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September 26, 2015: Financial Fitness Workshop 2015 MEDICARE & MEDICAID UPDATE
Daniel Timins, Esq., CFP® 477 Madison Avenue, Suite 240 New York, NY 10022 (212)
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Disclaimer All information contained in these pages is for informational purposes only. It should not be considered legal advice. Please consult an attorney before taking any steps based on this information.
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Medicare v. Medicaid MEDICARE: MEDICAID:
An “Entitlement Program” – you paid for it, you get it Pays for HEALTH care MEDICAID: A “Needs Based Program” (1) Must have the physical / mental need (2) “Means Tested”: must meet asset & income limits Pays for PERSONAL care / Activities of Daily Living
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Medicare: Coverage & Premiums
PART A: Inpatient Hospital Care Pay up to $407 per month (if “Ineligible”) PART B: Supplemental Medical Insurance Pay $ $ per month in 2015 (but see Slide 13…) PART C: Managed Care Cost varies by plan PART D: Prescription Drug Benefits $0-$50 per month; cost varies by plan; higher- income consumers often pay more
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PART A: Inpatient Hospital Care
Operating expenses Semi-private room and meals Nursing services Social services Use of hospital equipment Rehabilitation services Diagnostic testing
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Part A (Continued) Skilled Nursing Facility Home Health Care
Physician must certify rehab is needed for a hospital treatment in last 30 days There is an ~ $ per day coinsurance charge for day 21 – 100 Home Health Care Pays for full cost up to 100 home visits, but MUST occur after a hospital or skilled nursing facility stay Recipient MUST be confined at home PART B may cover additional expenses
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Part A: What is NOT Covered?
“Luxury” and Elective surgeries Most services performed outside of US Procedures performed in federal facilities
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PART A: Who is Eligible? (1) Everyone aged 65 and older who is receiving monthly Social Security (including survivor’s benefits), or (2) People aged 65 and over who have deferred receiving Social Security retirement benefits (must apply for Medicare; others in “pay status” are automatically enrolled), or (3) 65 year old civilian employees of the federal government who did not elect into the Social Security system under the 1983 law, or (4) People who receive or are eligible to receive railroad retirement benefits, or (5) Any spouse aged 65 and over of a fully insured worker who is at least aged 62
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PART A: What if I’m Not Eligible?
What if I am not eligible for PART A? You have to pay for it! If insured worked for less than 30 quarters of his or her life: Can voluntarily enroll by paying premiums of approximately $407 per month Premium can increase monthly If insured worked between 30 and 39 quarters of his or her life Can voluntarily enroll by paying premiums of approximately $290 per month
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PART A: Coverage Calculation
Covers hospital expenses for up to 90 days for each “benefit period” (spell of illness) A “benefit period” ends only AFTER recipient has been out of a hospital OR skilled nursing facility for 60 consecutive days At that time a new benefit period begins First 60 days of benefit period are paid in full with an ~ $1,260 deductible Next 30 days of benefit period are paid in full with an ~ $315 coinsurance charge for EACH day Also, there is an additional 60 “lifetime reserve days” over an individual’s lifetime $630 coinsurance per day Recipient can choose when to use these days
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PART B: Supplemental Medical Insurance
Physician and Surgeon fees Diagnostic tests in hospitals and Dr. offices Physical or occupational therapy Radiation therapy Medical supplies and devices Ambulance service Pap smears and one yearly mammogram Flu and pneumonia vaccinations Emergency room care Drugs that CANNOT be self-administered
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PART B: What is NOT Covered?
Custodial care Routine physical, eye & hearing exams and tests Eye glasses and hearing aids (potential 1 time exemption for hearing aids) Routine foot care and orthopedic shoes Immunizations Cosmetic surgery Dental care and dentures
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PART B: Premiums Monthly premiums for PART B are based on your income… …but beware of a drastic bump-up on 30% of people in 2016 If your yearly income in 2013 (for what you pay in 2015) was You pay (in 2015) You MAY pay (in 2016) File individual tax return File joint tax return File married & separate tax return $85,000 or less $170,000 or less $104.90 $105-$160 above $85,000 up to $107,000 above $170,000 up to $214,000 Not applicable $146.90 $223.00 above $107,000 up to $160,000 above $214,000 up to $320,000 $209.80 $318.60 above $160,000 up to $214,000 above $320,000 up to $428,000 above $85,000 and up to $129,000 $272.70 $414.20 above $214,000 above $428,000 above $129,000 $335.70 $509.80
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PART B: How is Coverage Calculated?
PART B pays 80% of approved medical expenses after an $147 annual deductible Like PART A, PART B is automatic at age 65 If you do not want PART B you must reject it in writing by2 months of receiving Medicare Notice If you change your mind later you have to pay for past-years (expensive)
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PART C: Managed Care Participants can elect to have Medicare benefits provided by a managed care plan An HMO, PPO or insurance company (but MUST use a preferred provider unless an emergency) The Participant still pays PART B premiums, and usually pays more for PART C… …BUT deductibles are usually eliminated and copays are lowered to reasonable amounts A Medigap policy may not be necessary (because coverage is often redundant)
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PART C (Continued) Benefits must be at least equal to (and sometimes better than) those available under Medicare Additional Benefits: Prescription drugs Eyeglasses and hearing aids routine physical exams
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PART D: Prescription Drug Benefits
You MUST have PART D unless you have supplemental health insurance A voluntary program available to all people entitled to PART A and enrolled in PART B Run through private plans that develop a list of covered drugs Plans do NOT need to cover EVERY prescription drug… …BUT must cover at least TWO in each therapeutic category and class Premium is approximately $50 per month (depending on the chosen plan)
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MEDICAID: Activities of Daily Living
ACTIVITIES OF DAILY LIVING (“ADLs”) Transferring (Walking) Bathing Dressing Eating Continence Toileting
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When To Start Medicaid Planning?
Healthy Married Couple: When some aging illness is diagnosed or no earlier than 70s Single Person with No Kids: NEVER (Private pay caregiving is better than Medicaid care) Disabled Family Member: Immediately Disabled Minor Family Member: Prior to them attaining age 18
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Types of Medicaid Home / Community Care Institutional Care
The type of Medicaid benefit you receive determines “look back” periods (I.e. the penalty for transferring assets) Home / Community Care Personal care, physical therapy, home health care and home health aid services; clinical or out-patient basis; includes physicians, dentists, pharmaceutical, nursery Institutional Care Hospitals, medical facilities, nursing homes
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Why Do People Hesitate? You have to give away Money (gifting) AND / OR
You have to give up control of spending REMEMBER: This is a “Needs Based” program, NOT an “Entitlement” program; if you have no financial need you do not qualify
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Financial Eligibility Requirements for an Individual
ASSETS $14,850 in the recipient’s name EXCEPTIONS: “Burial Allowance” of $1,500 Life Insurance: $1,500 cash value Personal Property (unlimited) Client’s House (ONLY for Home & Community care) Supplemental Needs Trusts Medicaid Trusts Retirement Plans (IRAs) are exempted from assets if they are in “payout status” (Required Minimum Distributions or Separate and Equal Periodic Payments if recipient is under age 59 ½), in which case payments are included in Income MONTHLY INCOME HOME CARE: $825 per month Any excess income must go to the recipient’s “SPEND DOWN” Often goes to a “POOLED TRUST” INSTITUTIONAL: ALL of the recipient’s monthly income in excess of $50 must be paid to the Nursing Home to offset Medicaid payments
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Transfer Penalties Home & Community Care Nursing Home
Department of Social Services and Medicaid impose a “Lookback Period” for transferring assets outside of the proposed recipient’s name Home & Community Care 3 MONTH Lookback One Strategy: Transfer all financial assets (except $14,850) to a non-spouse, wait one month for bank statements to be updated, then apply for Home Care. DOWNSIDE: If the recipient needs Nursing Home care… the 5 Year Look back rule applies Nursing Home 5 Year Lookback Period, and the Homestead can be attached by Medicaid EXAMPLE: In January, 2011 Mary transfers her Coop and most of her assets to her son Joe (total of $280,000), and applies for Home Care. In March 2015 Mary goes to a Nursing Home. She failed to make the 5 year Lookback (4 years & 2 months). Nursing Home Care in Manhattan equals approximately $12,000 per month. $280,000 (amount gifted) = MONTH $12,000 (monthly benefit) “Penalty Period” Medicaid will not pay Mary’s Nursing Home benefits for 23 months. ..and Joe is liable. Joe should have paid for Mary’s care for 10 more months to get through Mary’s Lookback Period.
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“MAPT”: Medicaid Asset Protection Trust
Types of Trusts Different Types of Trusts are required for ASSETS and INCOME Both require giving up control “MAPT”: Medicaid Asset Protection Trust Protects & transfers assets Your choice of Trustee (anyone except you & spouse) Your beneficiaries keep the assets at your death Assets MUST adhere to look back periods, so do in advance Pooled Trust Hold excess income “Spend Down” You choose the Not-For-Profit agency that runs the trust The agency keeps any excess assets left at the time of death Needs to be done around the time you apply for Medicaid benefits
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MEDICAID TRUSTS: Essentials
NO principal can be distributed Income distributions are optional A pure “Asset Transfer vehicle” Perfect for illiquid assets, such as real estate Elder client is Beneficiary & Creator Child(ren) is the Trustee Look-Back Period still applies Does NOT work at the last minute – need to plan Deed & account changes required; separate tax return may be needed for invested assets
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MEDICAID TRUSTS: Benefits
Step-up in basis is maintained at client’s death Assets are protected from children’s creditors Client qualifies for Medicaid based on Look Back period (Home / Institutional Care) Trust can hold almost any Asset Example: LLP Fractional ownership of NYC parking garages, investment real estate, investments
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Other Planning Options
For 3rd Party Money (Ex: Parent’s $) Inter Vivos Supplementary Needs Trusts Testamentary SNTs (in Will) For 1st Party Money (the Recipient’s $) Pooled Trusts (payback provisions apply) Inter Vivos SNTs (payback provisions apply) Promissory Notes (protects 40%-45%)
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What About the “Well” Spouse?
The “Community Spouse” is entitled to some assets and income, but they are limited If spouse is in a Nursing Home: $2,931 of income per month $74,820 - $117,240 of resources If spouse has Home Care: Combined income of $1,192 per month During the Medicaid Application process the well spouse may exercise a “Spousal Refusal” to avoid inclusion of his/her assets and income Medicaid may accept this (varies county to county), but will have a claim against the well spouse when he/she dies New “Spousal Impoverishment” rules avoid liens
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How is a Planner Still Relevant?
Determining HOW MUCH to transfer Proper income generation still required Knowledge of Cost Basis / Capital Gains taxes is more important than ever Identifying ALL of the assets, income & gifting is ESSENTIAL
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Tips for “Older” / Ill Clients
Execute POAs & HCPs early Gift early / Fund Trusts early Pre-pay burials Look into child / sibling care givers for homestead exemption Look at disabled parent / child pairs Fund IRAs / Retirement as much as possible
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Reminder: What Does NOT Work
Roth IRA Conversions do NOT avoid RMDs / 72t SEPP STILL have to take Required Minimum Distributions Commercial Annuities are HORRIBLE for Medicaid Planning (unless in IRAs) Large cash values in Life Insurance policies are also bad - $1,500 limit on cash value
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YIKES! Care Givers You “Hire” someone at 30 Hours Per Week
An Employee? You “Hire” someone at 30 Hours Per Week Need Worker’s Comp / Disability Withhold for Payroll Taxes Should have a Time Card If You Don’t… Worker’s Comp can GET YOU IRS / NY Tax authority can GET YOU Care Giver can GET YOU
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BEWARE! (Caregiver Buzz Words)
“This is a family friend” “She only accepts cash” “We pay her under the table” “Mom doesn’t like ________” “We have known her forever” “A friend recommended her” “She can work 24 / 7”
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Care Giver Prep Hire an OUTSTIDE Social Worker
Not biased toward care hours Use an AGENCY for Care Givers IF you choose an unlicensed Care Giver: Background Check!!! Do ALL things on prior page Keep receipts: Care may be Tax Deductible Do NOT pay cash Remove jewelry & financial statements
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QUESTIONS?
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