and preventive health services.
The Environmental Protection Agency would lose $330 million, to a level far below the 2001 level without adjusting for inflation.
The budget would fund some educational programs but cut others, so that the total for K-12 spending would not keep pace with inflation.
There are over $15 billion in cuts in discretionary grants for states and localities, or over $19 billion after inflation (11 percent). For example, grants for homeland security, firefighters, and first responders would be cut 45 percent ($1.5 billion) before inflation.
Cuts in Medicaid over five years amount to $18.2 billion. These do not reflect planned reductions in the cost of health care but essentially shift costs to the states.
Medicare would be cut by over $550 billion over ten years. Some of these cuts are recommended by Congress’ expert advisory panel (MedPAC), and these are considered safe. But the Bush administration would make additional cuts that would threaten the willingness of providers to continue participating. And the Bush administration does not propose to make the recommended cuts in overpayments to health maintenance organizations under Medicare. The proposal would protect and continue those overpayments.
While that proposal includes an increase for the State Children’s Health Insurance Program of $19.7 billion over five years, this is less than the $21.5 billion needed just to continue the current level of the program.

President Bush’s proposal will now be taken up by Congress, which will attempt to pass a comprehensive budget resolution this spring. The budget resolution then governs the actual appropriations bills that Congress will attempt to pass prior to the end of the current fiscal year on September 30.

Source for this article: Robert Greenstein et al., “The Dubious Priorities of the President’s FY 2009 Budget,” Center on Budget and Policy Priorities (Feb. 7, 2009). That article and a number of others about the budget can be found at http://www.cbpp.org. For more information, contact John Bouman at johnbouman@povertylaw.org or Melissa Cubria at melissacubria@povertylaw.org.

Attachments

2008-02-15T22:11:51Z