Posts Tagged ‘Medigap’

January Session Will Focus On Paying for Long-Term Care


Do you wonder what will happen if you are no longer able to live independently? Will you have to “go into a home?” Is a nursing home the only way to go, or are there other living situations that might allow more independence? What will happen to your spouse? And who will pay for all of this? Medicare? Medigap insurance? Your kids? Is long term care insurance the answer?

Elders whose care is not covered by Medicare (and beware, Medicare covers only a limited period of “skilled” nursing care) have to look to Medicaid for help. Arizona has its own Medicaid program, the Arizona Long Term Care System (ALTCS). Unlike Medicare, which is available to elders above age 65, ALTCS applicants must qualify both medically and financially. The financial eligibility criteria are stringent and complex.

Victoria Blair, one of the partners at Fleming & Curti, PLC, offers a two hour program to address just these sorts of questions on Wednesday, January 27th and Thursday, January 28th. We will serve a continental breakfast and we promise to answer your questions about planning for (and paying for) long term care.

Both programs will include a discussion of the basics of ALTCS. Wednesday’s session will focus on our clients who are considering long term care options for themselves or a loved one. Thursday’s session will be a little more technical, and aimed at case managers, social workers and other professionals who want to better assist their clients. You are welcome to attend either session. There will be no charge for either program, but space is limited and reservations must be secured in advance.

Who should come to ALTCS School? Anyone who is thinking seriously about nursing home care, assisted living or in-home care, or is just curious about the options. Anyone who is contemplating purchasing a long term care insurance policy. Case managers and social workers are welcome (especially at Thursday’s session) and will leave with a clearer understanding and with answers to their questions about the system.

Ms. Blair will explain the medical and financial eligibility criteria for ALTCS. She will review what resources the “healthy” spouse can keep — a house, a car, money to live on — and strategies for “spend down.” She will review the penalties for making gifts (or selling assets for less than their value) to family members. And she will go over long term care insurance policies: what they cost, what they cover, and whether purchasing such a policy makes sense for you and your family.

To attend: contact Yvette in our office at (520) 622-0400 or by e-mailing our office. Please be sure to provide us with contact information and indicate whether you prefer to attend the client/layperson session on January 27th or the social worker/case manager/allied professional session on January 28th.

Medicare Changes Will Include Prescription Drug Coverage


With the U.S. Senate’s approval of sweeping new Medicare provisions the public discussion has focused on whether the changes will be good for the program, its beneficiaries and the nation as a whole. Much controversy has also centered on the politics of the changes—including whether Republicans or Democrats won or lost, whether drug and insurance companies benefited at the expense of seniors, and whether senior advocacy groups sold out their members for temporary political gain. Not enough attention has been given to the actual provisions of the new law and the many questions raised by its enactment.

Under the new Medicare law, “Part D” coverage will be the primary payor for prescription drugs for seniors and the disabled, but the new law does much more than just adopt a new drug benefit. We answer many of the questions about the prescription drug benefit here, but in a companion issue of his newsletter Elder Law Fax, our friend and colleague Tim Takacs, a Hendersonville, Tennessee, elder law attorney, answers questions about the non-drug related provisions in the new law.

Q: What benefits will be available before Medicare’s full prescription drug program begins in 2006?

A: Starting sometime early in 2004, Medicare recipients will be offered a discount drug card costing $30. The card should entitle them to receive discounts of as much as 15% to 25% on drug costs. Low-income Medicare recipients will pay nothing for the drug discount card, and will receive $600 credit toward the cost of their drugs—though they will have to pay a co-payment of 5% to 10% of each prescription. The drug card program will end when the full prescription drug benefit takes effect in 2006.

Q: Will Medicare beneficiaries automatically receive the new drug benefit when it becomes available in 2006?

A: Apparently not. What is being called Medicare “Part D” will require enrollment and a monthly premium, currently set at $35 (but subject to changes before the 2006 effective date). This payment will be in addition to the Part B premium ($66.60 beginning next month). Medicare recipients with incomes below about $12,000 (or, for married couples, about $16,000) will pay no premiums for Part D.

Q: Once a beneficiary signs up for Part D, what drug savings should he or she expect?

A: Part D beneficiaries will still pay the first $250 of prescription medications out of their own pockets each year. The beneficiary will pay 25% of the next $2,000 of drug costs, and the entire cost of drugs between that level and $5,100.

Q: What does this mean for a real-life beneficiary’s drug benefit?

A: To take one example, a beneficiary with $500 in monthly drug costs today will pay about $335 per month under the new plan—if the premiums do not increase and the cost of drugs remains fairly stable. A beneficiary with current drug expenses of $50 per month will actually pay a little more than $60 per month under the new plan—but will be insured against catastrophic medication costs for the slight increase in payments. Neither of those examples will apply, incidentally, to poorer Medicare recipients, who will pay less for their drugs. Calculating the actual cost of drugs for a given beneficiary can be difficult; the Kaiser Family Foundation has prepared an internet page to give individuals a better idea of their own savings (or costs) under the Part D coverage.

Q: Are there other limitations on Part D coverage?

A: Yes, there are several other ways in which the drug benefit is limited. For example, after reaching the $5100 level in total drug costs, the participant will still have a co-payment for additional drugs of 5% of the drug costs.

Q: Will private insurance plans pay for the uncovered portion of drug costs?

A: Yes and no. Anyone who already has a “Medigap” (supplemental Medicare) policy that provides a drug benefit can continue to receive that benefit–provided that they choose to opt out of the new Medicare drug benefit program. No new Medigap policies with drug coverage can be sold, and no other private insurers will be permitted to sell policies that cover the deductibles and co-payments in the Medicare drug program.

Q: Will low-income seniors and disabled Medicare beneficiaries receive any additional benefits after 2006?

A: Yes. In addition to the waiver of premiums described earlier, there are also reduced co-payments for poorer participants. They will pay $1 to $2 (depending on income levels) for generic and $3 to $5 for brand name and “non-preferred” drugs. The “donut hole” (the uncovered portion of drugs costing between $2,250 and $5,100 each year) does not exist for poorer beneficiaries. Existing Medicaid coverage for drugs, however, will end—except for benzodiazepines and some other drugs that will not be covered by Medicare’s Part D program.

Q: Who will actually provide the Part D drug coverage—Medicare or private insurers?

A: The new law encourages individual insurance companies to enter the marketplace and provide coverage options under government supervision but without direct government management. In areas where no insurance programs are offered, however, Medicare will provide better subsidies to what the new law calls “fallback” insurance plans. The goal is to make sure that every Medicare beneficiary has at least two choices of drug coverage available. Incidentally, no “fallback” plan is permitted to offer drug coverage for the entire country.

Q: What effect will the new drug benefit have on state budgets?

A: The states are now paying a significant portion of drug costs for poorer Medicare beneficiaries who simultaneously qualify for Medicaid coverage—although the federal government does pay about half of Medicaid costs in most states. States will see some savings as those costs are shifted to Medicare, but the law requires the states to pay most of those savings back to Medicare.

Q: How will eligibility be determined for Medicare’s new needs-based benefits?

A: Medicare has never had a financial eligibility test before, though the little-known QMB and SLMB programs have provided premium assistance for poorer Medicare beneficiaries. The new law provides several additional benefits for Medicare recipients with low income and limited assets. In addition, the Medicare Part B premium will for the first time be increased for wealthier participants. State governments will be responsible for determining eligibility and enrolling low-income, low-asset beneficiaries in the new subsidized programs—probably utilizing the same eligibility staffs now employed to make Medicaid determinations.

There is much more to be considered in the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Some of the changes include provisions to reduce the cost of care in rural areas, a rollback of planned cuts in doctors’ reimbursement rates and an expansion of options available for health care coverage for younger citizens. For answers to questions about some of those other provisions, visit colleague Tim Takacs’ companion explanation in his weekly newsletter, Elder Law Fax.

Bipartisan Commission Fails To Propose Medicare Reforms

MAY 17, 1999 VOLUME 6, NUMBER 46

The National Bipartisan Commission on the Future of Medicare sounded like a good idea. Seventeen Commission members met for the first time in March of last year, and were scheduled to make a truly bipartisan recommendation on how to “save” the Medicare program by March of this year. On March 16, 1999, the Commission held its final meeting, and failed to make any recommendations at all.

The idea of a bipartisan approach to Medicare reform was written into the Balanced Budget Act of 1997. Its seventeen members included five U.S. Senators, four members of the House of Representatives, and a collection of doctors, nurses, health insurance industry leaders, lawyers and businesspersons. The final proposal was based on a concept of “premium support”–an idea that would require private providers and the existing Medicare program to bid for Medicare dollars, and guarantee Medicare recipients only so much coverage as the average bid would provide.

Although the final Commission report was not adopted, a majority of the Commission supported the premium support idea. Because Congress wanted to ensure that any recommendation was truly bipartisan, the Commission’s rules required eleven votes to adopt any proposal. Ten members supported the final report, so the idea of premium support might be expected to resurface in future Congressional actions. As Commission member Dr. Bruce Vladeck says: “In Washington, D.C., no bad idea ever truly dies.”

Critics of the premium support approach to Medicare reform sharply questioned projections of substantial savings from the proposed change to Medicare. Most economists challenged the assumptions on which the savings were based, and the Health Care Financing Administration (the government agency in charge of Medicare and Medicaid) estimated that the Commission’s approach would save no more than 2.5% of the future cost of Medicare–far short of what will be needed to avoid huge predicted shortfalls early in the next century.

Huge (and unanticipated) budget surpluses in the last two years have led some to question whether Medicare reform is such a pressing need. Nonetheless, the evidence indicates that legitimate concerns about Medicare’s future arise from expected demographic and financial changes, including:

Medicare’s Part A fund (which pays for beneficiaries’ hospitalization costs) is projected to “go broke” in 2008.
Annual Medicare spending, now at just over $200 billion, will rise to between $2 and $3 trillion by 2030.
Medicare beneficiaries are now paying just under one-third of the cost of their medical care. In 1995, that amounted to an annual average of $2,563 per beneficiary. That figure is expected to rise dramatically over the next few decades, and to rise more quickly than increases in the general cost of living. Incidentally, private employers and so-called “Medigap” insurance policies are currently paying about one-tenth of the beneficiaries’ share.
77 million “Baby Boomers” (those born between 1946 and 1964) will begin to qualify for Medicare in 2011. The total number of Medicare recipients will double, to over 80 million in 2040.
If no other action is taken, the Medicare payroll tax will have to increase from its current 2.9% to 5.6% by 2030.

Health Insurance Reform: What the New Law Does


Last August, President (and Candidate) Bill Clinton signed the Health Insurance Reform Act, better known as the Kassebaum-Kennedy bill after its two principal sponsors. Much has been written about the effect of the new legislation on the elderly, but most of the focus has been on the bill’s provision making it a crime to transfer assets for the purpose of gaining Medicaid eligibility. Other provisions of the new law have potentially far-reaching effects as well.

The Good News

The primary focus of the new legislation is “insurance portability.” Many workers have found that they are unable to change jobs (even to higher salaries and better positions) because of the inability to secure medical insurance coverage for pre-existing conditions. The new law should eliminate that problem; insurers must cover pre-existing conditions for workers who have maintained continuous medical insurance coverage, and there is a time limit of one year for most pre-existing condition exclusions in any event.

The new law also forces insurance companies to make policies available to smaller employers, and expands the right of workers to continue their insurance programs after leaving employment. Both of these changes are intended to make insurance more widely available to the small-company employee and self-employed workers. This goal is further advanced by increasing the income tax deductibility of health insurance premiums for the self-employed.

The most important new provision for seniors, however, is to make clear that nursing home and home health care costs are fully tax-deductible. While many practitioners advised claiming most or all such long-term care costs as medical deductions in previous years, the law was unclear. The new provision removes any uncertainty and provides clear tax relief to long-term care patients, at least those with incomes high enough to be concerned about taxes.

Similarly, the cost of long-term care insurance will now be an income tax deduction, just as health insurance has been for years. This provision may encourage at least some taxpayers to purchase long-term care insurance, and may help make the industry more robust and effective. Unfortunately, the tax break is only going to apply to those with relatively high incomes, and so will provide little relief for low or middle-income citizens.

The Bad News

Of course, the most dramatic bad news for those faced with long-term care costs is the criminalization of some gifts. Under the new law, anyone who “knowingly and willingly” transfers assets (that is, makes a gift) to qualify for Medicaid may have committed a felony. Even in the face of this somber news there remains a ray of hope, however; the new law is so poorly written and so ambiguous that it seems unlikely to result in any prosecution or administrative action. Still, those who would otherwise consider planning to make themselves eligible for long-term care assistance must now seriously consider the possible punitive effect of the new law.

Even as the new law encourages the development of long-term care insurance as another option for financing nursing home (and home health) care, it also opens the door to a new kind of abuse. Insurers are permitted to sell overlapping and redundant policies, without any requirement of disclosure or review of existing long-term care insurance. Observers who recall the abuses by insurance companies (and agents) selling multiple “Medigap” policies prior to government regulation may well cringe at the prospect of another insurance feeding frenzy, preying on the legitimate concerns and accepting manners of a burgeoning elderly population.

Most observers expect further changes to be debated in Congress again this year. Stay tuned.

Worthless Policy Costs Insurer; Air Ambulance Not Covered


Medicare Won’t Pay For Air Ambulance

After Dr. Francis Keefe (age 82) broke his hip while traveling in Missouri, his wife decided that she wanted him to be closer to their New York home. Dr. Keefe was flown to a hospital near his home by air ambulance.

Mrs. Keefe submitted a bill for $3,456 for the air ambulance to her husband’s Medicare Part B provider. The carrier denied coverage, and an administrative law judge agreed.

Mrs. Keefe had argued that federal regulations require Medicare providers to pay for transportation “to the nearest hospital” and to the recipient’s home from the hospital. She asserted that the hometown hospital was the “nearest available” because family involvement is so important in discharge planning. Furthermore, she argued that the air ambulance flight was actually transportation “home” from the Missouri hospital.

The U.S. Court of Appeals agreed with the Medicare carrier and the administrative law judge. It held that the transportation requirement did not include air ambulance, and that transportation to the nearest acute care facility did not require travel to the family home, notwithstanding the value of family involvement in discharge planning. Keefe v. Shalala, Second Circuit Court of Appeals, Dec. 13, 1995.

Worthless Medigap Policy

Alabama resident Daisey L. Johnson (age 84) was covered by Medicaid for her medical needs. Nonetheless, the Life Insurance Company of Georgia was only too happy to sell her a Medigap policy to supplement her Medicare coverage. Ms. Johnson even presented her Medicaid card to the agent when he signed her up; for the next three years, Ms. Johnson paid over $3,000 in insurance premiums.

When Ms. Johnson figured out that her policy was worthless, she sued the insurance company. An Alabama jury awarded her $250,000 in compensatory damages and $15 million in punitive damages.

After the trial judge reduced the punitive damages award to $12.5 million, the Alabama Supreme Court further reduced it to $5 million. The Court noted that the insurance company had followed a pattern of selling Medigap policies to Medicaid recipients, and that its conduct “was egregious and reprehensible and resulted in a great financial hardship to some of the most vulnerable members of our society.” However, said the judges, the conduct was not “the most odorous this Court has been required to review,” and the award should therefore be reduced.

Furthermore, the Court used this case to change the way Alabama handles punitive damages awards. After payment of court costs and attorneys’ fees, the balance of Ms. Johnson’s award will be split between her and the State’s general fund. Life Insurance Company of Georgia v. Johnson, Alabama Supreme Court, Nov. 17, 1995.

Biggest-Selling Drugs

Industry sources report that the top five selling drugs (and the approximate value of sales) for last year were:

Drug      Purpose      Sales   
Zantac    ulcers      $2 bil   
Procardin heart       $1 bil   
          pain and             
Mervacor  high        $1 bil   
Vasotec   high       $895 mil  
Prozac    depression $875 mil  

Recent Court Cases

APRIL 18, 1994 VOLUME 1, NUMBER 21

Some recent court cases of note to those caring for or working with elders:

Fraudulent Medigap Sale

An Alabama insurance salesman persuaded Mattie Foster to purchase a Medicare supplemental insurance policy. Ms. Foster was 70 years old and illiterate. Although she told the agent that she was covered by Medicare, she was actually receiving Medicaid. The agent left brochures explaining the policy, but did not tell Ms. Foster that without Medicare coverage the policy would be worthless.

Three years later, Ms. Foster filed a claim for reimbursement from the insurance company. She was told that the claim was being “investigated,” but no payment was made. A year later Ms. Foster learned from her doctor’s office that the policy was worthless; the doctor’s office also spoke with someone from the insurance company, who promised to “look into the matter” but never did.

Ms. Foster canceled her policy (after having paid a total of $2,468.600 in premiums) and filed suit. The jury awarded her a total of $1 million in punitive damages and $250,000 in actual damages for reimbursement, mental anguish and distress. The trial court reduced the punitive damages to $250,000.

The Alabama Supreme Court reinstated the $1 million punitive award. The actual damages were reduced to $50,000, based on the court’s reasoning that the evidence of distress was “scant.” Foster v. Life Insurance Co. of Georgia, Alabama Supreme Court, January 14, 1994.

Nursing Home Did Not “Dump” Patient

Catherine Fields, a patient at a Florida nursing home, was transferred to the hospital due to respiratory failure. After hospital treatment, the nursing home refused to readmit her because of its “inability to deliver proper patient care.” The hospital filed suit, seeking payment for five days of non-acute care provided while it looked for alternative placement.

The hospital argued that the nursing home’s actions constituted “patient dumping” as defined in federal statutes prohibiting hospitals from transferring patients to other facilities based on the inability to pay. The Federal Court in Florida disagreed, holding that the “patient dumping” prohibition applies only to hospitals, not nursing homes. Even if the federal rules applied to this transfer it was motivated by the need for emergency care and not by the nursing home’s desire to shift the burden of uncompensated medical care to another facility. In re: Senior Care Properties, Inc., Florida Federal District Court, Northern District, November 24, 1993.

Reducing Fractures

A recent study shows that flouride and calcium, taken in combination, may help reduce the risk of bone fractures in elderly women. An interim report of the study relates that 48 women with osteoporosis have taken an experimental slow-release fluoride, along with calcium citrate, for the past 2½ years. During that time, only 10 new fractures have been reported, compared to 26 new fractures in the control group of 51 women receiving a placebo.

Tests also show that there may be some bone rebuilding in the women taking fluoride. The interim results are reported in the current Annals of Internal Medicine.

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