Posts Tagged ‘Medicare’

 

What does cashing in an IRA, or perhaps converting to a Roth IRA, have to do with Medicare premiums? Maybe a lot . . . a lot of your money.

Occasionally a person going into a nursing home may have to cash in an IRA. In other situations converting a traditional IRA into a Roth IRA may make financial sense. At the right time and with the right advice these may be smart moves. But there can be a hidden cost that many advisors never think of.

Medicare Premiums and Income

First a bit of background on Medicare Part B premiums. Medicare is a federal health insurance program. Part B covers visits to and services by various providers. The insured pay for coverage with premiums, usually by deductions from monthly Social Security checks.

Most Medicare enrollees (72%) have been paying $96.40 monthly Medicare premiums the past few years and may be surprised to learn that the 2011 premiums are actually $115.40 a month. But federal law provides a “hold-harmless” provision that says that for most people the premiums will not go up more than any Social Security cost of living adjustment for the year. As we all know, Social Security has not gone up the past few years, so neither have the Medicare premiums. Had there been a Social Security adjustment for 2011, the monthly premiums could have been as high as $115.40.

The other 27% are not so lucky. For people who do not have premiums deducted from their Social Security checks and for new enrollees the 2011 $115.40 a month applies.

For those pulling in a bit more than average the premiums get even steeper. Individuals with annual income of between $85,000 and $107,000, and married couples with income between $170,000 and $214,000 will pay monthly premiums of $161.50. An individual with income between $107,000 and $160,000 ($214,000 and $320,000 for a couple) will pay $230.70 monthly premiums. There are a number of other brackets that scale upwards until premiums hit $369.10 monthly. You may review the 2011 Medicare premiums, co-pays and deductibles here on this website.

The Social Security Administration looks at income reported two years ago to determine Medicare premiums. In other words, 2009 income is used to determine 2011 premiums.

The Rub: Converting IRAs to Roth IRAs

When someone cashes in an IRA – for whatever reason – the cash-in will probably be a taxable distribution. In other words, if Granddaddy converts a $100,000 IRA to a Roth IRA, he will likely have an extra $100,000 gross income for tax purposes.

The result:  If Granddaddy had other income of $40,000, with his IRA conversion he will have reportable income of $140,000. That means in two years, he will be paying $230.70 in monthly Medicare premiums (using 2011 figures). That amounts to $1,611.60 extra that year.

I am not saying converting to a Roth IRA does not make sense. It may be a great move. Do be aware of the extra costs.

A reader asked me if that was a “hidden tax” and I disagreed with him. There is nothing hidden about it!

I could retire if I had a dollar (better make it five dollars) for every client who had been told she would not qualify for further Medicare nursing home coverage because she was no longer improving or had “plateaued”.

Nonsense. Time to bust a myth!

Medicare Nursing Home Basics

Medicare pays a limited amount of nursing home care, but the care that is paid can be critical to the patient. In order to qualify, however, the patient must meet specific requirements.

First, the patient must have been hospitalized for at least three days. Second, the patient must be admitted to the nursing home for at least one of the underlying conditions treated in the hospital.

Third, the nursing home resident must receive skilled level of care on a daily basis. “Skilled services” actually cover a broad array of services. A common reason given for cutting off Medicare coverage is that “skilled services” are longer needed when, in fact, the patient indeed requires skilled services as broadly defined under the Medicare regulations.

What is “Skilled”?

Skilled services require technical or professional personnel such as registered nurses, licensed practical nurses, physical, occupational or speech therapists. In order for a service to qualify as “skilled”, it must be so inherently complex that it can only be safely and effectively performed by, or under the supervision of, professional or technical personnel.

Importantly, skilled services can include “observation and assessment of a changing condition” as well as “overall management and evaluation of a care plan”. So, for example, monitoring of fluid and nutrient intake might be necessary to prevent dehydration.

The Level Truth About Plateaus

Often nursing homes may mistakenly require a resident to be improving or showing progress in order to continue skilled services and maintain her Medicare coverage. If a resident “plateaus”, or the nursing facility says the resident no longer has rehabilitation potential, the facility may deny her further coverage. Denying Medicare coverage for this reason is improper.

The Medicare regulations are clear that “restoration potential” is not a valid reason for Medicare coverage denial. Other regulations provide coverage for “maintenance programs based on initial evaluations and periodic assessments”. A number of court cases prohibit the use of “rules of thumb” and require individual assessment of an individual’s needs.

Unfortunately, the “improvement standard” has wriggled its way into the system and is improperly applied at all levels, from nursing homes to the appeals level. One reason may be that there are so few advocates who are aware of the rules and who have the skills to appeal a coverage denial.

There may be some help on the way from the courts. Two recent federal court decisions in the past few months agree with my position. Both courts, relying on the regulations discussed above, held that Medicare can pay for skilled care if it is needed simply to preserve a patient’s current functioning or prevent further decline.

Papciak v. Sebelius

In September the US District Court for the Western District of Pennsylvania found in favor of Wanda Papciak, an 81 year old who had Medicare covered services denied by a nursing home on the basis that she was unlikely to improve.

Ms. Papciak sued the Obama administration claiming that Medicare should have considered whether she required skilled nursing care to maintain her current level of functioning.

The court held that “[t]he restoration potential of a patient is not the deciding factor in determining whether skilled services are needed. Even if full recovery or medical improvement is not possible, a patient may need skilled services to prevent further deterioration or preserve current capabilities.”

Anderson v. Sebelius

Sandra Anderson, a 60-year-old buy percocet online woman who had been receiving home health care covered by Medicare following a second stroke, sued when Medicare cut off her benefits.

In October , the US District Court in Vermont ruled in Anderson’s favor holding that “[a] patient’s chronic or stable condition does not provide a basis for automatically denying coverage for skilled services.”

The Pols Weigh In

Recently a group of House Democrats wrote the administration on the issue. “Beneficiaries are frequently told that Medicare will not cover skilled services if their underlying condition will not improve. . . . For example, as people with multiple sclerosis are often not likely to improve, skilled services such as physical, occupational and speech therapies that are necessary to slow the progression of the disease, or maintain current function, are denied. As a result, these individuals’ conditions deteriorate –frequently leading to more intense, more expensive services, hospital or nursing home care.”

Unfortunately, the administration has so far been unwilling to correct its guidelines. That leaves the courts as the last resort. While the recent court opinions add fuel to the growing clamor to enforce the law as written, as district court decisions they have little more than persuasive relevance outside of western Pennsylvania or Vermont.

Fortunately, the nonprofit Center for Medicare Advocacy recently announced an effort to combat this myth. The first approach is to prod the federal regulators to issue clear guidance. If that does not work, litigation will follow.

Wish them luck! Improper denials often harm those most in need of help. These include not only older patients, but also those with disabilities such as Multiple Sclerosis, Alzheimer’s, Lou Gehrig’s, spinal cord injuries, diabetes, and others.

Stay tuned.

Coastal Senior is a monthly periodical published in Savannah, Georgia and circulated throughout the Georgia and South Carolina low country. Bob Mason is its legal columnist.

In case you missed my last column, I am not a fan of Medicare Advantage Plans. Proponents of the plans will tell you they offer “more options” to seniors. In my experience “more options” often is code for “more complex”.

Advantage Plans also cost the taxpayers more. The government pays about 20% more to insurance companies for each Medicare beneficiary than it pays directly to doctors and hospitals on behalf of Medicare beneficiaries under traditional Medicare.

I came down particularly hard on Medicare Advantage “Private Fee for Service Plans” – a type of plan that promises much, often comes up short, and has been accused by the government of using overly aggressive (not to mention illegal) sales techniques (like forgery).

All of this is my opinion. I imagine there could be reasonable people who would disagree – and there actually may be some happy Medicare Advantage enrollees who have experienced some – umm – advantages to Medicare Advantage.

Some Important Considerations

In case you really want to take a look at a Medicare Advantage Plan, consider the following:

• Are your favorite doctors and hospitals covered by the plan? Do they accept the plan’s terms and conditions?

• Do you need a referral to see a specialist?

• Can you get care outside the plan’s service area or network? How?

• What costs are involved in the plan (premiums, deductibles, copayments)?

• Are there copayment requirements for lab tests, diagnostic tests, x-rays, MRI scans, or CT scans?

In case you want that “nice young man” from the insurance company to come by, consider:

• It’s OK to have someone with you when you discuss a Medicare Advantage Plan or any insurance product with an agent. If an insurance agent comes to your home uninvited, make an appointment to meet the agent at a time and place that is convenient to you. Do not invite strangers into your home.

• Obtain the agent’s business card so you can contact him or her later.

• If you are satisfied with your current coverage, you do not need to change.

Bailing Out

Speaking of changing, you need to get a handle on how (and how often) you can change from one type of plan to another – say from traditional Medicare to an Advantage Plan and back. Oh, alas! More complexity.

If you enroll directly in an Advantage plan for the first time upon becoming Medicare eligible or you have dropped a Medigap (Medicare Supplement) ONCE, you can voluntarily disenroll from their plan anytime within the first 12 months of enrollment. If it has been more than 12 months since enrollment, there are limitations as to when you may disenroll. Read on.

First you have an Annual Election Period (AEP), which runs from November 15 through December 31. If you are in a Medicare Advantage Plan you can switch to Original Medicare (and a Part D Prescription Drug Plan) or you can switch to a different Medicare Advantage Plan. Changes will take effect January 1 of the following year.

Next you have an Open Enrollment Period (OEP) for Medicare Advantage that runs from January 1 through March 31 of each year. If you are in a Medicare Advantage plan with Prescription Drug coverage you may switch to another similar plan offered by another company or return to Original Medicare and select a stand-alone Part D Prescription Drug Plan. You may not switch to an Advantage Plan that does not provide Medicare Prescription Drug coverage.

There are a host of other complexities on the types of plans you may switch from or to. Remember: all of this is meant to provide you with options! Just imagine the vista of possibilities opening before you!

My best advice is to be aware that November 15 begins a time when you can make some changes. Do your homework and explore those changes.

Unfortunately, I do not have space for specifics. But once you locate a new plan, you’ll need to notify both your old plan and Medicare. KEEP COPIES OF EVERYTHING.

Get help from a knowledgeable friend, adult child, or counselor.

Occasionally government does work well. The US Marines are one example. Another good example is federal funding of state programs to help seniors with Medicare and other health insurance issues. They work well and have trained counselors.

In Georgia you may find help through the Coastal Georgia Area Agency on Aging. Call them at 1-800-580-6860 and scream “HELP!”. You can also call the GeorgiaCares State Health Insurance Information Program at 1-800-669-8387.

In South Carolina call the low country office of Insurance Counseling Assistance and Referrals for Elders Program (I-CARE) (whew!)at 843-726-5536 and scream “HEY-YELP!” (They sound different in South Carolina – my opinion). By the way, the South Carolina I-CARE website is excellent: www.state.sc.us/ltgov/aging/Seniors/ICARE.htm.

We need a KISS Program (Keep It Simple Silly), but I’m NHMB (Not Holding My Breath).

Next month, one of my favorite topics: Living Trusts . . . you might just be able to live without them.

Bob Mason, certified elder law attorney by the National Elder Law Foundation, practices in Savannah, Georgia, and Asheboro, North Carolina. Email Bob at ram@masonlawpc.com or visit www.masonlawpc.com.