Posts Tagged ‘Social Security’

How To Leave An IRA To A Child Who Has a Disability

SEPTEMBER 27, 2010 VOLUME 17 NUMBER 30
This is so confusing to clients, but it needn’t be. The rules are actually simpler than they seem. Stay with us, and we’ll walk you through it.

OK, here’s the set-up: You have three children, one of whom (the youngest) has a disability. We’ve decided to name her Cindy (sorry if we got that part wrong). Your estate plan is to leave everything equally to your three children, but you know that (1) Cindy can’t manage money, and (2) even if she could, leaving her money directly would knock her off of her public benefits. Just to make things more complicated, nearly half of your net worth is held in an IRA.

Before we roll up our sleeves, let us make a few observations about your situation:

  1. If instead of an IRA you have a 401k, a 403b, Keogh or other retirement plan, the rules are pretty much the same. They’re somewhat different if you have a Roth IRA; we may tackle that issue in a future newsletter.
  2. If Cindy’s disability entitles her to public benefits but she is able to manage money just fine then some of the trust issues might be different from what we describe here.
  3. We’ve decided that your estate (your combined estate, if you are married) is just under the estate tax limits, whatever they might be. That’s so we don’t have to complicate this explanation with an estate tax element. But the truth is, that wouldn’t complicate things all that much — we just don’t want to have to throw those oranges into our apple basket. Not today, anyway.

Ready? Here we go. We’ll start by asking you some questions:

First question: What benefits does Cindy get? Is she on Supplemental Security Income (SSI)? Does she also get Social Security benefits, either on her own work history or on yours? Is she receiving Medicare coverage? How about Medicaid (or, in Arizona, AHCCCS)? Does she also get a housing subsidy, benefits through the Division of Developmental Disabilities, or therapy and care from the school district?

This question is important, because first we need to figure out whether her benefits will be affected by any trust you might set up for her. Here’s a surprise: it’s not enough to figure out what benefits she is on now, particularly if she was disabled before age 22. She might be eligible to receive benefits on your work history (or your spouse’s), and those benefits could go up when you retire and again when you die. Since your estate plan is all about what happens to your money when you die, the benefits Cindy gets then will be more important than the benefits she receives now.

Second question: How important is it to you to give your children the chance to “stretch-out” your IRA? We’re sorry — we didn’t explain what that means.

You already know that you have to withdraw money at a set pace, calculated based on your life expectancy, once you reach age 71 (we know — it’s really 70.5; it’s actually the year after you turn 70.5, so let’s just call it 71, okay?). You probably also realize that your beneficiaries get to use their own life expectancies after they inherit your IRA. Or at least they do most of the time.

If that is important to you, your beneficiary designation should make it easy for your children to use the longest stretch-out period possible. Since they are probably all different ages that means there is a benefit — maybe a slight one, but a benefit — to the youngest children to be able to use their own age rather than being stuck with an older sibling’s age.

Note: this assumes your children share your interest in stretching out the IRA withdrawals. Take the simple case, with Cindy not involved: if you make the other two children (let’s call them Amelia and Barbara) beneficiaries of the IRA, Barbara (the younger) will be able to take a little less out each year than Amelia is required to do. But if either of them decides to just withdraw all the money and use it for an extended European vacation, then they can choose to make a decision that is not tax-wise. If you want to prevent them from doing that, you have raised the complication factor — but it can be done. We’re just not going to try to explain it here. But we do — here.

Third question: Do you want to try to give Cindy some non-IRA assets rather than an interest in the IRA, just to make this simple? Let’s say you left your IRA to Amelia and Barbara, and increased Cindy’s share of the non-IRA assets to make the shares equal. Would that work?

Well, yes — but it’s not quite that easy. Say you leave $100,000 in an IRA to Amelia — is that worth $100,000 to her? No, because she will have to pay taxes on it when she takes it out. How much? It depends on her state, her marginal tax rate and how long she leaves it in the IRA, so it’s very hard to figure out the “real” value to Amelia. Plus we know that the real value of the same amount of IRA will be different for Barbara, making the calculation that much more difficult.

Maybe we can use a rule of thumb, though. Let’s guess that Amelia and Barbara will delay taking out their inherited IRA money as long as possible, and that when they do they’ll both be retired and not making a lot of income. Perhaps the “real” value (to them) of your IRA will be 65% to 80% of its balance when you die. Is that close enough for you to figure out what would be “fair” if you gave Cindy more cash and less IRA? We can’t tell you — this one is a judgment call for you.

Fourth question: Who will manage Cindy’s money after your death? Amelia, the banker (and classic first-born)? Barbara, who has some financial challenges of her own but has always been close to Cindy, and still lives in the same community with her? Your local bank? A family friend, or a professional you have worked with?

Enough questions for a moment. Let us tell you what we think, based on your answers.

First, you can create a trust and name it as beneficiary of your IRA. Don’t listen to your banker or your accountant if they tell you that you can not do that — they are reciting old rules that no longer apply.

But if you do name a trust as beneficiary, you are likely to force everyone to use a shorter stretch-out date — probably all three daughters will be stuck with Amelia’s life expectancy. If there are only a few years’ difference between the girls, that may not be a big deal. If this issue is important, then we probably can work around it — we can name Amelia and Barbara as beneficiaries directly, and a stand-alone “special needs” trust for Cindy’s benefit to receive her share of the IRA. If we do that, though, you have to make us a promise: you can’t let anyone else tell you to change your beneficiary designations after we get them set up. At least you have to promise not to make any changes until after you have met with us and gone back over the beneficiary form.

In fact, you will find that you have to help educate lots of folks about IRA beneficiary designations. Over time you will be told that you have a mistake in your designation, that you have unnecessarily caused tax increases for your daughters, that your lawyer obviously doesn’t know how to do this. We do, and we can help you respond to those bankers, accountants and others who tell you that you need to make changes. Keep us in the loop, please.

We also need to make sure you realize Cindy’s share can’t go to charity after her death. None of it. Even though the non-profit which provides a sheltered workshop for her would be the logical beneficiary of a share of “her” IRA portion, it mucks everything else up.

So how do we get Cindy’s portion of the IRA — and for that matter the rest of her inheritance — set up to benefit her without knocking her off of her SSI, Medicaid, AHCCCS and other government benefits? That’s what a special needs trust is all about.

We have important advice for you: Be careful as you look for information about special needs trusts, though: much of what you read will be about the rules (and limitations) on so-called “self-settled” special needs trusts, and Cindy’s trust will not be one of those. You will be establishing a “third-party” special needs trust, and the rules will be much different, and much more liberal. You can leave IRA and non-IRA assets in a special needs trust for Cindy’s benefit, and you will actually improve the quality of her life without jeopardizing the programs and benefits she receives.

We hope this helps sort through some of the finer points of IRA beneficiary designations. If you want more, we can recommend a really thorough article by our friend Ed Wilcenski, a New York lawyer. He wrote for Forbes.com, and he’s a smart guy who writes well.

Incidentally, we’d love to hear from you. Maybe you have a question about IRAs and special needs trusts, or you just want to tell us whether this helped you out. Maybe you want to quibble with some of our advice. We love to hear from readers.

We will not, however, undertake to represent you based on a simple e-mail or internet inquiry — we need much more information (starting with where you live — we don’t practice outside Arizona) before undertaking a lawyer/client relationship. We won’t be able to answer your specific questions about your own legal situation, either. What good are we, then? Well, we’ll try to demystify some of the general rules and answer general questions about these topics. Contact us if you’d like us to try, or simply Leave a Reply below. We’ll read your comments and let you know, even if we can’t help you with individual legal problems.

Support Can Be Awarded After Child’s Majority In Some Cases

APRIL 12, 2010  VOLUME 17, NUMBER 12

Most people are familiar with modern concepts of child support. It can be awarded to the custodial parent in a divorce proceeding. The amount of support is usually calculated by reference to standardized computations promulgated by the courts. A support award usually includes an automatic assignment of wages to help ensure the payments get made. It ends when the child reaches age 18. Wait — that last one is not necessarily correct.

Most states (Arizona included) permit courts to order continued child support for an adult child with a serious mental or physical disability. The rules vary from state to state, but Arizona’s approach is not particularly unusual. If you are concerned about this issue because you know about an adult child with a disability living in another state, be sure to check that state’s laws before assuming the Arizona rules are identical.

In Arizona, child support can be awarded to an adult child with a disability if:

  • The child is severely disabled, either mentally or physically, and is “unable to live independently and be self-supporting,”
  • The disability began before the child turned eighteen, and
  • The court considers the financial resources and needs of the child and both parents, along with the effect of the disability on those needs.

[There are actually two circumstances in which child support can extend past age 18 under Arizona law. The court can also continue child support until age 19 if the child is still in high school.]

See Arizona Revised Statutes section 25-320(E) for the precise language of Arizona law. Note that the law does not require the parents to be divorced, separated or even pending divorce or separation. A court proceeding can be initiated solely for the purposes of establishing support requirements, and the resulting order can be directed against either or both parents — including against a parent with whom the adult child lives. Note also that the support request does not have to be filed before the child reaches age 18, though the disability itself must begin before that age.

A recent Arizona Court of Appeals case dealt with the issue of support for an adult disabled child. In Gersten v. Gersten, decided November 17, 2009, the appellate court dealt with a trial court decision denying support payments to the father of an adult child with a disability only because the father had not been appointed as his son’s guardian or conservator. The Court of Appeals directed that the matter be returned to the trial court, and the son’s interests considered either by having a guardian or conservator appointed or by joining him as an actual party to the divorce proceedings.

One common problem when support is ordered paid to an adult child with a disability (or to the parent with whom the child lives): the support will be treated as income for Supplemental Security Income (SSI) eligibility purposes. See, for example, the Social Security Administration’s POMS section SI 00830.420(C), which sets out the procedure an SSI eligibility worker must follow when assessing child support payments for an adult child with a disability.

That may mean that the support order reduces the beneficiary’s check by almost as much as the support order, and it might even result in elimination of SSI. That, in turn, might lead to the loss of Medicaid benefits paid for through the Arizona Health Care Cost Containment System (AHCCCS).

In some cases it might be possible to maintain eligibility for public benefits and still seek an award of support for the benefit of an adult child with a disability. A special needs trust for the benefit of the child support recipient can be set up (perhaps even by the court ordering the support) and the monthly payments assigned to the trust. The process is not always simple or straightforward, and an experienced attorney should be consulted.

Social Security Probably Won’t Have a Cost of Living Increase

AUGUST 24, 2009  VOLUME 16, NUMBER 52

According to the Trustees of the Social Security and Medicaid trust funds, it looks like the annual cost-of-living adjustment (COLA) for Social Security next year will be, well, zero. In other words retirees, those on Social Security Disability and even Supplemental Security Income recipients will see no increase in their Social Security checks in 2010.

A summary of the Trustee’s report is available online, and it makes for interesting reading. The Trustees have provided explanations, figures, projections and calculations — and also some calculations of the real-world effect of those projections on individual beneficiaries and the funds as a whole.

If the no-COLA projections are correct, it would be the first year without an increase since COLAs were introduced in 1975 (you can see the history of COLAs since 1975 in a chart maintained by the Social Security Administration). The law mandating COLAs does not allow for reductions in Social Security benefits, so at least no one will see any automatic decreases.

Well, that’s not quite correct. Some recipient’s checks will go down, since their Medicare Part B premiums may increase — though only about one-quarter of Social Security recipients will be affected by that possibility. For the rest, Part B premiums are not permitted to increase by more than the COLA amount. With no COLA projected, that means no increase in Part B premiums. For those whose premiums are indexed for income, however, that may mean large increases in Part B premiums.

In addition, Medicare Part D (the drug benefit) premiums are expected to increase slightly for most Social Security beneficiaries. Since those premiums are automatically deducted from Social Security, the effect for most recipients will be a decrease in their monthly checks.

The culprit, of course, is mostly the recession and the general economic slowdown. Despite the lack of a COLA, most Social Security beneficiaries are actually paying more for their basic needs this year — partly because they pay more for health care, where costs have not held steady or decreased as they have for many consumer goods.

The projections are murkier for next year, of course, but the Trustees predict that there will likely be no COLA in 2011, either. Their planning assumes only a small COLA in 2012.

The final numbers will not be released for another two months, but anyone receiving Social Security benefits should assume that they will not be seeing any increase next year. That will be a significant change from last October, when Social Security announced a 5.8% COLA — the largest since 1982 (see the Social Security chart, which provides year-by-year figures for the COLAs).

What effect does the lack of a COLA have on the Social Security and Medicare trust funds? The Trustees predict that Social Security’s trust fund is adequately funded for the next ten years, but that beginning in 2014 (two years earlier than estimated last year) payouts will begin to exceed the fund’s value. The hospital insurance portion of Medicare’s fund looks even bleaker; it will begin being spent down in 2011 and run out in 2017.

Medicare Part D Enrollment Period Runs Through Year End

NOVEMBER 20, 2006  VOLUME 14, NUMBER 21

Medicare Part D (the prescription drug benefit plan begun  last year) includes an annual “election period” from November 15 through the end of the calendar year. Seniors—many of whom struggled to understand the program a year ago and waded through reams of information to select the most promising choice—now must review their existing Part D plan, figure out what changes are in store, and make another selection of the best option available for their individual circumstances.

As was the case last year, there is plenty of information about the plan options facing each Medicare beneficiary. The best collection of information about plan choices comes from the Medicare program itself, which operates a well-designed, understandable and informative website at www.medicare.gov. Among the points made by the Medicare site: the real due date for your Part D selection is December 8, not December 31—you need to make sure your new plan is in effect in time to assure coverage for any January prescription needs.

The upcoming year will provide a number of changes affecting prescription drug coverage. A few of those include:

  • The number of available plans continues to proliferate. In the Tucson area, for example, there will be 53 Prescription Drug Plans, 19 Medicare Health Plans, and 10 Medicare Special Needs Plans available—an increase of 20 total options.
  • Premiums will generally increase. Last year’s premiums for the Tucson area ranged from $6.14 to $64.86 per month, while the 2007 premiums will vary from $10.40 to $78.10.
  • Other costs will also increase, and by more than the rate of general inflation. While Social Security payments, for example, will increase by 3.3% next year, the out-of-pocket costs (not including premiums) for 2007 will increase by 7%. That figure includes a $265 deductible (the 2006 figure was $250), a copayment of the 25% for the next $2,135 (last year the copayment was for just $2,000 of drug costs), and a “donut hole” of $3,051.25 (up from $2,850).

Congress’ switch from Republican to Democratic control may lead to other changes, as well. Democratic leaders have made clear that they expect to immediately address the existing ban on government negotiation of drug prices. One Democratic leader has already introduced a bill that would direct the government to offer and operate a Medicare drug plan of its own. Administration officials argue that both measures conflict with the underlying free-market rationale behind Medicare’s prescription drug program, but it is too early to predict the outcome of that debate.

Bank Liable for Exploitation By Branch Manager and Assistant

MAY 10, 2004 VOLUME 11, NUMBER 45

Carmen DiCesare, age 82, may have been a little confused when he visited the local branch of Prudential Savings Bank in south Philadelphia that day in August, 2000. By the time he left the bank he had made major changes in his estate plan, and the bank’s branch manager and assistant branch manager had benefited from Mr. DiCesare’s situation.

What Mr. DiCesare apparently wanted to accomplish was to arrange for direct deposit of his Social Security checks into a passbook savings account at Prudential. Frances Mazzei, the branch manager, told him that he would need to have his original passbook with him to set up the direct deposit account, and he told her that he had lost the book. She then helped him to open a new account, and to transfer his existing Prudential account balances.

One of the documents Mr. DiCesare signed that day was a note prepared by Ms. Mazzei that said “I want to put the account in trust to Frances Mazzei and Lucia Sqiieri.” Ms. Squitieri (the note misspelled her name) was the assistant branch manager. The two women even called bank President Thomas Vento to check on whether the account titling was permissible; Mr. Vento did not advise them not to set up the account. The two women then held on to Mr. DiCesare’s passbook, giving him only a copy.

The “in trust for” language, of course, meant that the two women would receive Mr. DiCesare’s account upon his death. They assisted him in transferring almost $250,000 into the new account, and then moved $430,000 from another bank into the account. The balance was then $680,454.63, with another $709 deposited each month by Social Security.

When Mr. DiCesare did die ten months later Ms. Mazzei and Ms. Squitieri removed and spent the account balance. Mr. DiCesare’s estate then brought suit against Ms. Mazzei, Ms. Squitieri and Prudential Savings Bank itself.

After recovering $156,000 from Ms. Mazzei and Ms. Squitieri, the estate obtained a judgment against them and the bank for the remaining balance. Prudential and the two women appealed.

The Pennsylvania Superior Court upheld the judgment against all three defendants. The court quickly determined that Mr. DiCesare was vulnerable, and that Ms. Mazzei and Ms. Squitieri had developed a relationship of trust with him that made them liable for the loss.

As for the bank’s liability, the court ruled that Mr. DiCesare’s estate did not have to show that Prudential had violated any law or regulation. The fact that senior management knew what the two branch officers were doing, and did nothing to stop their actions or even inquire, was enough to make Prudential liable for the entire $563,767.40 judgment. Owens v. Mazzei, April 7, 2004.

Eligibility, Benefits Figures Increase With Cost of Living

OCTOBER 22, 2001 VOLUME 9, NUMBER 17

Each year Social Security benefits are raised automatically to keep up with the increased cost of living. Benefit increases are pegged to standard measures of inflation, and take effect on January 1. Social Security figures, however, are not the only automatic increases affecting seniors and the disabled.

Beginning January 1, 2002, Social Security beneficiaries will see their monthly checks go up by 2.6%. Supplemental Security Income (SSI) recipients will also see a 2.6% increase, with the largest federal checks going up to $545 (some but not all states contribute an additional amount to SSI benefits).

That SSI increase will have an indirect effect on Arizona nursing home residents. The Arizona Long Term Care System (ALTCS), Arizona’s Medicaid program for long-term care subsidies, is available only to those with incomes less than three times the maximum SSI benefit.

As a result ALTCS recipients with more than $1635 in monthly income will need to take additional steps to qualify for assistance. In most cases that will mean establishing a “Miller” Trust, though it may be more complicated for some long-term care recipients. Some ALTCS patients who have already established Miller Trusts may no longer need them if income has failed to keep up with the automatic increases.

Participants in the federal Medicare program will also see some increases in program numbers. Perhaps most importantly (or at least most immediately apparent) will be an increase in the Part B premium paid by Medicare beneficiaries. That premium is usually deducted from Social Security benefits, which means that a portion of the cost of living increase will be withheld from checks automatically. The Part B premium is slated to increase from $50 to $54 per month.

Other Medicare numbers will also change, with most of the changes pegged at 2.5% over 2001 figures. Increased figures will include the deductible for hospital stays (rising to $812 per month), and the coinsurance amount for nursing home stays between the 21st and 100th day of the stay (rising to $101.50 per day).

Some state government figures have also increased. Arizona annually calculates the average cost of nursing home care for purposes of determining whether gifts made by ALTCS applicants should disqualify them from coverage. In most cases the value of a gift is divided by the state-calculated figure to determine a period of months of disqualification. Arizona’s calculation of the average cost of care increased, effective October 1, 2001, to $3,540.67. In other words, if an ALTCS applicant gave $35,406.00 to his children in 2001, he would be ineligible for ALTCS for 9 months (the ineligibility period is rounded down). The figure for counties other than Pima, Pinal and Maricopa is lower, at $3,290.17.

It can be a chore to keep track of the regular changes in benefits levels and rates. At Elder Law Issues we will try to keep you current; let us know if there are other benefits figures you have difficulty locating.


Guardianship Fees Deducted From Patient’s “Share of Cost”

FEBRUARY 3, 1997 VOLUME 4, NUMBER 31

Mary Perry was admitted to a Massachusetts hospital in 1991. After treatment was completed, the hospital sought her discharge to a nursing home that November. Unfortunately, Ms. Perry lacked both capacity and resources.

The Massachusetts court appointed a guardian to make placement decisions for her, and she was promptly placed in an appropriate nursing home. A Medicaid application was completed, and Ms. Perry qualified for government assistance with her nursing home expenses.

Once Ms. Perry’s care was arranged and eligibility obtained, the Medicaid agency turned to the question of how much Ms. Perry would need to contribute (from her monthly Social Security check) toward her care. Ms. Perry’s “share of cost” was calculated, and payments began.

Meanwhile, Ms. Perry’s guardian sought approval of the fees and costs incurred in securing the guardianship, making (and implementing) the placement decisions and applying for Medicaid coverage. The Massachusetts court approved the guardian’s fees, and ordered that payments could be made from her monthly Social Security check.

Unfortunately, Ms. Perry’s personal needs allowance (the state Medicaid program was leaving her only a small amount each month) was insufficient to both provide for her personal needs and pay the accumulated guardianship fees. Ms. Perry’s guardian therefore applied for a reduction in the “share of cost” amount to permit the guardian’s fees to be paid. In support, the guardian argued that the fees were required to obtain medical care, and that medical expenses may be deducted from the share of cost amount.

Massachusetts’ Medicaid agency denied the request, citing HCFA (Health Care Financing Administration) regulations categorizing guardianship expenses as not related to medical costs. The guardian appealed to the state courts.

The Massachusetts judge has now ruled that guardianship costs are “necessary medical expenses” when they are required to obtain consent to medical treatment. Under the law of informed consent, Ms. Perry’s treatment could not be undertaken without approval from a surrogate; since she had made no provision for surrogates herself (such as by executing a power of attorney for health care), the guardianship was required before treatment decisions could be made. Perry v. Bullen, Mass. Super. Ct., May 31, 1996.

Arizona law is similar to Massachusetts’ provisions, and a similar result might be expected. ALTCS regulations provide that the share of cost may be reduced by a “noncovered medical or remedial expense” incurred during the three months before application, but then makes a list of allowable expenses. Not surprisingly, guardianship (or legal) fees are not included. ALTCS does permit “other non-covered medically necessary services which the member petitions AHCCCS for and which the Director approves,” (ALTCS Eligibility Policy and Procedure Manual §1016.2.C.2.b.vii) but it seems unlikely that would quickly concede the point.

Nonetheless, guardianship may legitimately be required before nursing home placement can be secured and an ALTCS application completed. How can these expenses be paid if the ward has no assets? One obvious choice is to make a referral to the Public Fiduciary’s office, but if family are actively involved they may be instructed to initiate their own proceeding. If family members are reluctant (or have insufficient resources to pay for the guardianship themselves), the facility may find itself at an impasse.

Relying on the logic of the Perry case, an argument can be made that the costs of securing the guardianship should be paid from the patient’s ultimate share of cost calculation. While this result might not be easily obtained, Perry gives valuable support.

HMO Patient’s Survivors Not Limited To Medicare Appeal

DECEMBER 30, 1996 VOLUME 4, NUMBER 26

William and Cynthia Ardary lived in rural California. In 1991, they attended a seminar sponsored by Aetna Health Plans of California; the seminar was part of Aetna’s marketing plan for its Medicare HMO, Aetna Senior Choice.

Mr. and Mrs. Ardary were interested in the HMO alternative, but were concerned about the availability of care in their rural area. They particularly asked about access to emergency care and more sophisticated treatment. According to Mr. Ardary, the Senior Choice representative reassured them that, if the need arose, they would immediately authorize transfer to a larger hospital or more specialized treatment facility.

Attracted by the excellent benefits and lower prices (compared to Medigap coverage), the Ardarys changed from “regular” Medicare to the Senior Choice HMO. Two years later, Mrs. Ardary suffered a serious heart attack.

Mrs. Ardary was first treated at a small rural hospital near her home. The local facility did not have either cardiac or intensive care capabilities. According to Mr. Ardary, both he and his wife’s physician repeatedly requested that Aetna authorize an airlift transfer to a larger medical center, but Aetna declined. Mrs. Ardary died in the local hospital.

Mr. Ardary and his children brought a wrongful death action against Senior Choice and Aetna. In their lawsuit, they alleged that the HMO was negligent in denying the transfer to a larger, more advanced treatment facility. Aetna argued that the Ardarys’ only recourse was to appeal the alleged denial of Medicare benefits through the administrative appeal process.

The U.S. District Court agreed with Aetna and dismissed the Ardarys’ lawsuit. The Ardarys appealed, arguing that they were not seeking review of the denial of Medicare benefits itself, but the alleged negligence of the treatment team in failing to secure proper medical care.

The Ninth Circuit Court of Appeals now agrees with the Ardary family. The appellate court finds that the claims are not “inextricably intertwined” with the denial of benefits, and the Ardarys may seek to prove their claims at a trial in the District Court. Ardary v. Aetna Health Plans of California, October 21, 1996.

[Note: The Ninth Circuit includes Arizona, so the same result would clearly be reached in Arizona.]

ALTCS and SS Figures for the New Year

Last week, Elder Law Issues reported on the new 1997 figures for Medicare copayments and benefits. Many Medicaid and Social Security figures will also change with the new year. Some new numbers:

Income Cap (single applicants earning more than this amount do not qualify for long-term care Medicaid–ALTCS– unless they create special trust arrangements) $1,452.00 /mo

Minimum Community Spouse Resource Allowance (in Arizona this is called the CSRD–this is the minimum amount a community spouse is permitted to retain while permitting the institutionalized spouse to still qualify for long-term care/ALTCS) $15,804.00

Maximum Community Spouse Resource Allowance (the community spouse is permitted to retain one-half the total available resources of the couple, up to this amount–but always retains at least the minimum amount above) $79,020.00

One other ALTCS eligibility number will not change. The Minimum Monthly Maintenance Needs allowance (the MMMNA), the figure used in calculating share of cost for married ALTCS recipients, will remain at $1,295 until July 1, 1997.

Monthly exempt earning amount (Social Security retirees may earn this amount without having any reduction in benefits):

Under age 65 $720.00

Ages 65-69 $1,125.00

(Elder) Figures Never Lie …

JANUARY 8, 1996 VOLUME 3, NUMBER 28

Discussions about the future of long-term care in the United States are obviously dependent on the current and projected extent of the need for care. While many working in the field have an intuitive feel for the frequency of use of nursing homes, the statistics can nonetheless be surprising.

Admission Rates

According to a 1991 article in the New England Journal of Medicine, 33% of men turning 65 in the prior year would spend at least some time in a nursing home. For women, that number grew to 52%.

While total admissions for women are significantly higher, short-term admissions are much less sex-dependent. Of that same 65-year-old group, 21% of women and 19% of men will be admitted for stays of less than one year. But for longer stays, women begin to dramatically outnumber men.

10% of men and 18% of women will spend between one and five years in the nursing home. Only 4% of the 65-year-old men will spend more than five years in the nursing home, while 13% of their female counterparts will do so.

Nursing Home Financing

According to the American Association of Retired Persons, over half of the cost of nursing home care is paid by the federal-state Medicaid program (ALTCS in Arizona). The actual figure is 51.7% of all nursing home costs, compared to 8.8% for the Medicare program and 2.2% for other public programs.

Long-term care insurance and medical insurance account for 2.4% of nursing home costs, with private programs (such as charities) provide 2.2%.

The remaining 33% of nursing home costs are paid by patients from their income and savings. It is not clear, however, whether the patients’ “share of cost” contributions to Medicaid coverage are included in this statistic.

1996 Medicare and Social Security Rates

Although numbers may change as the budget compromise takes final shape, 1996 numbers for Medicare and Social Security are currently in place. Until further changes, the following figures apply:

Medicare Part A

Hospital Deductible $736/illness
Daily Coinsurance (Hospital)
Days 1-60 $0
Days 61-90 $184
Lifetime Reserve $368
Daily Coinsurance (Skilled Nursing)
Days 1-20 $0
Days 21-100 $92
Premium (for those not otherwise qualified) $289/month

Medicare Part B

Premium $42.50/month
Deductible $100/year
Coinsurance
20% of approved charge
Balance Billing
15% of approved charge

Social Security

Cost of Living Adjustment 2.6%
Retirement Earnings Limits
Age 65-69 $11,520/year ($960/month)
($1 in benefits withheld for every $3 of earnings over the limit)
Under 65 $8,280/year ($690/month)
($1 in benefits withheld for every $2 of earnings over the limit)
Maximum SSI Benefit
Individuals $470/month
Couples $705/month

Minority Elderly Poorer Than Popularly Believed

SEPTEMBER 18, 1995 VOLUME 3, NUMBER 12

Although most people believe that today’s generation of elderly Americans is relatively wealthy, a recent survey suggests that the perception is misplaced. Data released by the Rand Corporation, an independent California research group, shows that many of the elderly have retired into financial insecurity. Furthermore, the study reveals that those scheduled to retire in the next ten years are equally at risk.

More startling even than the information about the entire elderly population is the disparity the study found between minority and non-minority seniors. While the median white household in the 51-60 age group had $18,000 in personal savings (not including the family home), the comparable black and Hispanic family asset level was less than $500.

_For every dollar of wealth held by white middle-aged households, black households were found to have only 27 cents, and Hispanic households about 30 cents. While the top 5% of white retirees claim $650,000 or more in assets, forty percent of black and Hispanic middle-aged families have no savings at all.

For both most minority households and the typical white household, Social Security remains the largest single source of wealth. Furthermore, the study concludes, the current benefit levels of the Social Security program, combined with other social benefit programs, discourage active savings programs._

Republican Medicare Plan Update

As Republicans begin to release information about their Medicare reform plan, new elements emerge. Faced with cutting $270 billion from the program, Republicans’ final proposal (due out within the next few weeks) will include

  • Increased Part B premiums. Already scheduled to rise, monthly premiums would increase to about $75.
  • Emphasis on HMOs. Financial incentives will be used to encourage enrollment in HMOs, which Republicans believe will save the government money.
  • Medical savings accounts. The plan may include vouchers, with beneficiaries’ savings placed in accounts for future years’ medical care.
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