Estate Planning Blog Articles

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What Is the Government Doing about Misleading Medicare Ads?

Kathryn A. Coleman, director of the agency’s Medicare Drug and Health Plan Contract Administration Group, said in a three-page letter that CMS is immediately upgrading its review of marketing materials, which must be submitted under its regulatory “File and Use” authority for Medicare Advantage and Part D drug plans, and “may exercise its authority to prohibit” their use, reports MedPage Today’s recent article entitled “CMS Puts the Kibosh on Misleading Medicare Advantage Sales Pitches.”

Medicare Advantage marketing materials can now go live five days after submission, provided the company submitting them “certifies the material complies with all applicable standards.” However, beginning on January 1, Coleman said no television advertisements will qualify to be submitted under its “File and Use” authority, meaning the ads will not run until CMS approves them.

Coleman said the agency is “particularly concerned with recent national television advertisements promoting MA [Medicare Advantage] plan benefits and cost savings, which may only be available in limited-service areas or for limited groups of enrollees, overstate the available benefits, as well as use words and imagery that may confuse beneficiaries or cause them to believe the advertisement is coming directly from the government.”

CMS is also looking at recordings of agent and broker calls with potential enrollees and is continuing its secret shopping of marketing events “by reviewing television, print, and internet marketing and calling related phone numbers and/or requesting information via online tools.”

CMS approved a final rule that requires all Medicare Advantage agents, brokers and third-party marketing organizations to record all their calls with potential enrollees “in their entirety, including the enrollment process.” In her letter, Coleman said reviews of recordings will continue.

“Our secret shopping activities have discovered that some agents were not complying with current regulation and unduly pressuring beneficiaries, as well as failing to provide accurate or enough information to assist a beneficiary in making an informed enrollment decision,” she wrote.

Coleman also noted that the agency will take “compliance action against plans for activities and materials that do not comply with CMS’ requirements.”

It also will review “all marketing complaints” received during the annual enrollment period, which runs from October 15 to December 7, and will target its “oversight and review on MA organizations and Part D sponsors with higher or increasing rates of complaints.”

Reference: MedPage Today (Oct. 21, 2022) “CMS Puts the Kibosh on Misleading Medicare Advantage Sales Pitches”

Why Is Medicare Enrollment Confusing?

Seniors enrolling in Medicare experience a process with many challenges. People also have significant gaps in knowledge of plan components and are overwhelmed. This causes them to enroll in plans that fail to best reflect and support their evolving healthcare needs.

Markets Insider’s recent article entitled “New Report Reveals Significant Gaps in Medicare Knowledge Among Older Adults” reports that such issues may jeopardize the ability of seniors to make the best choices for their unique health and wellness needs. Moreover, the results may worsen as they age. That’s what the findings are in a new report, Hidden Crisis: The Medicare Enrollment Maze, issued by national healthcare consultancy Sage Growth Partners. The report is based on a survey of 1,142 individuals ages 64 and older.

The report explores the significant effect of widespread confusion and overwhelming enrollment challenges on the elderly and the entire healthcare system. There were roughly 64 million Americans enrolling in Medicare in 2021 and the U.S. Census Bureau projects more than 73 million Americans will enroll by 2030. Many think the negative effects will only get worse.

“This report shows the striking level of confusion surrounding Medicare enrollment for all ages. While there may be many better plan options, very few enrollees have the necessary knowledge to choose them,” said Dan D’Orazio, Sage Growth Partners CEO. “The level of satisfaction with shopping for Medicare plans lies below the cellar-dwellers of industry satisfaction, such as cable tv providers and internet shopping. This is very troubling considering what is at stake for older adults and their clinical and financial health.”

The report’s key findings include the following:

  • Only 20% of Medicare-eligible individuals have a solid understanding of Original Medicare, and less than a third (31%) have a good understanding of Medicare Advantage.
  • 63% say they’re “overwhelmed” by Medicare advertising, with just 31% of respondents who “strongly agree” that they can make effective selection decisions.
  • Over half (58%) stay in their current Medicare plan each year and don’t review their plan options and enroll in the best plan for their evolving needs.

“This report confirms that most older adults find Medicare enrollment confusing and lack adequate resources or support to choose the best plan,” said Dave Francis, CEO of Healthpilot. “Enrolling in Medicare is a pivotal time for millions and the Medicare marketplace is ripe for transformation. I believe that it is possible to make health care better for individuals aged 64 and older throughout the country, but we need dynamic platforms and sincere actions to make this happen.”

Reference: Markets Insider (July 12, 2022) “New Report Reveals Significant Gaps in Medicare Knowledge Among Older Adults”

Do I Need All Insurance after 65?

Seniors should be cautious about canceling their insurance policies. Consider your future insurability and your individual circumstances and life goals. There’s no one answer that fits everyone.

The primary purpose of life insurance is to replace lost income. Retirees may still want to keep their coverage because it can be an important tool in wealth transfer to the next generation.

US News’ recent article entitled “The Only Insurance Policies You Need After Retirement” advises that these guidelines can help determine which policies are essential and which could be a waste of money. Let’s look at how to decide which policies you need and which you can skip after age 65.

Must-Have Policies for Seniors. These two types of insurance are necessary for seniors.

  • Medical Insurance. The increasing cost of health care that comes with advanced age is a big reason to buy medical insurance. The Affordable Care Act requires everyone to maintain coverage. Most seniors 65+ are eligible for Medicare, and those still working may have benefits through their job. Note that Medicare doesn’t cover all medical costs, so look at buying a supplemental plan, such as Medigap and Part D coverage, to help pay for services not fully covered by Original Medicare. A Medicare Advantage Plan offered by private insurers is another way to fill in coverage gaps.
  • Homeowners or Renters Insurance. Seniors with valuable jewelry or other items may need to add a rider to their policy to fully insure these possessions. Mortgage lenders require homeowners to maintain coverage, but once the loan is paid off, it’s not required. It may be tempting to save money by canceling the policy, but that could be a costly mistake. That’s because a big loss would have to be replaced with savings.

Some Smart Options. There are other types of insurance that could be helpful to seniors.

  • Travel Insurance. Those who plan to travel extensively may want to buy travel insurance. Find a policy that includes features, such as emergency medical and medical evacuation services along with trip delay or cancellation insurance.
  • Auto Insurance. Auto insurance is required in almost every state. Any senior who is still driving and owns a vehicle should insure it properly.
  • Umbrella Insurance. This insurance provides additional liability coverage above and beyond what’s included in homeowner and car insurance. Your volunteer activities could put you at risk for a liability claim and warrant added insurance coverage.
  • An immediate annuity can help guard against outliving savings by providing a guaranteed source of income. Annuities can be purchased for a lump sum amount and provide monthly payments that are based on a person’s age and the purchase price.
  • Long-Term Care Insurance. Medicare won’t pay for ongoing custodial care in a nursing home or assisted living facility, and Medicaid is only available after a person has depleted almost all their assets.

One Type of Insurance to Cancel. Seniors who aren’t working don’t have a need for disability insurance.

Reference: US News (Feb. 27, 2020) “The Only Insurance Policies You Need After Retirement”

How Can I Save on Medicare Drugs?

New research by the Senior Citizens League shows comparing plans also works for Medicare Part D plans, which cover prescription drugs for those with Medicare health insurance. The advocacy group found that the price of a particular drug can vary by hundreds or even thousands of dollars from one Medicare Part D plan to another. So, shopping around for the best plan could save you hundreds, says Money Talks News’ recent article entitled “How to Save Hundreds of Dollars on Medicare Drug Costs.”

The best time to do comparison shopping is during the annual Medicare open enrollment period that starts October 15 and ends on December 7.

The Senior Citizens League’s analysis identified several reasons for which drug prices can vary so much for Medicare recipients, including the fact that most people on Medicare rarely shop around during open enrollment. each Part D plan also has its own formulary, a list of prescription drugs that a plan covers. The federal government, which runs the Medicare program, doesn’t negotiate drug prices on behalf of Medicare recipients. Each private insurance company that offers Medicare drug coverage does its own negotiating.

There are two main types of Medicare health insurance: Original Medicare, which is offered directly by the federal government, and Medicare Advantage plans, which are offered by private insurers that contract with the federal government’s Medicare program. Note that original Medicare doesn’t include prescription drug coverage. Seniors on Original Medicare who want drug coverage must buy a separate Medicare Part D plan from a private insurer.

Here’s a checklist for the process:

  1. Review your current coverage. Look at the Annual Notice of Change (ANOC) that you get from your Medicare Part D plan or Medicare Advantage plan. This will include changes to your current plan that take effect in the new year, if you stay on that plan.
  2. Do an inventory of your prescriptions. Make a list of all prescription meds you take. For each drug, include the name, dose, quantity taken per day and quantity required per month. You’ll need it to compare drug plans. It is also handy to take with you on each visit to your physician.
  3. Consider getting help. Medicare recipients have access to free, one-on-one Medicare insurance counseling from State Health Insurance Assistance Programs (SHIPs). To find the SHIP for your state, visit the national SHIP website.
  4. Narrow down your options. When you know what your Medicare Part D plan or your Medicare Advantage plan will cover next year, and you have a detailed list of your medications, compare that coverage with other drug plans to determine if they’d provide better or cheaper drug coverage. To compare plans, use the Medicare Plan Finder feature at Medicare.gov, the federal government’s official Medicare website.

If you choose to switch to a new plan, go through the Medicare website rather than the insurer.

Reference: Money Talks News (Nov. 11, 2019) “How to Save Hundreds of Dollars on Medicare Drug Costs”

Is a Roth Conversion a Good Idea when the Market Is Down?

A stock market downturn may be a prime time for a Roth IRA conversion, reports CNBC’s recent article titled “Here’s why a Roth individual retirement account conversion may pay off in a down market.” This is especially true if you were considering a Roth conversion and never got around to it.

A Roth conversion allows higher earners to sidestep earnings limits for Roth IRA contributions, which are capped at $144,00 MAGI (Modified Adjusted Gross Income) for singles and $214,000 for married couples filing jointly in 2022.

Investors make non-deductible contributions to a pre-tax IRA, before converting funds to a Roth IRA. The tradeoff is the upfront tax bill created by contributions and earnings. The bigger the pre-tax balance, the more taxes you’ll pay on the conversion. However, the current market may make this a perfect time for a Roth conversion.

Let’s say you own a traditional IRA worth $100,000, and its value drops to $65,000. Ouch! However, you can save money by converting $65,000 to a Roth instead of $100,000. You’ll pay taxes on the $65,000, not $100,000.

According to Fidelity Investments, the first quarter of 2022 saw Roth conversions increase by 18%, compared to the first quarter of 2021. That was before the second quarter’s market volatility, which has been more dramatic.

The decision to do a Roth conversion can’t take place in a vacuum. Consider how many years of tax savings it will take to break even on the upfront tax bill. Weigh combined balances across any other IRA accounts, because of the “pro-rata rule,” which factors in your total pre-tax and after-tax funds to determine your tax costs.

Attractive features of the Roth IRA are the freedom to take—or not take—distributions when you want, and there are no taxes on the withdrawals. However, there is an exception, and it pertains to conversions—the five year rule.

If you do a conversion from a traditional IRA to a Roth IRA, you have to wait five years before making any withdrawals of the converted balance, regardless of your age. It’s an expensive mistake, with a 10% penalty. The clock begins running on January 1 of the year of the conversion. If you are close to retirement and will need funds within that timeframe, you’ll need other assets to live on.

However, there’s more. If the conversion increases your Adjusted Gross Income (AGI), it may create other issues. Medicare Part B calculates monthly premiums using Modified Adjusted Gross Income (MAGI) from two years prior, which means a higher income in 2022 will lead to higher Medicare bills in 2024.

Before doing a Roth conversion, evaluate your entire financial and retirement situation.

Reference: CNBC (May 10, 2022) “Here’s why a Roth individual retirement account conversion may pay off in a down market”

Must I Sell Parent’s Home if They Move to a Nursing Facility?

If a parent is transferring to a nursing home, you may ask if her home must be sold.

It is common in a parent’s later years to have the parent and an adult child on the deed, with a line of credit on the house. As a result, there’s very little equity.

Seniors Matter’s recent article entitled “If my mom moves to a nursing home, does her home need to be sold?” says that if your mother has assets in her name, but not enough resources to pay for an extended nursing home stay, this can add another level of complexity.

If your mother has long-term care insurance or a life insurance policy with a nursing home rider, these can help cover the costs.

However, if your mom will rely on state aid, through Medicaid, she will need to qualify for coverage based on her income and assets.

Medicaid income and asset limits are low—and vary by state. Homes are usually excluded from the asset limits for qualification purposes. That is because most states’ Medicaid programs will not count a nursing home resident’s home as an asset when calculating an applicant’s eligibility for Medicaid, provided the resident intends to return home

However, a home may come into play later on because states eventually attempt to recover their costs of providing care. If a parent stays a year-and-a-half in a nursing home—the typical stay for women— when her home is sold, the state will make a claim for a share of the home’s sales proceeds.

Many seniors use an irrevocable trust to avoid this “asset recovery.”

Trusts can be expensive to create and require the help of an experienced elder law attorney. As a result, in some cases, this may not be an option. If there’s not enough equity left after the sale, some states also pursue other assets, such as bank accounts, to satisfy their nursing home expense claims.

An adult child selling the home right before the parent goes into a nursing home would also not avoid the state trying to recover its costs. This because Medicaid has a look-back period for asset transfers occurring within five years.

There are some exceptions. For example, if an adult child lived with their parent in the house as her caregiver prior to her being placed in a nursing home. However, there are other requirements.

Talk to elder law attorney on the best way to go, based on state law and other specific factors.

Reference: Seniors Matter (Feb. 25, 2022) “If my mom moves to a nursing home, does her home need to be sold?”

What are States Doing to Help Pay Long-Term Care Costs in Future?

Starting this year, workers in Washington state must pay 58 cents of every $100 they earn into the Washington Cares Fund. That money will help pay their long-term care costs in the future. Those with qualifying long-term care insurance can be eligible for an exemption.

Next Avenue’s recent article entitled “How Medicaid and Medicare Fit Into Planning for Long-Term Care” says that starting in 2025, those Washington residents who’ve paid in for at least three out of the prior six years, or for 10 years in total, will be able to withdraw up to $36,500 to pay for their costs of care. It is an effort by the state to fill in a major gap in our long-term care system. California has also enacted a law to bring down the eligibility threshold for Medicaid to totally eliminate it by the end of 2023. New York state is considering similar legislation.

Any senior may need assistance as they age, whether due to dementia, illness, loss of eyesight, or simple frailty. The level of assistance and how long it will last can vary greatly. However, few retirees have enough saved to pay for their care for very long out-of-pocket. According to research from Boston College, more than half of today’s 65-year-olds will need a medium to high level of assistance for more than a year. Almost two thirds of that care will be provided by family members – mostly children and spouses – for no cost, but more than a third will be provided by paid caregivers.

According to the Congressional Research Service, 43% of long-term care services are paid for by the Medicaid program, 20% by Medicare, 15% out-of-pocket and 9% by private insurance. The rest comes from a combination of private and public sources that includes charitable payments and VA benefits.

Medicare Coverage. This is the federal health insurance program for people beginning at age 65. Note that Medicare only covers so-called “skilled” needs following a hospitalization. It pays for up to 100 days of care in a skilled nursing facility following a hospitalization and longer term for home health services.However, the home health coverage is not comprehensive.

Medicaid Coverage. The financial rules for Medicaid coverage are complicated and state-specific. However, generally people must spend down to about $2,000 in savings and investments. Planning to use Medicaid to pay for long-term care is also complicated by the fact that while its coverage of nursing home care is comprehensive, its payment for home care and assisted living facility fees is only partial and differs both from state to state. Even if you may be able to leverage Medicaid to help pay home and assisted living care, you must also rely on your own savings.

Out-of-Pocket Costs. The low percentage of long-term care costs paid for out-of-pocket is surprising, in light of the vast growth of both assisted living and private home care agencies over the last several decades. However, this demonstrates the fact that most older adults have limited resources to pay for anything beyond their basic living expenses. When the need for care arises, they must rely on family members or Medicaid.

Insurance. A large component of insurance coverage of long-term care consists of Medicare supplemental insurance payments for skilled nursing facility copayments. While Medicare will pay for up to 100 days of skilled care following a hospitalization, it actually pays entirely for only the first 20 days. For days 21 through 100, there is a copayment which for most is paid by their MediGap insurance. As such, long-term care insurance pays for a very small share of long-term care costs. For those who have coverage, it can be terrific. However, due to its high cost, those who have it often also have the resources to pay for their care out-of-pocket, at least for some period of time.

Veterans Benefits. More vets are taking advantage of a Veterans Administration benefit known as Aid & Assistance that will provide veterans who qualify financially with up to $2,431 a month (in 2022) to help pay for their care.

Reference: Next Avenue (Feb. 2, 2022) `“How Medicaid and Medicare Fit Into Planning for Long-Term Care”

What’s Elder Law and Do I Need It?

Yahoo News  says in its recent article entitled “What Is Elder Law?” that the growing number of elderly in the U.S. has created a need for lawyers trained to serve clients with the distinct needs of seniors.

The National Elder Law Foundation defines elder law as “the legal practice of counseling and representing older persons and persons with special needs, their representatives about the legal aspects of health and long-term care planning, public benefits, surrogate decision-making, legal capacity, the conservation, disposition and administration of estates and the implementation of their decisions concerning such matters, giving due consideration to the applicable tax consequences of the action, or the need for more sophisticated tax expertise.”

The goal of elder law is to ensure that the elderly client’s wishes are honored. It also seeks to protect an elderly client from abuse, neglect and any illegal or unethical violation of their plans and preferences.

Baby boomers, the largest generation in history, have entered retirement age in recent years.  Roughly 17% of the country is now over the age of 65. The Census estimates that about one out of every five Americans will be elderly by 2040.

Today’s asset management concerns are much sophisticated and consequential than those of the past. Medical care has not only managed to extend life and physical ability but has itself also grown more sophisticated. Let’s look at some of the most common elder law topics:

Estate Planning. This is an area of law that governs how to manage your assets after death. The term “estate” refers to all of your assets and debts, once you have passed. When a person dies, their estate is everything they own and owe. The estate’s debts are then paid from its assets and anything remaining is distributed among your heirs.

Another part of estate planning in elder law concerns powers of attorney. This may arise as a voluntary form of conservatorship. This power can be limited, such as assigning your accountant the authority to file your taxes on your behalf. It can also be very broad, such as assigning a family member the authority to make medical decisions on your behalf while you are unconscious. A power of attorney can also allow a trusted agent to purchase and sell property, sign contracts and other tasks on your behalf.

Disability and Conservatorship. As you grow older, your body or mind may fail. It is a condition known as incapacitation and legally defined as when an individual is either physically unable to express their wishes (such as being unconscious) or mentally unable to understand the nature and quality of their actions. If this happens, you need someone to help you with activities of daily living. Declaring someone mentally unfit, or mentally incapacitated, is a complicated legal and medical issue. If a physician and the court agree that a person cannot take care of themselves, a third party is placed in charge of their affairs. This is known as a conservatorship or guardianship. In most cases, the conservator will have broad authority over the adult’s financial, medical and personal life.

Government programs. Everyone over 65 will, most likely, interact with Medicare. This program provides no- or low-cost healthcare. Social Security is the retirement benefits program. For seniors, understanding how these programs work is critical.

Healthcare. As we get older, health care is an increasingly important part of our financial and personal life. Elder law can entail helping a senior understand their rights and responsibilities when it comes to healthcare, such as long-term care planning and transitioning to a long-term care facility.

Reference: Yahoo News (Jan. 26, 2020) “What Is Elder Law?”

Can I Restructure Assets to Qualify for Medicaid?

Some people believe that Medicaid is only for poor and low-income seniors. However, with proper and thoughtful estate planning and the help of an attorney who specializes in Medicaid planning, all but the very wealthiest people can often qualify for program benefits.

Kiplinger’s recent article entitled “How to Restructure Your Assets to Qualify for Medicaid says that unlike Medicare, Medicaid isn’t a federally run program. Operating within broad federal guidelines, each state determines its own Medicaid eligibility criteria, eligible coverage groups, services covered, administrative and operating procedures and payment levels.

The Medicaid program covers long-term nursing home care costs and many home health care costs, which are not covered by Medicare. If your income exceeds your state’s Medicaid eligibility threshold, there are two commonly used trusts that can be used to divert excess income to maintain your program eligibility.

Qualified Income Trusts (QITs): Also known as a “Miller trust,” this is an irrevocable trust into which your income is placed and then controlled by a trustee. The restrictions are tight on what the income placed in the trust can be used for (e.g., both a personal and if applicable a spousal “needs allowance,” as well as any medical care costs, including the cost of private health insurance premiums). However, due to the fact that the funds are legally owned by the trust (not you individually), they no longer count against your Medicaid income eligibility.

Pooled Income Trusts: Like a QIT, these are irrevocable trusts into which your “surplus income” can be placed to maintain Medicaid eligibility. To take advantage of this type of trust, you must qualify as disabled. Your income is pooled together with the income of others and managed by a non-profit charitable organization that acts as trustee and makes monthly disbursements to pay expenses on behalf of the individuals for whom the trust was made. Any funds remaining in the trust at your death are used to help other disabled individuals in the trust.

These income trusts are designed to create a legal pathway to Medicaid eligibility for those with too much income to qualify for assistance, but not enough wealth to pay for the rising cost of much-needed care. Like income limitations, the Medicaid “asset test” is complicated and varies from state to state. Generally, your home’s value (up to a maximum amount) is exempt, provided you still live there or intend to return. Otherwise, most states require you to spend down other assets to around $2,000/person ($4,000/married couple) to qualify.

Reference: Kiplinger (Nov. 7, 2021) “How to Restructure Your Assets to Qualify for Medicaid”

What’s the Price Increase on Medicare Next Year?

Money Talks News’ recent article entitled “Traditional Medicare Premiums Will Soar in 2022” says that the rising costs include the:

  • 2022 Medicare Part B standard premium: $170.10 per month, an increase of $21.60 from $148.50 in 2021. That’s compared with an increase of $3.90 per month one year earlier.
  • 2022 Medicare Part B deductible: $233 per year, an increase of $30 from $203 in 2021. That’s compared with an increase of $5 one year prior.
  • 2022 Medicare Part A inpatient hospital deductible: $1,556, an increase of $72 from $1,484 in 2021. That’s compared with an increase of $76 one year prior.

What this means is that Medicare costs will go up 2022 and will effectively reduce the 5.9% cost-of-living adjustment (or “COLA”) that increases retirees’ monthly Social Security benefit payments in the new year. For the average retiree, the 2022 COLA is about an extra $92 a month. These Social Security COLAs averaged 2.2% between 2000 and 2020 and annual increases in the Part B premium averaged 5.9% during the same period.

Here what Medicare Part A covers:

  • Inpatient hospital services
  • Skilled nursing facility services; and
  • Some home health care services.

Nearly all (roughly 99%) of Medicare beneficiaries don’t pay a premium for their Part A coverage due to how long they worked and had Medicare taxes withheld from their paychecks. Medicare Part B covers the following types of care:

  • Physician services
  • Outpatient hospital services
  • Certain home health services
  • Durable medical equipment; and
  • Certain other medical and health services not covered by Part A.

Part B premiums are based on income. Those with higher incomes pay higher Part B premiums — which will be anywhere from $238.10 to $578.30 for 2022, depending on income and federal tax-filing status.

Reference: Money Talks News (Nov. 15, 2021) “Traditional Medicare Premiums Will Soar in 2022”