Thursday, December 12, 2019

Medicare Part B Premium and Deductible to Rise in 2020


Medicare is the vital healthcare program that covers most older Americans. It’s a complicated program. This article will take a look at one of its components – Medicare Part B and Part B’s premiums.   
Medicare Overview
Medicare is the federal health insurance program that covers people 65 and older and some younger adults with permanent disabilities and certain medical conditions. When Medicare was established in 1965 about half of American seniors had no health insurance. Today, virtually all Americans over age 65 have at least some health coverage through Medicare.
Medicare does not cover all health care services. For example, Medicare generally does not pay for long-term care services, regular eye exams and eyeglasses, hearing aids, or routine dental care.
Medicare coverage is divided into four parts – Part A, Part B, Part C (Medicare Advantage), and Part D.
Part A (Hospital Insurance) covers inpatient hospital care, some limited skilled nursing facility stays, home health care, and hospice care.
Part B covers physician services, outpatient hospital care, and some home health visits. It also covers laboratory and diagnostic tests, such as X-rays and blood work; durable medical equipment, such as wheelchairs and walkers; certain preventive services and screening tests, such as mammograms and prostate cancer screenings; outpatient physical, speech and occupational therapy; outpatient mental health care; and ambulance services.
Part D is prescription drug coverage.  
Part C (Medicare Advantage) allows beneficiaries to choose to receive their Part A, B, and D services through a private managed care insurance plan rather than original Medicare.  
Medicare Part B Premiums and Deductible
Over 90% of eligible Medicare beneficiaries enroll in Part B and over 70% use Part B services during a year. Part B generally pays 80% of the approved amount for covered services in excess of the annual deductible ($185 in 2019 and $198 in 2020). The beneficiary is liable for the remaining 20%. Many beneficiaries purchase a Medicare Supplement (Medigap) policy to cover that exposed 20%.
Part B coverage is not free. You pay a premium each month for your Part B coverage. If you get Social Security, Railroad Retirement Board, or Office of Personnel Management benefits, your Part B premium is deducted from your benefit payment. If you don’t get these benefit payments, you’ll get a bill. 
The Centers for Medicare and Medicaid Services (CMS) has recently announced that the standard monthly Part B premium for 2020 will be $144.60. This is an increase of $9.10 over the 2019 amount. Some beneficiaries will pay substantially more while those with low incomes and limited resources can get help paying the premiums through several Medicare Savings Programs.
Your monthly Part B premium will be increased if you are subject to penalty for late enrollment or reenrollment. Premiums are also increased for individuals with higher incomes. This is referred to as your Income Related Monthly Adjustment Amount (IRMAA). The Government uses the taxpayer’s recent (2018) federal income tax return to determine if they are subject to an IRMAA premium adjustment. The calculation is based on your adjusted gross income plus tax-exempt interest income. This is referred to as your modified adjusted gross income (MAGI)Here are the IRMAA adjusted Part B monthly premium amounts for 2020:
If your MAGI income in 2018 was (you will pay in 2020)
You pay each month (in 2020)
File as Single on tax return
File joint tax return
File married separate tax return
$87,000 or less
$174,000 or less
$87,000 or less
$144.60
above $87,000 up to $109,000
above $174,000 up to $218,000
Not applicable
$202.40
above $109,000 up to $136,000
above $218,000 up to $272,000
Not applicable
$289.20
above $136,000 up to $163,000
above $272,000 up to $326,000
Not applicable
$376.00
above $163,000 up to
above $326,000 up to
above $87,000 up to
$462.70
$499.999.99                $799,999.99                         $412,999.99

$500,000 and above              $750,000 and above             $413,000 and above                             $491.60                           
Filing Single rates also apply to Head of Household and Qualifying Widow filings.
Special rules may apply to lower your IRMAA premium is some situations where your income has come down due to changed circumstances.   Click here for more information.
Note: If you have joined a Medicare Advantage Part C Plan, you still have Medicare. You'll get your Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance), and perhaps Medicare Part D (Drug) coverage from the Medicare Advantage Plan and not Original Medicare. Medicare Advantage Plans have different rules and charge different out-of-pocket costs. Those rules and costs change each year.
Related Links:


Thursday, November 28, 2019

What are Trusts and How can you use Them?


What is a trust? There are so many different kinds of trust arrangements that it is impossible for me to provide a simple answer to this question. But the trust is such an important estate planning device for many seniors that I will try to provide the reader with a basic understanding of trusts and how they are used. This article will focus not on trusts used by the wealthy, but on their use by Average American individuals and families.   
A trust is an arrangement involving three parties:
1)    the Settlor (or Trustor) – the person setting up the trust and transferring assets to it;
2)    the Trustee – a person or firm that holds and administers the assets for the benefit of others; and
3)    the beneficiary – the person for whose benefit the assets are being held and administered.
A trust can have multiple settlors, trustees, and beneficiaries.
With an estate planning -trust you (the “settlor”) transfer legal title to assets you specify to a “trustee” to be held and managed by the trustee and distributed to the beneficiaries in accordance with your directions. With some trusts you can name yourself as Trustee. Often people will name a family member or a professional trust company as trustee or co-trustee. You can also name yourself as primary beneficiary and designate other “contingent” beneficiaries in the event of your death.
Here are some examples of trusts that are commonly used as part of the estate plans of individuals and families.
Illustration 1Financial Management Trust.  Mary, a widow with two children, has approximately $225,000 in various savings and retirement accounts.  With the help of her elder law attorney Mary creates a trust agreement that names a carefully chosen Bank trust department as the trustee. The trustee assigns a trust officer to Mary who helps get the trust set up and funded from Mary’s savings. 
In accordance with Mary’s instructions, the trustee will then begin paying Mary’s bills each month. It will pay Mary’s real estate and estimated income tax payments as they come due.  The trustee will deposit money in Mary’s checking account each month as needed for her personal use. Mary can increase or decrease the mount of her monthly draw by phoning her trust officer.  If Mary wants more money for any reason, she calls her trust officer and money is transferred to her checking account. The trustee invests Mary’s money in a manner approved by Mary in advance so that it is consistent with her risk tolerance. Mary gets a full accounting statement in the mail every three months. She can check her account anytime online.    
Upon Mary’s death the Trustee will pay her final expenses from the trust funds and distribute the remainder to her children. Mary can change this distribution at any time. Mary can also cancel the trust at any time and all of the money will be returned to her.  
In the above illustration Mary is the Settlor, the Bank is the Trustee, and Mary is the Primary Beneficiary of the Trust. Mary’s children are called contingent beneficiaries.  Lawyers call this kind of a trust a revocable “inter vivos trust” or “living trust.”  It is revocable because Mary (the Settlor) can undo it at any time during her life. (“Inter vivos” means between living people and here the Settlor is alive. On the other hand, a “testamentary trust” is one that is created in the Settlor’s Will and which takes effect after the death of the Settlor.)
A revocable inter vivos trust can be an excellent way to set up a financial care management arrangement for an older adult.  For more information on this arrangement see my article Who to Choose as your Financial Pinch-Hitter – a Family Member or a Trust Company
Illustration 2 – Special-Needs Trust. Miriam is a widow with two children: Ron, age 33, works with computers at Penn State’s main campus. Allen, age 31, has a developmental disability. Allen resides with Miriam and works part time on the maintenance staff of a local hospital.  He currently receives SSI and Medicaid benefits.  Ron and Allen have always been very close.
Miriam wants to leave an inheritance to Allen but is worried that an inheritance would cause Allen to lose his SSI and Medicaid benefits.
Miriam’s elder law attorney drafts a will that includes a special-needs trust (SNT) for Allen. Upon Miriam’s death ½ of her estate will pass to this trust. When properly drafted and administered this trust will provide for Allen’s needs while preserving his right to receive means-tested public benefits like SSI and Medicaid. The lawyer and Miriam discuss the kinds of expenses that can be paid from the trust, and Miriam decides to name her other son, Ron, as Trustee with a Professional Trust Department as back-up. Upon Allen’s death any funds remaining in the trust will be distributed to Miriam’s grandchildren.
The elder law attorney also suggests that both Miriam and Allen have powers of attorney drafted, and that Allen should consider whether he should set up an ABLE account.
Illustration 3 - Home Protection Trust. Ken and Virginia are both in their early 70s. They married when Ken got back from Vietnam in 1969. They have a daughter, Betty Lou, with whom they are very close. Betty Lou has had a hard life so far, and her parents want to ensure that they are able to leave her an inheritance when they are gone. They also have a son Sam. Sam lives in Pittsburgh with his wife and a child and has a good job as a pharmacist.
Like many couples, Ken and Virginia’s home is their most valuable asset. A house down the street recently sold for $280,000.  In addition to the home, the couple has about $200,000 in savings.
Last year Virginia’s mother died at age 94. Her mother had received long-term care services at home for almost two years before moving to a nursing home where she spent the last 28 months of her life. Her mother had worked for over 40 years as a bookkeeper and had saved as much as she could for retirement. But all these savings were wiped out to pay for her care needs. And, after her death, the state forced Virginia to sell her mother’s home and pay the proceeds to the government to reimburse it for money Medicaid had paid toward the cost of her mother’s care. Virginia learned this is called Medicaid Estate Recovery. Virginia doesn’t want the same thing to happen to her home when she and her husband are gone. She wants to ensure that the home will go to Betty Lou.
Ken and Virginia meet with an elder law attorney and discuss how to best protect their home for themselves during their lives and for Betty Lou after they are gone. They discuss the consequences and dangers  of giving the home to Betty Lou outright.
After discussing their options, Kenn and Virginia decide to place their house in a home protection trust. In order for the home to be protected from nursing home and other care costs, the trust needs to be irrevocable, which means that Ken and Virginia cannot cancel it. But they can live in the home for the rest of their lives, and if they ever want to move, the trust can sell the home and buy another residence for them.
The lawyer explains that because of Medicaid’s 5-year look-back rule, it is best to transfer the settlors home to the trust while the settlors are relatively healthy.   
When held by the trust, their home (and any other assets they decide to transfer) can be protected from Medicaid estate recovery in the event one or both of them ever have a long expensive stay in a nursing home. And since the trust, rather than a child, hold legal title to the property it is protected from divorce or other bad things that may happen in their child’s life as well.
The elder law attorney suggests that a Family meeting might be a good idea to bring Betty Lou and Sam into their parents’ trust planning. See: A Family Meeting as Part of Effective Estate Planning. The meeting is held when Sam is in town visiting his sister and parents. He is totally on-board with the idea of Betty Lou getting the house someday.; And Sam and Bett Lou agree to serve as co-Trustees of the trust.
These are just a few examples of common ways that trusts are used to help seniors with their lifetime and estate planning. There are dozens of different types and uses of trust. Trusts are not just for the wealthy.
This article is intended to be just a starting point. Talk with your elder law attorney about whether and how a trust might help you achieve your planning goals. If you live in Pennsylvania, you can call Marshall, Parker and Weber for expert help in putting together a plan that best meets your unique situation and goals. 

Monday, October 14, 2019

Three Ways to Protect Yourself from the Cost of Nursing Home Care


As we age, we have to face an unpleasant reality of life - we are likely to need long-term care services before we die.
“Long- term care” means the type of care you need if you have a prolonged physical illness, disability or severe cognitive impairment (such as Alzheimer’s disease) that keeps you from living independently. As a result, you need assistance carrying out basic self-care tasks, including feeding, bathing, dressing, personal care, and transferring. Long-term care is sometimes referred to as “long-term services and supports.”
A majority of seniors will receive such help sometime during their remaining lives —usually at home, but often in a nursing home. Long-term care needs will last for an average of 2.5 years for women and 1.5 years for men. 14% of us will need long-term care assistance for five years or more.
The costs can be overwhelming; the burdens on our loved ones enormous.
An elder law attorney can help ease those costs and burdens. This article will discuss three techniques that elder law attorneys use to help families protect themselves against the financial cost of long-term care once the need for that care has arisen. These strategies are just part of the planning arsenal that is available. They can be used in a time of crisis. But, of course, it is best to plan early, rather than wait for a crisis to happen.
The planning ideas discussed below focus on qualifying for the government’s Medicaid program to help protect the financial security of an individual (known as “the community spouse”) who is married to a nursing home resident. But these techniques can be adapted for unmarried individuals and for those persons, married and unmarried, who are receiving care at home.
WHO PAYS FOR LONG-TERM CARE?
The average cost of nursing home care in Pennsylvania is now over $125,000 a year (in 2019). Not many Pennsylvanians can afford to pay that kind of cost for long. Privately paying for your care involves spending your savings and liquidating certain other assets to pay the nursing home or in-home caregivers each month. At an average cost of over $10,000.00 a month for care in a Pennsylvania nursing home the assets that you have accumulated during your life can be quickly depleted.
When a married couple is facing a spouse in a nursing home, to protect the financial security of the “community spouse” (i.e. the spouse not requiring long-term care,), at least some of that cost may be shifted onto a third party as soon as possible. Potential third-party payers include Medicare, private insurance, and Medicaid.
Most seniors have Medicare financed coverage as their primary payer of health care costs. But Medicare does not pay for long-term stays in a nursing facility. At a maximum, and only after meeting certain qualifications, Medicare may pay up to 100 days in a nursing home.
Another possible payment source is insurance. While standard health insurance doesn’t cover nursing home costs, healthy individuals can buy special long-term care insurance that does. But few seniors have this kind of coverage. It’s expensive and underwriting standards can be difficult to meet. And premiums have historically continued to increase. As a result, few seniors are covered by long term care insurance.

USING ASSETS TO PAY OFF DEBTS AND EXPENSES
By using at risk assets to pay bills prior to applying for Medicaid (but after the institutionalization date to a skilled nursing facility, also known as the “snapshot date”) the community spouse can reduce the demands on the assets he or she needs to spend on care under the Medicaid spousal impoverishment rules. For example, a couple may elect to pay off existing debts and/or to prepay real estate taxes, insurance, or other large bills.
Example: John and Marian Jones have a home and $100,000.00 of countable savings when John enters a nursing home for a long-term stay. Under Medicaid spousal impoverishment rules, Marian is allowed to keep $50,000.00 as her protected allowance and John is permitted to retain $2,400.00. They have $47,600.00 in excess resources that prevent John from being eligible for Medicaid.
After John’s admission to the nursing home, Marian spends the $47,600.00 excess by paying off the mortgage on the couple’s home, some credit card debt, and by making an advance payment of real estate taxes. Because Marian now has only $50,000.00, and John has only $2,400.00 left, John is eligible for Medicaid.
BUYING ASSETS THAT ARE NOT COUNTED BY MEDICAID
Medicaid eligibility rules do not count certain assets such as a home, one vehicle, and personal effects. Therefore, in appropriate cases a community spouse might take money from countable savings to buy a more expensive home; repair or improve an existing home; or buy a new car, new household furnishings, or personal effects. Medicaid rules do not restrict spending countable assets on non-countable ones of equivalent value. Money spent on non-countable assets needed for the community spouse’s use can accelerate Medicaid qualification.
Additionally, irrevocable funeral and burial arrangements can be pre-planned and funded for the institutionalized spouse and/or the community spouse. Medicaid does not count these irrevocable funeral assets, provided that they fall under the limits set forth each year.
Example: In the John and Marian example above, after John’s admission to the nursing home, Marian could spend the $47,600.00 excess on a new furnace for their home, a new car, and irrevocable funeral and burial expenses. Because of this allowable spending John is now financially eligible for Medicaid.
CONVERTING COUNTABLE ASSETS TO INCOME
Some strategies are designed to convert excess assets into income for use by the community spouse. In order to avoid a Medicaid penalty, the community spouse must receive something of equal value in exchange for the converted assets.
A conversion strategy that is frequently used involves annuities. Annuities are contractual arrangements in which an individual pays a lump sum to receive a future stream of income in return. They are offered in a variety of forms by commercial financial entities, and can involve poorly understood consequences and costs to the consumer.
Most annuities are inappropriate vehicles for Medicaid planning. But there are particular annuities that conform to the specific requirements of Medicaid law that can be used to protect all of a couple’s excess resources for the community spouse. Although savings are immediately and substantially reduced, the community spouse’s income is increased by a more modest but recurring amount. The at-home spouse can either spend that income or reinvest it, effectively recouping all of the assets used to purchase the annuity.
In the typical scenario, after the institutionalized spouse enters the facility, the community spouse, acting under the guidance of an elder law attorney, liquidates the couple’s excess resources and uses the funds to purchase an irrevocable, non-assignable, non-transferable annuity that meets all of the requirements of the Deficit Reduction Act of 2005. If done correctly, there is no transfer penalty, and, since the annuity payments are payable to the community spouse, the payments received are income to the community spouse and do not impact the Medicaid eligibility determination.
Example: Let’s go back to John and Marian. What if John and Marian do not have expenses to pay, already have a brand-new vehicle before the nursing home admission, their house was recently updated, and they paid for their final expenses years ago? There is another choice rather than spending the $47,600.00 on care costs. Annuity planning may be appropriate for John and Marian.
Marian could purchase a Medicaid Compliant annuity that satisfies all of the requirements of the law with the excess $47,600.00. The annuity will pay her equal installments of income each month for a determined period. For example, she could receive payments for 5 years of approximately $793.33 a month. These funds would be saved from the cost of her husband’s care and allow her to maintain her standard of living in the community.
Medicaid does have a 5-year look-back for gifts, meaning gifts made within 5 years of applying for benefits will create a penalty during which time you are not able to receive Medicaid benefits. However, there is no penalty for gifts of assets between spouses.
Additionally, with a single individual, a variation of an annuity plan that includes gifts to other family members can be completed if an individual has enough assets to pay through a penalty for those gifts. This gift annuity planning is highly specialized and should only be implemented under the supervision of an experienced elder law attorney.
IMPORTANT NOTES
Don’t try the annuity conversion strategy or the other techniques mentioned in this article without expert help from an elder law attorney who knows the rules in the Medicaid applicant’s state inside and out.
The Certified Elder Law Attorneys at Marshall, Parker and Weber understand these planning techniques. In fact, Attorney Matt Parker was the attorney on the precedential case of James v. Richmond in 2005 that HELPED established the use of Medicaid annuities. It’s easy to make a catastrophic mistake by buying the wrong annuity or an annuity that does not contain required special Medicaid provisions or which was purchased at the wrong time.
Importantly, there is different planning that can be done before a time of crisis to help protect assets from the cost of long-term care. This planning can include irrevocable Medicaid asset protection trusts. It also can include a financial power of attorney that can allow someone else (your “Agent”) to step into your shoes and complete any of the planning discussed in this article on your behalf.
Medicaid qualification rules vary from state to state and change over time. This article is based on Medicaid rules in effect in Pennsylvania as of October 2019. Be sure to consult with a Medicaid experienced lawyer in the state where the Medicaid applicant resides to find out about the rules in that state and to help you get the planning assistance you need.
This article lists just a few of the planning strategies available to you under the Medicaid statute and regulations. Each family situation is different and the best solutions for you will depend on your unique circumstances. Consult with an elder law attorney who is experienced in Medicaid issues.
If the person in need of care resides in Pennsylvania, Marshall, Parker and Weber can help. We have been helping families get through the long-term-care maze for over 35 years.
(This is a 2019 update of an article that previously appeared on this blog.)

Thursday, October 3, 2019

Helping Reduce Medicare Fraud


 Medicare fraud costs American taxpayers billions of dollars each year. Last year Medicare removed Social Security numbers from Medicare ID cards and issued new Identification numbers to all beneficiaries as a way of reducing the amount of fraud. (See my prior article: Social Security Numbers to be Removed from Medicare ID Cards).
According to CMS (Medicare’s governing agency) one recent scheme involved “Durable Medical Equipment supply companies. These companies were soliciting Medicare recipients through robocalls and allegedly paying doctors to write prescriptions for “free” medical equipment, like a back or knee brace – ultimately to be billed to and paid by Medicare - without any patient interaction or with only a brief telephone conversation with patients they had never met or seen.”
I’ve gotten this kind of robocall. If you are on Medicare you have probably received them as well. This type of large-scale scam (130 distinct providers were suspended) can result in billions of dollars of loss to Medicare.  Read more about the investigation.
Recently CMS issued regulations that provide it with new powers to keep unscrupulous providers out of our federal health insurance programs. This new rule becomes effective on November 4, 2019 Here is a link to this new rule and related comments.
Helping the government reduce Medicare fraud is one way that consumers can help reduce the nation’s soaring health care costs and preserve Medicare for the future.  Here are a few things that people on Medicare can do to help the government reduce Medicare fraud:
Con artists may try to get your Medicare Number or personal information so they can steal your identity and commit Medicare fraud. Medicare fraud results in higher health care costs and taxes for everyone.
Protect yourself from Medicare fraud. Guard your Medicare card like it’s a credit card. Remember:
  • Medicare will never contact you for your Medicare Number or other personal information unless you’ve given them permission in advance.
  • Medicare will never call you to sell you anything.
  • You may get calls from people promising you things if you give them a Medicare Number. Don’t do it. 
  • Medicare will never visit you at your home.
  • Medicare can’t enroll you over the phone unless you called first.
Check regularly for Medicare billing fraud. Review your Medicare claims and Medicare Summary Notices for any services billed to your Medicare Number you don’t recognize.
Source:  CMS,  Help fight Medicare fraud
What should you do if you suspect fraud? Report anything suspicious to Medicare. If you suspect fraud, call 1-800-MEDICARE
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