Tips on Choosing a Medicare Prescription Drug Plan

Do you want to lower the amount you spend on prescription drugs? Then you need to know about “formularies” and “tiers.”

What is Medicare Part D?

If you are over 65 and retired you probably have drug coverage through Medicare’s prescription drug insurance program. It’s referred to as “Part D” and is offered solely through private insurance plans that contract with Medicare. Medicare will approve a contract only if the plan meets with certain minimum requirements.

Part D is a voluntary program and enrolling in it is up to you (unless you are low income and receive an “Extra Help” subsidy). You must take the initiative to enroll during certain times called enrollment periods.

If you have Original Medicare you can enroll in a stand-alone Part D plan. If you have coverage through a Medicare Health Plan (also called a “Part C” or “Advantage Plan”) your part D coverage may be bundled together with the plan's other benefits. In any event, Part D works the same way whether bundled within an Advantage Plan or purchased as a stand-alone. 

What are Formularies and Tiers?

Each Medicare Prescription Drug Plan has its own list of covered drugs (called a "formulary"). The plans differ as to their formularies, as well as their premiums, costs, and pharmacy networks. Each plan can change each year in any of these areas, so you need to review your plan each year. There are dozens of Medicare Part D plans from which you can choose. In Pennsylvania in 2013 you can choose from over 30 stand-alone Part D plans.

Most Part D plans impose various forms of restrictions within their formularies. With some drugs you must get prior authorization; plans may require step therapy; and plans may impose quantity limits on your medications.

Many Medicare drug plans place drugs into different "tiers" within their formularies. Tiers are co-payment categories. Drugs in each tier have a different cost to you. Drugs in Tier 1 have the lowest co-payments. The plan will impose a higher co-payment (often $30-$50 in 2013) on Tier 2 drugs. Tier 3 drugs have the highest co-payments (often $60 to over $100 for a thirty day supply). A few drugs may be placed in a “specialty” tier and be very expensive. 

Tips on Choosing a Medicare Drug Plan

When choosing a Part D plan you need to go beyond a simple determination of whether the prescription drugs you will be taking are included in the plan’s formulary. You also need to find out into which tier your drug has been placed by the plan and the amount of your co-pay responsibility. A drug in a lower tier will generally cost you much less than a drug in a higher tier. (Note, that in some cases, if your drug is on a higher tier and your prescriber thinks you need that drug instead of a similar drug on a lower tier, you or your prescriber can ask your plan for an exception to get a lower copayment.)

When you are choosing between Part D plans, make a list of all of the non-generic prescription medications you expect to be taking during the upcoming year. Then check the drugs against plan's tiers and co-payment requirements. Try to determine what will be the total cost to you over the year of a plan's premiums + deductibles + co-pays. 

Use the Medicare Plan Finder

While this sounds complicated, the Medicare website can simplify your investigation and help you make a good decision.  Visit the Medicare Plan finder to search for Medicare drug plans in your location. The link is:  https://medicare.gov/find-a-plan/questions/home.aspx.

The Plan finder allows you to enter your list of prescription drugs, your preferred pharmacies and other information related to your prescriptions. After you complete the intake information, the Plan finder will provide you with a personalized list of plans organized in order of lowest estimated cost. This greatly simplifies the process of determining which plan may best meet your needs. The Plan finder deals with the complexities of formularies and tiers and co-payments for you.

The Plan finder will also provide you with a rating for each drug plan. Medicare uses information from satisfaction surveys and other sources to give overall performance star ratings to plans. Each plan is given a rating between 1 and 5 stars. A 5 star rating means “excellent” for quality and performance. The ratings are updated each fall and can change each year.  

Be aware, however, that drug plans can (and do) change their formularies and tiers and co-pays and premiums each year. And your personal medication needs may change over time. This means that it’s best to review your plan choice annually. The Medicare Plan finder makes this task much less formidable. 

Switching Drug Plans

If you decide to switch plans, Medicare has relatively liberal rules. You can switch to a different drug plan during any enrollment period. An open enrollment period takes place this year from October 15–December 7.  In addition, you can switch to a 5-star rated drug plan during most of the year: from December 8 to November 30^th.   And a special enrollment period may be available to you if you move out of your existing plan’s service area or enter or leave a long term care facility.   

Like much of health care in the United States, prescription drugs are expensive and your choices are complicated. Fortunately, Medicare is able to help. Using the Plan finder should take an hour or less and should provide you with the information you need. If you need more help, additional assistance is available to you through your State Health Insurance Assistance Program.

Further Information

Your Guide to Medicare Prescription Drug Coverage, (Center for Medicare and Medicaid Services)

Part D / Prescription Drug Benefits, (Center for Medicare Advocacy)

MedPac Status Report to Congress on Part D (March 2012)

Links to Free Medicare Related Publications by the Federal Government

2013 Medicare Part D Prescription Drug Plans: Overview by State

Your State Health Insurance Assistance Program can provide you with personal assistance.

Inheritance can create problems for grandchild with special needs

One blessing of aging is that it gives us the opportunity to get to know our grandchildren, and perhaps even our great-grandchildren. As we live through our 70s and 80s we can watch them grow into adulthood. We can develop special relationships with them and be a big part of their lives (and vice versa).   

It’s no wonder then that so many grandparents want to leave an inheritance for their grandchildren. Often the major portion of the grandparent's estate is left to his or her children, but a small inheritance is designated for each grandchild.

Remembering our grandchildren in our estate plan can be a wonderful gesture of love. But be careful if you have a grandchild with special needs. Even a small inheritance can create big problems for them.

Take the case of a client I’ll call Mary. When I met with Mary she brought her old will with her. In that will, she left $25,000 outright to her grand-daughter Emily. I asked Mary about Emily. She explained that she was always especially close with her grand-daughter, who she said had “a good heart.” Emily was age 32 and had some problems in her life. Emily was bi-polar. While she was usually good about taking her medications, every once in a while she had a problem and was hospitalized.

Emily was unable to work. She received a monthly benefit from SSI and her health care was covered by Medicaid. Although she was unable to work, Emily was able to live on her own in subsidized housing. 

Mary figured that Emily could use a little money. And Mary wanted Emily to know that she loved her deeply – that was the main purpose for the $25,000 inheritance.     

I had to explain to Mary that her wonderful loving gesture was likely to cause Emily some problems. In order to keep her SSI and Medicaid benefits Emily is allowed to have no more than $2,000 in the bank. The $25,000 inheritance could mean that Emily would lose these important benefits.

But it wasn’t necessary for Emily to be disinherited. Mary could still remember Emily and leave her an inheritance – she just needed to leave the gift in a protected manner that wouldn’t disturb Emily’s benefits. A special needs trust could be used to do this.

If the $25,000 inheritance was left to a special needs trust, the money would be held by a third party who would use it to provide benefits for Emily in a manner that would not cause her to lose her public benefits. There were several ways that Mary could implement this kind of planning.

-       Mary could create a special needs trust in her will. Someone who Mary trusted to care for Emily’s interests (probably a parent or sibling) would be named as trustee to manage the inheritance and use it for Emily’s needs.

-       The inheritance could be contributed to a pooled trust account set up for Emily. Under this option, the money would be professionally managed by a non-profit entity and used to fund Emily’s needs without disturbing her benefits.

-       The inheritance could be contributed to a special needs trust for Emily that was set up by Emily’s parents, or some other third party.      

We called Mary’s daughter (Emily’s mother) to ask if she had done any planning for Emily. We found out that Emily’s parents had already set up a special needs trust for her. We ended up designating that trust as the recipient of the inheritance from Mary.

When Mary signed her will, she gave a big sigh. I asked what that was about. She told me she had been worrying for years about the money she wanted to leave Emily. She hadn’t been thinking about SSI and Medicaid. Instead, she had been concerned that if she had $25,000 in the bank, someone might take advantage of Emily, who was the “sweetest girl in the world,” Now, she didn’t have to worry about this anymore. Putting the money in trust would protect it for more than just public benefit reasons.

When Mary left my office she gave me a big hug. “Thank you Mr. Marshall,” she said. “Thank you so much.”

After she left, I felt really good. Some days it’s just great being an elder law attorney.    

For More Information

What are "Special Needs Trusts"

Planning for a Special Needs Grandchild

Federal Court voids Restrictions on Pooled Trusts

Pooled Trusts operating in Pennsylvania include:

• The Achieva Family Trust, 711 Bingham Street, Pittsburgh, PA 15203; 412-995-5000, http://www.achieva.info/family.jsp  

• The ARC Community Trust of Pennsylvania, 1012 West 9th Ave., Suite 215, King of Prussia, PA 19406, Phone: 610-265-4788, http://www.arctrust.org/

Community Spouse Minimum Income Allowance to Increase to $1,939 on July 1, 2013

If a married nursing home resident receives Medicaid long-term care benefits, his or her community spouse is entitled to retain a certain minimum level of income called the Monthly Maintenance Needs Allowance (MMNA). If the community spouse's own income is insufficient to provide this allowance, income can be diverted to the community spouse from the institutionalized spouse.

The MMNA is set at 150% of the federal poverty level for a family of two plus an excess shelter allowance, if applicable. The Pennsylvania MMNA is adjusted on July 1st of each year to keep up with inflation.

As of July 1, 2013 the minimum MMNA is being increased to $1,939 per month. The actual MMNA can be higher than the minimum if the community spouse has high housing cost and is entitled to an excess shelter allowance.

A standard monthly shelter allowance of $582 a month will be built into the minimum MMNA effective July 1. If certain housing-related expenses of the community spouse exceed this standard allowance the MMNA is increased by the amount of these excess shelter costs. This is the called the "excess shelter allowance."

These minimum income allowance rules are part of the federally mandated “spousal impoverishment” protections that were enacted in 1988 to avoid the total impoverishment of spouses of nursing home residents. 

Further Information:

Department of Public Welfare Policy Clarification PMN-16337-468 (submitted 05/13) 

Hospital Arbitration Agreement signed by Mother is Unenforceable against Daughter

Can a mother enter into an agreement with a hospital that limits her daughter’s rights to sue the hospital for negligent care? What if the mother doesn’t have power of attorney or guardianship authority? That issue was the subject of a recently decided Pennsylvania appeals court case, Walton v. Johnson, 2013 Pa. Super. 108 (May 7, 2013).

Lakeysha Walton was comatose when she was admitted to Kindred Hospital in Philadelphia. A friend signed the original admission agreement. Two weeks later the hospital asked Lakeysha’s mother, Nancy Walton, to sign additional paperwork regarding her daughter’s admission. That added paperwork included a Voluntary Alternative Dispute Resolution Agreement (“ADR agreement”) along with various other hospital forms. 

Nancy signed the forms including the ADR agreement which required that claims against the facility be submitted to arbitration.

Lakeysha had never given her mother power of attorney or any other authority to act on her behalf.

Two years later, Lakeysha filed a court suit against Kindred Hospital. Kindred objected to the suit and claimed that the case should go to arbitration because of the ADR agreement. Kindred argued that Nancy was acting as Lakeysha’s agent when she signed the agreement to arbitrate disputes.

The trial court rejected Kindred’s objection and held that the ADR agreement was unenforceable under these facts. On appeal, the Pennsylvania Superior Court (an intermediate appellate court) agrees and affirms the trial court’s ruling.

The Ways an Agency Relationship can be Established

The Superior Court discusses four different legal grounds under which Nancy could be deemed to have been acting as agent for her daughter:

1.   Express authority exists where the principal deliberately and specifically grants authority to the agent;

2.   Implied authority exists in situations where the agent’s actions are proper, usual and necessary to carry out express agency;

3.   Apparent agency exists where the principal by word or conduct causes people with whom the alleged agent deals to believe that the principal has granted the agent authority to act;

4.   Authority by estoppel occurs when the principal fails to take reasonable steps to disavow the third party of their belief that the purported agent was authorized to act.  

The Court found that none of these grounds were present given the facts in this case. It noted that the party asserting the existence of an agency relationship bears the burden of proving it by a fair preponderance of the evidence. “The relationship of agency cannot be inferred from mere relationship or family ties unattended by conditions, acts or conduct clearly implying an agency.” Sidle v. Kaufman, 29A.2d77, 81 (Pa. 1942). Thus, the ADR agreement was unenforceable. 

Powers of Attorney and Health Care Representatives

While the patient/plaintiff prevailed on these facts, the Walton decision raises some concerns for lawyers drafting powers of attorney for clients who want to avoid arbitration agreements.

• Many elder law attorneys include a statement in powers of attorney that the agent has no authority to enter into ADR agreements. If desired, this type of clause should probably be included in both financial and health care powers of attorney.

• But Walton suggests that there are instances where an agent can bind a principal even though the power of attorney does not authorize the agent to do so. In cases of apparent agency and authority by estoppel a “no ADR” clause (especially one hidden away in the boilerplate) may not be sufficient to avoid arbitration.  Can the lawyer draft a “No ADR” document that limits the potential for its future negation due to the conduct of the principal?

• The Walton opinion does not discuss the authority that resides in a health care representative. It appears this issue was not raised by the parties. But a Pennsylvania statute gives at least some authority to default health care representatives who become authorized to act for incompetent persons, like Lakeysha, who have no other decision-makers. Does this Pennsylvania statute (and similar laws in other states) give a representative the authority to enter into an ADR agreement? (See my comments below).

Implications of Health Care Agents and Representatives Act

Nancy Walton may have been the default health care representative for her daughter under the Pennsylvania Health Care Agents and Representatives Act. Section 5461 of that statute provides that a default health care representative (spouse, adult child, parent, etc.) may make health care decisions for an incompetent individual.

Did the mother have authority to enter into the ADR agreement in her capacity as her daughter’s health care representative?

Section 5461(c) of Pennsylvania’s Health Care Agents and Representatives Act provides that a representative has the same authority as an agent as set out in Section 5456.  

§5461(c) Extent of authority of health care representative.--Except as set forth in section 5462(c)(1) (relating to duties of attending physician and health care provider), the authority and the decision-making process of a health care representative shall be the same as provided for a health care agent in section 5456 (relating to authority of health care agent) and 5460(c) (relating to relation of health care agent to court-appointed guardian and other agents). 

§5456 (a) Extent of authority.--Except as expressly provided otherwise in a health care power of attorney and subject to subsection (b) and section 5460 (relating to relation of health care agent to court-appointed guardian and other agents), a health care agent shall have the authority to make any health care decision and to exercise any right and power regarding the principal's care, custody and health care treatment that the principal could have made and exercised. The health care agent's authority may extend beyond the principal's death to make anatomical gifts, dispose of the remains and consent to autopsies. [Emphasis added]

Is this authority broad enough to authorize the execution of an enforceable ADR agreement by a health care representative? It is an important question, since family members are often asked to sign such an agreement when they admit an elder to a hospital or nursing home. Given the stress of the admissions process and a flood of paperwork, it seems unrealistic to expect that they will know what they are signing. 

Are these agreements binding if the family member is health care representative for the elder? What if the family member is power of attorney for the elder but the document says nothing about ADR agreements? We will have to wait for other cases to get more answers.  

Further Information

Often Overlooked In Nursing Home Admission Paperwork Is An Arbitration Agreement (Kaiser Health News, September 17, 2012)

Nursing Home Arbitration Agreements: Consumers Beware (ElderLawAnswers)

Using Powers of Attorney and Living Trusts to Avoid Guardianship

At any age we face a risk that an event may occur that will make us temporarily or permanently incapable of managing our own financial affairs. That risk increases as we age. And even without encountering a catastrophic health event, we may face a reduction in our capacity to manage, or of our interest in continuing to manage, our financial matters.

In order to protect our financial and property interests during our uncertain future lifetimes, it is important that we understand the legal tools that can be used to give someone legal authority to deal with financial matters for us.

Our society has developed a number of legal tools that allow a transfer of financial decision making authority to take place. Several are voluntary tools that we can create in advance of potential incapacity. The voluntary tools help ensure that our finances will be handled in the manner of our choosing, by a person or institution of our choosing. It is necessary to resort to involuntary tools if effective advance planning is not in place.

This article will briefly describe frequently used legal tools for substitute financial management.

THE FINANCIAL POWER OF ATTORNEY

The Financial Power of Attorney can be a simple, effective, and low cost means of allowing someone else to manage financial and property issues for you. Using a Financial Power of Attorney, a person delegates decision making authority to a trusted family member or other agent. The power can be immediately effective, or it can be dormant until needed. Virtually every adult should consider signing a Financial Power of Attorney to allow their financial affairs to be managed effectively and in accordance with their wishes in the event of their incapacity.

A Financial Power of Attorney is a powerful tool that should only be given to an agent who can be trusted completely. There are many issues you need to consider before you sign a Financial Power of Attorney. Questions to ask yourself include: (1) Should the document give your agent the power to act whenever the agent decides it is necessary, or only when only when someone other than your agent (e.g. your doctor) determines that you are incapacitated? (2) How broad are the powers you want to give to your agent? For example, do you want your agent to have the power to give away your assets? (3) Do you want to name more than one person to serve together as co-agents for you. (4) Who should you name as a back up to take over if your original agent cannot serve?

JOINT OWNERSHIP OF PROPERTY

Joint ownership is a widely used form of property management. Couples often share ownership of bank and investment accounts and real estate in this manner. Often these assets are held “with right of survivorship,” which means that upon the death of one of the owners, the asset becomes owned solely by the survivor. Joint ownership as a property management tool has many limitations and may not allow your joint owner to effectively manage your finances. There can also be tax complications with joint ownership arrangements and they can upset your estate plan. Most experts suggest that you should not rely on joint ownership as your only management tool.

THE LIVING TRUST

A living trust is a trust you create to take effect during your lifetime. If it can be changed or canceled by you at any time, it is called a revocable trust. If you cannot change or cancel the trust, it is called an irrevocable trust. Revocable living trusts are asset management and probate avoidance devices. They have no tax or asset protection advantages. Irrevocable trusts are usually created to obtain tax savings, to protect assets from creditors, or to qualify for Medicaid or other public benefits.

REPRESENTATIVE PAYEES AND GUARDIANS

Representative payee authority functions something like a mini-guardianship, limited to the sole purpose of managing a person’s Social Security income check. It is also available for Civil Service, Railroad Retirement, and Veterans Administration checks. A representative payee can be established for an incapacitated beneficiary without going to court. Someone must apply to the Social Security Administration or other agency to be named as representative payee. Annual financial accounting is required.

Guardianship (called “conservatorship” in some states) is usually the legal tool of last resort for decision-making and management of the financial and personal affairs of an incapacitated person. It may be required if effective voluntary tools are not in place. Guardianship involves a court proceeding whereby an individual is adjudged to be incapacitated and someone is appointed by a Judge to act as guardian for that individual. The guardian may be authorized, acting under court supervision, to act for the incapacitated person in making property management or personal and health care decisions, or both. Guardianships are inflexible and relatively expensive, can be conflict ridden, and may be embarrassing. People generally want to avoid resort to this tool.

For most people, it’s wise to plan ahead by creating the voluntary tools that may be needed later for management and protection of their finances and property. Your elder law and estate planning attorney at will help you consider your options and put the best planning tools in place. If you live in Pennsylvania, you can contact my law firm, Marshall, Parker and Weber, for a free initial consultation. 

FURTHER INFORMATION

Do You have a Comprehensive Estate Plan?  

I'm Power of Attorney for my dad. What are my duties? 

What is the Difference my Power of Attorney and my Executor?