Friday, August 31, 2012

How Would Paul Ryan Change Medicare?

Last year, we reported that House Budget Committee Chairman Paul Ryan (R-WI) proposed a budget that would radically reshape Medicare and shift more costs to seniors and the disabled. At the time, we noted that “the plan may well become the Republican Party's de facto platform in 2012.”

Little did anyone know that the plan’s architect would become Republican candidate Mitt Romney’s choice as his running mate, putting the Ryan plan for Medicare center-stage less than three months before the election.  It is time, then, to review Rep. Ryan’s latest proposal to overhaul the popular Medicare program. 

Ryan would end Medicare as a government-funded program that pays all costs except for deductibles and co-pays.  Instead, Ryan would shift financial risk from the government to Medicare's beneficiaries.  Each beneficiary would receive a fixed amount of money every year (a “voucher”) to buy coverage either from traditional government-administered Medicare or from private health plans that would compete with Medicare while offering the same basic benefits.  The voucher program would begin when those who are currently 54 years of age and younger become eligible for Medicare. 

The amount of the voucher might cover the full cost of Medicare, especially in the early years, but there's no guarantee that it would.  If the voucher can’t cover the cost of the plan beneficiaries choose, they would have to pay the difference themselves (or reap savings if their plan costs less than the voucher amount).

Analyzing an earlier Ryan proposal very similar to the current one, the nonpartisan Congressional Budget Office (CBO) calculated that a decade into the program, the typical 65-year-old Medicare beneficiary would be spending $12,500 a year out-of-pocket in today's dollars, more than double under the current system.

At the same time, Ryan would gradually raise the eligibility age for Medicare from 65 to 67 by 2034.  Because Ryan would also repeal the new health reform law's coverage provisions, many 65- and 66-year-olds would be uninsured.  

The plan also puts a “hard cap” on Medicare spending that could result in significant benefit cuts. Spending would not be allowed to rise more than half a percentage point higher than the growth rate of the economy, or the gross domestic product.  If it rose higher than this, Medicare’s spending would have to be lowered one way or another, including cutting benefits to seniors.
Critics say that turning Medicare into a voucher program would create a two-tiered system and drive up costs for sicker beneficiaries.  The private plans would lure healthier seniors with perks like gym memberships, while the less healthy would stick with traditional Medicare, in part to keep their own doctors.  This would increase premiums for traditional Medicare and prompt doctors to abandon the program as reimbursement rates are cut, something that would affect current beneficiaries.   

Supporters of Ryan’s proposal contend that with "skin in the game," seniors would shop for the cheapest health care plans, which would spur competition among private health plans and push costs down. But “critics argue that elderly sick people aren't likely to be good comparison shoppers and could easily be misled by complicated insurance programs,” says the Los Angeles Times.

In addition, the Ryan plan would do away with one of the most popular parts of the health reform law – the gradual elimination of the so-called "doughnut hole" in the Medicare prescription drug benefit, which forces beneficiaries pay 100 percent of drug costs.  The doughnut hole would continue under the Ryan plan.  

For Kaiser Health News's answers to frequently asked questions about the Ryan plan, click here.

For a more detailed discussion by the Commonwealth Fund of the plan, which is also called "premium support," click here.

For more about Medicare, click here.

Reprinted with the permission of ElderLawAnswers.

Friday, August 24, 2012

Legal DIY Web Sites Are No Match for a Pro, Consumer Reports Concludes

After road testing three leading Web sites that help you create your own will, power of attorney, and other important legal documents, Consumer Reports has concluded that none of the will-writing products is likely to entirely meet your needs unless those needs are extremely simple.

The independent non-profit testing agency evaluated three online services: LegalZoom, Nolo, and Rocket Lawyer. Using online worksheets or downloads, researchers created a will, a car bill of sale for a seller, a home lease for a small landlord, and a promissory note. They then asked three law professors -- including Gerry W. Beyer of Texas Tech University School of Law, who specializes in estates and trusts -- to review in a blind test the processes and resulting documents.

In his evaluation of the will-making programs, Prof. Beyer said that two of them could create good simple wills but he found deficiencies in all three, including features that could lead a user to add clauses that contradict other parts of the will.

Consumer Reports' verdict?   “Using any of the three services is generally better than drafting the documents yourself without legal training or not having them at all. But unless your needs are simple—say, you want to leave your entire estate to your spouse—none of the will-writing products is likely to entirely meet your needs. And in some cases, the other documents aren’t specific enough or contain language that could lead to 'an unintended result,' in [a professor's] words,"

An article on the study, titled “Legal DIY websites are no match for a pro,” appears in the September 2012 issue issue of Consumer Reports.  To read it, click here.

Consumer Reports’ findings accord with ElderLawAnswers’ own evaluation of online estate planning programs.  For our White Paper on these programs, click here.

Reprinted with the permission of ElderlawAnswers.

Thursday, August 16, 2012

IRS to Crack Down on IRA Tax Rules

If you have an individual retirement account (IRA), now is the time to make sure you have been complying with tax rules. The Internal Revenue Service (IRS) is going to start cracking down on individual retirement accounts in an effort to collect penalties from taxpayers who do not follow rules regarding maximum contributions and minimum distributions. According to an article in the Wall Street Journal, the crackdown is part of an attempt to collect millions of dollars in previously uncollected penalties.

Individuals are only allowed to contribute a certain amount to regular and Roth IRAs each year. For 2012, you can contribute the lesser of $5,000 or your taxable compensation for the year, plus an addition $1,000 if you are over age 50. If you paid more than is allowed, you may have to pay a penalty of 6 percent of the excess amount.

In addition, once you reach age 70½, you are required to start taking distributions from your IRA. If you don't take the required minimum distribution, you can be subject to a 50 percent penalty on the amount you should have withdrawn. The same penalty applies to inherited IRAs. There is no statute of limitations on the penalties, so if errors are made over subsequent years, the penalties can add up quickly.

It is unclear how the IRS will step up enforcement of the penalties. The IRS will report to the Treasury Department on October 15th on its strategies, which could include more paperwork and audits. According to the Wall Street Journal, in 2006 and 2007, the IRS failed to collect $286 million in penalties for missed withdrawals and contributions.

Individuals and financial planners need to look over their IRAs to make sure contributions and withdrawals have been made properly. If you have any errors, you should correct them immediately because delaying further only increases penalty and interest charges.

For more information from the Wall Street Journal, click here.

Reprinted with the permission of ElderLawAnswers.

Friday, August 10, 2012

Medicaid Expansion: What If a State Opts Out?

One of the key provisions of the Affordable Care Act, the new health reform law, gives money to states to expand Medicaid to adults and families with low incomes – a total of about 17 million additional people.

However, the Supreme Court recently ruled that the federal government cannot effectively coerce states into accepting the Medicaid expansion by withdrawing all a state’s Medicaid funds if it refuses.  Although elderly and disabled individuals who currently receive Medicaid aren't affected by the Court's ruling, it could leave millions of others without any options for health coverage -- and possibly cost lives.

The Affordable Care Act expands Medicaid eligibility starting in 2014 to individuals and families with incomes up to 133 percent of the poverty line, which is $14,856 for an individual in 2012. (Most states currently limit Medicaid to certain categories of people at or below the poverty line, including children, pregnant women, parents of eligible children, people with disabilities and elderly needing long-term care.)

The federal government will pay the complete cost for the Medicaid expansion for three years for newly eligible beneficiaries, and 90 percent of a state’s costs thereafter.

Nevertheless, the governors of several states, including Texas, Louisiana, and Florida, have said they will not accept federal money in order to expand coverage.  Although politics is undoubtedly playing a role in these pronouncements, some are worried about the costs associated with expanding Medicaid, despite the federal money.

On the other hand, some analysts predict that expanding Medicaid could actually lead to savings, in part because uninsured individuals already cost states billions of dollars.  Arkansas officials estimated the expansion would save the state $372 million in the first six years.  Another recent study found that when states have expanded their Medicaid programs in the past, fewer people have died.

If a state opts out of the expansion, then adults who earn too much to qualify for Medicaid but too little to qualify for tax subsidies to pay for private health insurance will be left without coverage. People in those states who earn less than 100 percent of the federal poverty limit ($11,170 for an individual) and are not eligible for Medicaid benefits would also not be eligible for tax credits to purchase otherwise unaffordable private insurance. If the state chooses to expand Medicaid, those people would be covered. For more information on this looming coverage gap, click here.

For more information about the debate taking place in states about whether to opt out of the health care expansion, click here and here.

For a Kaiser Commission brief titled "How will the Medicaid Expansion for Adults Impact Eligibility and Coverage?," which includes a state-by-state breakdown of current Medicaid eligibility, click here.   

Reprinted with the permission of ElderLawAnswers.

Saturday, August 4, 2012

Home Care Agencies Hiring Unqualified Caregivers, Study Finds

A new survey has shed light on the hiring practices of private home care agencies, and the news is not good.  In many cases, agencies are sending to the homes of vulnerable elderly patients workers with little or no experience or knowledge, no training, and inadequate background checks.

The study, which was carried out by researchers at Northwestern University, surveyed 180 private home care agencies in Illinois, California, Florida, Colorado, Arizona, Wisconsin, and Indiana.  (The study did not include agencies that are certified by Medicare and are subject to federal regulations.) 

The researchers posed as people calling the agency to obtain assistance for a family member, and they queried the agencies about their hiring and oversight of their caregivers.  The results may surprise families who assume that agencies follow strict hiring guidelines.

For instance, none of the agencies assessed their caregivers' ability to understand medical terminology, and only 15 percent provided their caregivers with any training prior to sending them out to clients.  Although slightly more than half (55.8 percent) of the agencies surveyed ran criminal background checks on their caregivers, none conducted checks outside of their own states, meaning that caregivers with criminal records in other states could still be employed. 

According to a summary of the study in the Senior Journal, more than one agency told the researchers that they used screening tests that don't exist, such as the “National Scantron Test for Inappropriate Behavior” and the “Assessment of Christian Morality Test.”

"People have a false sense of security when they hire a caregiver from an agency," the study’s lead author Lee Lindquist, M.D., said in a statement. "There are good agencies out there, but there are plenty of bad ones and consumers need to be aware that they may not be getting the safe, qualified caregiver they expect. It's dangerous for the elderly patient who may be cognitively impaired."

"Some of the paid caregivers are so unqualified it's scary and really puts the senior at risk" for elder abuse, Lindquist said.

Only a third drug-tested their workers.  "Considering that seniors often take pain medications, including narcotics, this is risky," Lindquist said. "Some of the paid caregivers may be illicit drug users and could easily use or steal the seniors' drugs to support their own habits."

Hiring a caregiver through an agency has a lot of advantages, especially when it comes to the logistics of paying the caregiver and complying with state and federal employment regulations.  But as the Northwestern University study shows, not all agencies are alike.  It's up to the customer to spend the time and effort to vet both the caregiver and the agency, asking questions about how the agency screens and assesses its caregivers.

The study was published in the Journal of the American Geriatrics Society.  To read the study abstract, and find links to the study itself, click here.

To read a detailed analysis of the study in The New York Times’ New Old Age blog, click here.

For questions to ask a potential caregiver, click here.

To learn about questioning a home care agency, click here

Reprinted with the permission of ElderLawAnswers.