Medicare and Medicaid

Medicaid planning strategies

1) Revocable trusts-- countable asset The principal of the trust is counted as a "resource" of the applicant and income distributed to the applicant is considered "income" for Medicaid eligibility purposes 2) Irrevocable trust-- any portion of the trust which could be made available for the applicant is considered a "resource" of the applicant, and income distributed to the applicant is counted as "income" In an irrevocable trust where the grantor can receive all income for life, and the heirs will receive the principal at the grantor's death, the principal is not counted as an available Medicaid resource Countable assets can be transferred to an irrevocable trust that the individual retains no interest or control over—not countable after 5 year look back period 3) Medicaid annuity trust-- convert savings, which could disqualify an individual for Medicaid, to income 4) Testamentary trust-- created by a deceased spouse for the benefit of the institutional spouse can receive favorable treatment under Medicaid rules Occurs when the trustee can make discretionary distributions to the Medicaid beneficiary which is not considered an obligation to pay for the beneficiary's support 5) First party special needs trust-- can be established by others for a disabled individual prior to age 65 The trustee is given complete discretion to distribute income and principal to the beneficiary according to the grantor's wishes

Part D

2 ways to obtain prescription drug coverage: 1) Purchase voluntary coverage with a private insurance company that participates in the Medicare Part D program These plans contain deductibles, co-pays, and stop loss limits, and premium amounts are adjusted every January Insurance companies often have software that allows prospective purchasers to input their list of prescriptions to determine the benefits of coverage—shop around to find most advantageous plan 2) Obtain coverage through a Medicare Advantage Part C program

Medicare

A health insurance program that is administered by the federal government for people age 65 or older, and for disabled individuals Individuals qualify for Medicare by being full insured for Social Security benefits (40 credits), having a spouse who is fully insured and who is enrolled in Medicare, or after receiving Social Security disability benefits for at least 24 months A person is eligible for Medicare on the first day of the month that he turns 65 For employees who are eligible for Medicare at age 65 or older, and who work for an employer with 20 or more employees, Medicare is a "secondary payer" which only pays for some additional charges not covered by the employer-sponsored health care plan

Medicaid

A joint federal and state entitlement program that pays for medical assistance to certain aged, disabled, or blind individuals, as well as children and families with low income and resources Income is calculated in relation to a percentage of the Federal Poverty Level, which is updated annually The FPL is $24,250 for a family of four in 2016 The Affordable Care Act of 2010 creates a national Medicaid minimum eligibility level of 133% of the federal poverty level for nearly all Americans under age 65 To qualify for Medicaid, individuals must also satisfy federal and state requirements for residency, immigration status, and documentation of U.S. citizenship Enrollment is open year-round

Medicare Advantage Part C

A type of Medicare health plan offered by a private company that contracts with Medicare to provide the retiree with all Part A and Part B benefits Participant must be enrolled in Medicare Part A and Part B before enrolling in this type of plan Medicare Advantage plans include: -Health Maintenance Organizations -Preferred Provider Organizations -Private Fee-for-Service Plans -Special Needs Plans, and -Medicare Medical Savings Account Plans Most plans require members to obtain medical services from doctors, hospitals, and other health care providers that are approved by the plan Many Medicare Advantage Plans offer prescription drug coverage for an additional premium

Part B

Almost anyone who is eligible for Part A can sign up for Part B Unlike Part A, which is usually paid for by the taxes paid while a person worked and is free when the worker is eligible for it, Part B is an optional program that most people choose to enroll in For those enrolling for the first time in 2016, the premium is $121.80 per month and it is deducted from the enrollee's Social security benefits Most people wait until they retire to enroll in Part B if they receive health care coverage under an employer plan bc it may not offer much additional coverage to justify the cost of the premium Also an annual deductible for Medicare Part B Provides medical coverage for routine health services, such as doctor office visits, lab work, and radiology

Part B coverage

Covers 2 types of services: 1) Medically necessary services-- services/supplies that are needed to diagnose or treat your medical condition and that meet accepted standards of medical practice 2) Preventive services-- health care to prevent illness or detect it at an early stage, when treatment is most likely to work best Covers expenses such as: Clinical research Physician's services Ambulance services Durable medical equipment Mental health Inpatient hospital services Most outpatient hospital services Partial hospitalization Getting a second opinion before surgery Limited outpatient prescription drugs Long-term nursing home care is not covered

Medigap coverage

Each standardized Medigap policy must cover basic benefits—depending on the type of plan selected, the following basic coverage may be provided: -Coinsurance requirements -Coverage of deductibles -At-home recovery -Foreign travel emergency -Basic drug benefit -Preventive care Medigap policies do not cover the following: -Long-term care -Vision or dental care -Hearing aids -Private-duty nursing -Unlimited prescription drugs

Medicaid resource eligibility

Generally to qualify for Medicaid, an individual must not have countable assets that exceed $2000 -Countable assets—cash, bank accounts, investment accounts, retirement accounts -Non-countable assets—home (if jointly owned), car, furnishings, personal property -Unavailable assets—jointly owned home or property

Part A coverage

Hospital care Skilled nursing facility care (limited benefits) Nursing home care (as long as custodial care isn't the only care you need) Hospice Home health services Part A covers many hospital expenses but also contains gaps which result in "out of pocket" costs to the retiree-- these include but are not limited to: Deductible: you pay a deductible of $1288 for each benefit period Coinsurance per benefit period for hospitalization: -For days 1-60: no coinsurance payment -For days 61-90: $322 coinsurance per day -For days 91 and beyond: $644 coinsurance per day After a 90-day hospitalization in one benefit period, each additional day counts toward your lifetime reserve of 60 days of hospitalization covered by Medicare Part A For days beyond your lifetime: you pay all costs

Medicaid annuity

In states where the income of the community spouse is not considered for Medicaid eligibility, the Medicaid Annuity is often suggested as a planning technique by elder care attorneys A community spouse with assets in excess of the allowed threshold amount can use excess assets to purchase an immediate annuity The annuity then pays an income to the community spouse based on the value of those assets Assets are no longer considered countable for Medicaid purposes and the income received by the community spouse does not affect eligibility

Long term care and Medicaid

Medicaid, in partnership with the states, provides community based long-term care services and support for elderly and disabled individuals and for those with chronic illness Individuals cannot have more than $2000 in countable assets when applying for Medicaid long term care services

Medicare payroll taxes

Medicare is paid for through a payroll tax on earned income of 2.9%-- for W-2 employees, this cost is split between the employee and employer During the year, if earned income exceeds certain limits, the payroll tax is increased by 0.9% to 2.35% for the employee The limit for individual filers is $200,000—earned income during the year in excess of $200,000 has 2.35% withheld for Hospital Insurance (HI) (Medicare) Married filing jointly filers have a higher threshold of $250,000—couples who file jointly and who both work may have to be careful not to under-pay the Medicare tax

Enrolling in Medicare

Most individuals must enroll at age 65 Signing up late for Part A will cause a penalty premium to be added which will last at least twice as long as the individual is late A person who signs up late for Part B may have to pay a late enrollment penalty for as long as that person has Medicare-- premium may increase 10% for each full 12-month period in which a person could have obtained coverage but didn't sign up Most common exception to Part B enrollment is for individuals who reach 65 and are still employed and covered under their employer provided health plan-- in this case Part B does not have to be applied for until separation from service or loss of the employer provided health care

Part A

Most people get Medicare Part A when they turn 65, and it is usually premium-free When you are enrolled in Part A, you are automatically enrolled in part B, unless you notify Social Security that you do not want Part B Those who are disabled will automatically be enrolled in Medicare Part A after they have received SS disability benefits for 24 months Spouse age 65 is eligible for Part A based on your work record even if you are age 62-64

Medicaid income eligibility

Nursing home residents must pay all of their income to the nursing home facility, minus certain deductions for their care A couple's combined income is not considered, since the community spouse's income is not counted toward eligibility-only income in the applicant's name is counted Some deductions include: personal needs allowance, community spouse's monthly income allowance, a family monthly income allowance, and an amount for uncovered medical expenses and medical insurance premiums incurred by the spouse who resides in the medical facility

4 parts to Medicare

Part A—hospital insurance Part B—medical insurance Part C—a combination of Parts A & B with a health plan (usually an HMO or PPO) that provides complete coverage (fills in the "gaps)-- offered through private companies under Medicare approval Part D—prescription drug covered-- offered through private companies under Medicare approval

Other Medicaid planning strategies

Pre-paying funeral costs—individuals may use assets to pre-pay funeral costs without those assets being subject to the 5 year look back period Home improvements—use cash and assets to improve a home Transfer to spouse—transfers to spouses are allowed and are not subject to the look back period

Medigap Insurance

Retiree enrolls in Part A and Part B and then purchases an insurance policy from an insurance company called a Medigap policy Retiree pays premiums for these policies As long as premium is paid, policies automatically renew each year Usually do not offer prescription drug coverage

Medicaid benefits

States must provide certain mandatory benefits and can provide additional optional benefits as well: Examples of mandatory benefits include: - Inpatient and outpatient hospital services and rural health clinic services - Physician, mid-wife, certified pediatric, and family nurse practitioner services - Nursing facility services and home health services - Early and periodic screening, diagnostic, and treatment services including lab work and x-rays Examples of optional benefits include: - Prescription drugs - Physical and occupational therapy - Optometry, dental, and chiropractic services - Hospice, private duty nursing care, and personal care services

Medicare tax on investment incomes

Taxpayers could be assessed a 3.8% Medicare tax on some of or all of their net investment income The amount owed is based on the lesser of your total net investment income amount or the amount of your MAGI that exceeds $200,000 for individuals, $250,000 for married couples filing jointly, or $125,000 for spouses filing separately "Unearned" net investment income includes net rental income, dividends, taxable interest, net capital gains from the sale of investments (including second homes and rental properties), royalties, passive income from investments in which you do not actively participate (such as a partnership), and the taxable portion of nonqualified annuity payments

Look back period

The Deficit Reduction Act provides for a 5 year "look back" period to determine if any income and assets were transferred to individuals, charities, or trusts for less than the FMV If this has occurred, Medicaid will apply a formula using the value of those gifts to effectively delay any Medicaid payments over a time period that would have been covered by the value of the gifts