I want to make available to you a guide titled Managing Someone Else’s Money in Alabama. This guide was adapted from the Consumer Financial Protection Bureau’s (CFPB) Managing Someone Else’s Money guides and tailored to Alabama state law by members of The Alabama Interagency Council for the Prevention of Elder Abuse, Jones School of Law Elder law Clinic at Faulkner University and AARP Alabama. The work was overseen by Clinical Associate Professor John Craft, and his Research Assistant, Lauren Hogeland. Many thanks for their work helping caregivers understand their duties.
Medicare Open Enrollment
It is that time of year to reexamine your Medicare coverage to determine if you like what you have or need to make changes. Medicare’s Open Enrollment Period (OEP), during which you can enroll in or switch plans, runs from October 15 to December 7 every year, so now is the time to review your options to determine if switching plans could save you money and to determine if your coverage will continue to meet your needs.
During this period Medicare eligible people may enroll in a Medicare Part D (prescription drug) plan or, if you currently have a plan, you may change plans. This is an important consideration since each year insurance plans have the option to change which drugs they cover. What was covered during the immediate past year may no longer be covered. Also during the seven-week OEP you can return to traditional Medicare (Parts A and B) from a Medicare Advantage (Part C, managed care) plan, enroll in a Medicare Advantage plan, or change from one to a different Advantage plans. While beneficiaries can go to http://www.medicare.gov or call 1-800-MEDICARE (1-800-633-4227) to make changes in their Medicare prescription drug and health plan coverage, a terrific resource to determine the available options is the State Health Insurance Program operated by local aging and disability resource centers. Counselors can provide unbiased assistance in helping you maneuver through the maze of options.
Even beneficiaries who were satisfied with their plans in 2016 need to review their choices for 2017. Be sure to carefully review the plan’s “Annual Notice of Change” letter that you should receive. Prescription drug plans can change their premiums, deductibles, the list of drugs they cover, and their plan rules for covered drugs, exceptions, and appeals. Medicare Advantage plans can change their benefit packages, as well as their provider networks.
As an example of how drastically coverage can change year to year, Avalere Health, a consulting and research firm, reports that premiums for the 10 most popular drug plans will rise an average of 4 percent next year. According to the Centers for Medicare and Medicaid Services, the average Medicare Advantage premium is expected to decrease from $32.59 on average in 2016 to $31.40 in 2017.
This is a time when you will see advertisements all over television offering help with open enrollment. Understand that these companies are advertising to sell you their product. While their product may be what you want, it might not be, and you should not make a decision about that coverage without knowing all of the options available to you. Also remember that people who are perpetrators of fraud will inevitably use the open enrollment period to try to gain access to individuals’ personal financial information. Medicare beneficiaries should never give their personal information out to anyone making unsolicited phone calls selling Medicare-related products or services or showing up on their doorstep uninvited. If you think you’ve been a victim of fraud or identity theft, contact Medicare. For more information on Medicare fraud, click here or here.
Some resources to help you navigate open enrollment include:
The 2017 Medicare & You handbook, which all Medicare beneficiaries should have received. The handbook can also be downloaded online at here.
The Medicare Rights Center provides good educational materials to help.
You can find the State Health Insurance Assistance Program that serves your area here.
The online Medicare Plan Finder can be located here.
Alabama ABLE Act to Provide Planning Opportunity for Disabled Persons
On June 9, 2015, Governor Bentley signed ABLE Act legislation into law in Alabama permitting the state to implement a program to permit developmentally disabled persons to have limited tax free savings without losing public benefits. ABLE stands for Achieving a Better Life Experience, and the act was passed on the federal level in December 2014 permitting each state to set up its own program. Though the program in Alabama has not yet become operable, it will be getting underway in the coming months.
The ABLE Act will permit up to $14,000 per year to be placed in one approved bank account set up for a developmentally disabled person living in Alabama (one who became disabled prior to age 26) with those funds exempt from counting as resources for public benefit purposes. This means that the disabled person can have these funds to use for disability-related expenses without losing his or her public benefits such as SSI or Medicaid. Up to $100,000 can be accumulated in an ABLE account without loss of SSI, and $350,000 can be accumulated in such an account in Alabama without loss of Medicaid (note that this is state specific, and some states may permit an accumulation as high as $425,210 or as low as $235,000 before loss of Medicaid). At the death of the disabled person any funds left in the ABLE account will be payable to Medicaid to repay that agency in amounts up to what the agency paid for the disabled person’s health care costs.
Contributions to an ABLE account are not tax deductible, and income earned by an ABLE account is not taxable.
Stay tuned for more information about these accounts in the coming months or go to the Alabama State Treasury’s ABLE website and sign up for an update notification when accounts are available.
How Much Cash Will Your Estate Need?
When an estate is being settled in Alabama, it will take six months or longer before the assets in the probate estate can be distributed. I frequently advise people to plan for this and to designate a bank account jointly titled to themselves and the person they have named to be the personal representative (aka executor) of their will so that funds will be available for any immediate cash needs. Another source of cash may be life insurance with the beneficiary designated as the person who will be responsible for the estate.
Historically, one main reason to buy life insurance as part of an estate plan was to have cash available to pay estate taxes. Now that the estate tax exemption is so large (in 2016, estates can exempt $5.45 million per individual from taxation), most estates don’t pay federal estate taxes. If someone dies in Alabama with less than the $5,450,000 exemption amount, his or her estate will not owe federal estate tax, and there is no Alabama estate tax. The heirs and beneficiaries will inherit the property free of tax as it relates to the federal government and Alabama (but they may owe estate tax in another state). So the use of life insurance for estate tax reasons is greatly diminished, however, life insurance can still be helpful in a number of other ways.
Life insurance provides cash to use for the payment of home expenses for property held in the probate estate (such as utilities, mortgage payments, maintenance, insurance, property tax), debt, burial fees, or estate administration fees and expenses, replacement of income or assets lost to pay for long-term care, funds for a trust for a minor child or a child with special needs, buying out a business interest, funding charity, or balancing the interests between heirs to non-probate property (e.g. if one child is inheriting a certificate of deposit, a life insurance policy can ensure that the other child receives the same amount).
It is important to think through the property you own and determine what will be part of your probate estate and what will fall outside the probate estate and plan for enough liquidity to make the settling of your estate manageable for those charged with that responsibility.
Medicare Aneurysm Preventive Services
Did you know that Medicare pays for many preventive medical services? An important preventive service provided by Medicare includes the following:
Abdominal aortic aneurysm screening is available for persons at the highest risk for aortic aneurysms.
WHO: People at risk for abdominal aortic aneurysm, which typically includes men 65-75 who have ever smoked
HOW OFTEN: One time and must have received a referral for screening during your Welcome to Medicare exam
YOUR COST: Free
Medicare Wellness
Medicare provides many disease prevention and early detection services to help Medicare beneficiaries stay healthy and detect health problem early when treatment works best.
With Original Medicare a yearly Wellness Visit is available at no cost.
With Medicare Advantage Plans, the subscriber should check with the plan.
From time to time we will be highlighting here preventive services Medicare beneficiaries can get at no cost.
Alabama Benefit Checklists Updated
The Alabama Benefit Checklists have been updated for 2016. They are archived in Resources at this site.
Incentives to Purchase Long-term Care Insurance
Long-term care insurance was originally designed to protect purchasers from the catastrophic expense associated with long-term care in a nursing home. However, over time the public has clearly voiced a preference for home care over care in an institution. In response to that preference, long-term care insurance companies now offer a variety of in-home services to help individuals pay for services to assist a person with activities of daily living. In fact most policies sold today are comprehensive policies which cover services in different long-term care settings including at home.
The majority of policies sold today are comprehensive policies. They typically cover care and services in a variety of long-term care settings to include at home skilled nursing care, occupational, speech, physical and rehabilitation therapy, and personal care. Some policies also cover homemaker services, such as meal preparation or housekeeping as well; adult day health care centers; hospice and respite; assisted living; and other residential care facilities and nursing homes.
Consumers should be aware of limitations on coverage, such as prior hospitalization requirements, and pre-existing condition exclusions. It is important to thoroughly understand what is being purchased, so a good deal of homework is involved in examining long-term care policies. Be sure that the services purchases are not services that are already covered by Medicare.
There are incentives in the form of resource protection offered by Medicaid for a person to purchase long-term care insurance.
For policies issued prior to March 1, 2009, Medicaid will not consider resources of a person equal to the amount of long-term care insurance benefit payments in determining Medicaid eligibility when the long-term care insurance policy has paid at least the first three years of nursing home care and/or home health care services.
For policies issued on or after March 1, 2009, Medicaid will not consider resources equal to the amount of benefits paid (dollar-for-dollar) by an Alabama Long-Term Care Insurance Partnership Policy (Partnership Policy) for long-term care services received in determining Medicaid eligibility and in estate recovery. The amount to be excluded will be above and beyond the standard resource exclusion provided under the Medicaid State Plan. To qualify for this exclusion, the individual must be covered by a Partnership Policy that has been certified by the Alabama Department of Insurance as a policy that covers a person who was a resident of Alabama when coverage first became effective under the policy. Medicaid will provide reciprocity with respect to long-term care insurance policies covered under other states.
Social Security Spousal Strategies Eliminated
Once upon a time a married worker could file for Social Security benefits at full retirement age and then suspend the benefits, allowing the worker’s spouse to begin drawing spousal benefits while the worker postponed receiving benefits until a later date resulting in higher benefits due to the delay in drawing. The strategy was known as “File and Suspend,” and it resulted a substantial monetary gain for couples who used it.
But “File and Suspend” is a thing of the past as a result of the budget signed into law November 2, 2015. Under the new rules, effective April 30, 2016, a spouse cannot begin receiving benefits until the worker is actually receiving benefits, too. Workers can still file and suspend, but the spousal benefit suspends along with worker’s benefit.
The law does not affect those already electing “File and Suspend” or those who turn 66 prior to the effective date who elect to “File and Suspend” before April 30, 2016.
Another strategy known as “Claim Now, Claim More Later” has been eliminated. That strategy allowed a spouse who takes benefits at full retirement age to choose whether to take spousal benefits or benefits on his or her own record. This allowed a higher-earning spouse to claim a spousal benefit at full retirement age and then switch to draw his or her own retirement benefit instead at age 70. Under the new law the worker cannot take spousal benefits and let his or her benefits continue to increase. An exception to this is the election allowed by a surviving spouse who will still be able to choose to draw on the deceased spouse’s account first and later switch to a larger retirement benefit.
Jan Neal Law Firm, LLC 