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Belt tightening

2013 Belt Tightening?

Yesterday Congress passed, and President Obama signed, legislation averting for the time being a trip over the “Fiscal Cliff.” I say “for the time being” because the real slugfest is ahead during the 113th Congress. The deal did very little to address stupendous amounts of debt which most sober folks say MUST be addressed to avoid a real catastrophe . . . the question is not “whether” but “how” to address the problem.

In the meantime, the tax resolutions were relatively benign unless you happen to have taxable income of more than $400,000 a year. Now $400,000 is a lot of money, and it doesn’t apply to most of my clients . . . but occasionally . . .

For most nonworking folks, however, it will be business as usual until the real problems kick-in (see the first paragraph of this article). For working folks (Everyone . . . not just the “rich”) payroll taxes will grab an extra 2% of pay and they’ll feel that in the next paycheck.

In a Nutshell:

All the old income tax rates apply unless you are an individual with taxable income of $400,000 or more or a couple with taxable income of $450,000. If you fit in this category you get a new tax bracket! Lucky you: 39.6%

Tax, Anyone?

If you fit the group with new tax bracket ($400,000/$450,000) long-term capital gains will set you back an extra 5% at 20% . . . the rest of your friends will be taxed at the “usual” 15%.

We’ve been going back and forth over the past decade on phasing out personal exemptions and certain deductions for all taxpayers. Congress usually rode in with a last minute fix. Now there is a permanent solution with no phase-out UNLESS . . . you happen to be part of a married couple filing jointly earning over $300,000 or are a single taxpayers earning over $250,000.

The provisions on estate taxes left me dumbfounded . . . I was expecting much harsher treatment. The only significant change is that the estate tax, if it applies at all, raises to a maximum of 40% from 35%. The exemption amount (the amount that an individual can leave “estate-tax-free”) stays at $5.12 million (and may even be going to $5.25 million after adjustments). That is $5.12 million EACH for Mom and Dad . . . and whatever one spouse doesn’t use at death can carry-over and be added to the surviving spouse’s $5.12 million. For almost all Americans, the estate tax is dead. The big relief for most affected people (and their lawyers and accountants) is that we have permanent rules . . . certainty after 12 years of up-and-down-and-all-around. No more wondering from year-to-year.

Filed Under: General, Tax Issues Tagged With: , ,

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That is a fair question. As anyone who has not been in a coma the past six months knows, there has been a bit of a fiscal crisis affecting the government. Two sides of the equation are in contention:  Cut spending or raise taxes. The likely outcome will be a compromise involving some of both. How could spending cuts affect nursing home Medicaid?

Nursing home Medicaid benefits is an easy issue to “demagogue.” During the run-up to the Deficit Reduction Act back in 2005, a common rhetorical question posed by politicians was, “Should Medicaid be an estate planning tactic for rich seniors?” I will not waste space with taking apart that ludicrous statement.

The fact of the matter is that Medicaid HAS become a primary financing mechanism for the middle class (Remember them? The folks who until November 6 everyone running for any office was so worried about?). I have also written that Medicaid has morphed into a strange system and ought to be scrapped . . . in favor of something else. I even proffered a suggestion.

In order to “scrap Medicaid in favor of something else,” however, there needs to be something else. Addressing the problems simply by slashing the program and without offering “something else” will simply exacerbate the problem and leave many middle class seniors in a terrible bind.

Slashing and Gashing Medicaid

What might Medicaid cuts look like? Over the past couple of months there have been some hints.

HR 6300.  On August 2, 2012, five Republican representatives filed HR 6300 entitled “Medicaid Long-Term Care Reform Act of 2012.” Admittedly it offered “something else” – namely clean-up long term care insurance and buy that. That is not without problems because many folks are simply not insurable and the LTC insurance market has been a mess.

The Bill then provides that it is the “sense of Congress” that the federal and state governments should work to reduce the number of “middle-income individuals” who rely on Medicaid and give states the flexibility to change eligibility rules to Medicaid for “poor Americans who need it most.”

The Bill also calls upon the federal and state governments to evaluate the effectiveness of estate recovery programs and for the Congressional Budget Office (CBO) to evaluate the effects of a drastically reduced exemption for home ownership protection.

Finally, the Bill calls upon the CBO to cost out the effects of changing the current gifting “look back” period from 5 years to 10 years.

For those who love details . . . you can look at the HR 6300 HERE.

September 14, 2012 Congressional Letter to Governors.  A month later, the same representatives sent a letter to all state governors. They told the governors that “Unfortunately, federal rules weaken Medicaid’s program integrity by forcing states to exempt more than half-a-million dollars in home equity and the entire value of a Rolls Royce when determining an individual’s eligibility for these welfare benefits.” Remember what I wrote about demagoguery above? Note to all clients and visitors: I really have a problem with clients parking their Rolls Royces on the Mason Law parking lot . . . it is soooo embarrassing!

The letter then poses a series of truly insightful questions, such as: “Should the federal government give states greater flexibility to consider assets?” or “Do you consider Medicaid estate planning to be a significant problem?” Find me a governor who answered “NO” to both.  Also, see again my comments regarding demagoguery.

I’ve posted the September 14 letter HERE.

CMS Questionnaire.  But wait! Let’s not blame Republicans.  About the same time the Centers for Medicare and Medicaid Services (CMS) sent a very detailed questionnaire to state Medicaid directors. The document is 18 pages of questions regarding Medicaid eligibility rules and estate recovery rules, many of which have the phrase “and if not, then why not?”  The overall tone is about the same as the September 14 Congressional letter. Yep . . . I’ve posted that, too: HERE.

Incidentally, CMS as an agency of the Department of Health and Human Services is decidedly NOT a bastion of Republicanism . . . so the belt tightening cuts across party lines (political rhetoric notwithstanding).

Going Forward For You

Plan ahead! Any future changes will likely take a prospective “going forward” approach. Plan ahead! Really!

Filed Under: General, Medicaid, Nursing Homes Tagged With: , , ,

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Medicare Improvement Standard A MythThe false Medicare “Improvement Standard” under which the Medicare program and its payment contractors have sought to deny nursing home and other benefits for individuals who “fail to progress” or who have “plateaued” is about to be buried. The funeral is scheduled sometime after the first of the year. Good riddance.

Almost two years ago I wrote (see Busting the Medicare “Plateau” Myth that nursing homes, Medicare payment contractors, and Medicare appeals contractors were incorrectly applying federal law to require patients and residents to show progress under treatment in order to continue to be eligible for Medicare nursing home benefits.

Federal law requires no such standard.

Settlement Agreement Ends the “Improvement Standard”

As I reported, a number of federal cases were “percolating” through the system and had potential to clarify the errors. One such case is Jimmo v. Sebelius, No. 11-cv-17(D. Vt.), filed January 18, 2011.

On October 16, 2012, the Centers for Medicare and Medicaid Services (CMS) and a class of affected plaintiffs agreed to a settlement agreement in the Jimmo case and submitted it to a federal judge for final approval.

An October 24 New York Times editorial, “A Humane Medicare Rule Change,” noted the proposed settlement reverses an “irrational and unfair approach to medical services” that developed “over decades because of Medicare’s fragmented and loosely administered process for handling beneficiary claims.” The editorial praised the settlement as “clearly the humane thing to do for desperately sick people with little hope of recovery.”

What It Could Mean For You

When the Jimmo settlement is approved sometime in the next few months CMS will be required to take definite steps to end the erroneous standard on a national level. This will involve a nationwide educational campaign to inform health care providers, Medicare contractors, and Medicare adjudicators that they should not limit Medicare coverage only to beneficiaries who have the potential for improvement. Instead, providers, contractors, and adjudicators must recognize “maintenance” coverage and make decisions based on whether a beneficiary needs skilled care that must be performed or supervised by a professional nurse or therapist.

CMS recognizes that the settlement does not change the underlying law and regulations governing the Medicare program. Because the underlying Medicare law has not changed, nursing homes and other health care providers should implement the maintenance standard now.

Because Jimmo will be certified as a nationwide class, it could have implications for people in both North Carolina and Georgia.

That is because the settlement establishes a process of “re-review” for Medicare beneficiaries who received a denial of skilled nursing facility care and other services as a result of the of the Improvement Standard after January 18, 2011.

Shortly after the federal district court approves the settlement, CMS will announce how beneficiaries can invoke the re-review process. Updates will be posted on the Mason Law, PC, website as more information becomes available.

Filed Under: General, Insurance, Medicare, Nursing Homes Tagged With: , , ,

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Chris Ward

Guest Column

There have been tremendous changes and fluctuations in the long term care insurance industry in the last 15 years. The cost of care has more than double while the cost for long term care insurance has tripled and in some cases quadrupled. There are also fewer companies offering traditional long term care insurance in the marketplace now than at any other time.

There are a couple of reasons for this. The first reason is the low interest rate environment that we have seen for the last several years. Insurance companies have seen dramatic changes in their investment income due to these lower interest rates. Secondly, and more importantly, are claims. More policy holders have bought and kept their policies than what was anticipated. Also, those policy holders have used those benefits. Long term care insurance claims are expensive and can be worse than medical claims in a lot of situations. They can continue for years. Imagine writing a check for $ 6,000 every month for the next four years.

According to the Department of Health and Human Services, on average, someone who is 65 today will need some type of long-term care services and supports for three years. Women need care longer (on average 3.7 years) than men (on average 2.2 years), mostly because women usually live longer. While about one-third of today’s 65-year-olds may never need long-term care services and supports, 20 percent will need care for longer than 5 years. Bottom line: Insurance companies are losing money on long term care insurance because their clients are using it.

What are your options then? You can do nothing. (bad idea) You can self-insure. (Just make sure you have the financial means to do so) Or, you can get a plan.

I’ll touch on three different concepts. Because of the Pension Protection Act of 2006, there has been an influx of hybrid products over the last five years. Hybrid products combine other traditional long term care insurance with some other type of insurance. One popular combination is pairing life insurance with long term care insurance. These products allow you to access the life insurance policy’s death benefit to pay for long term care services. It also provides a death benefit to beneficiaries if you use little or no long term care services.

Another popular combination is putting together annuities with long term care insurance. This is for someone who may have put aside a certain amount of money into a CD for a “rainy day” fund. They may not say it, but in reality, this is their nursing home fund. Hypothetically, you could put $50,000 into a specially designed annuity. If the need for long term care services arises, then they have $ 150,000 worth of benefits available to them to pay for those services. The benefits come out tax free and if they don‘t use it, the beneficiary would receive the $50,000 with interest at death.

Finally, for younger individuals (under age 70), I would certainly encourage you to still look at traditional long term care insurance. It might still be the best for you. Younger ages haven’t been hit as hard on those price increases. Explore long term care insurance, see what’s out there, and above all, develop a plan for you and your family.

 

Chris Ward is an insurance broker located at Advisors Financial Center in Asheboro, NC. He has been specializing in life life, long term care, and medicare insurance products for over 20 years.

 

 

Filed Under: General, Guest Columns, Insurance, Medicaid, Nursing Homes Tagged With: , , ,

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Shiver me timbers! Errr . . . Bend Me I-Beams! Crack Me Concrete!

Seeing is believing! Check this photo gallery to see the destructive force of . . . PAPER!

Vets . . . you ever wonder why those applications take soooo long? Or why once an application has been filed it can take 6 months . . . or it can take over a year?

Seems the VA Office of Inspector General recently completed an “onsite benefit inspection” of the VA Regional Office in Winston-Salem. Cited were “an excessive number of claims folders stored on top of, and around, filing cabinets.

We noticed floors bowing under the excess weight to the extent that the tops of file cabinets were noticeably unlevel throughout the storage area.

Pictures are worth a thousand words . . . so here is a photo gallery courtesy of the VA Office of Inspector General. All photo captions are quotes from the VA Office of Inspector General report.

This over-storage creates an unsafe environment for the employees, overexposes many claims folders to risk of fire/water damage, inadvertent loss and possible misplacement . . .

 

 

 

 

 

 

 

We estimated that approximately 37,000 claims folders were stored on top of file cabinets.

 

The excess weight of the stored files has the potential to compromise the structural integrity of the sixth floor of the facility.

A GSA fire inspection report . . . expressed concerns about “floor stack loading” on the floor stating that it constituted “an extreme fire load and a possible structural overloading concern.”

 

 

File cabinets were placed so closely together that file drawers could not be opened completely."

 

 

 

Filed Under: General, Miscellaneous, Veterans Tagged With: , ,