What Boomers Need to Know About Medicare Changes

The deadline for Medicare’s open enrollment is three weeks earlier this year that 2011, so boomers need to gather all the necessary information regarding changes and updates to care now to make the best decisions for the health and finances.

The deadline of Dec. 7 is right around the corner and the more information boomers have about the plans, the better off they will be now and down the road.

A new federal ruling could transform the way that Medicare covers long-term care and allows more patients to receive home health care services.

I sat down with Robert Quinlan, an independent insurance agent/broker since 1986 in New Windsor, N.Y. and had him review the following:

Boomer: Please explain how a recent court decision on Medicare services could impact boomers now and in the future.

Quinlan: The federal case in Vermont called Jimmo vs Sebelius was decided last month and expands Medicare’s skilled care services to people who needed care to maintain their health or prevent or slow further deterioration.

Prior to this decision, Medicare would not approve skilled care services to those who had no prospects for improvement in their health like people with Alzheimer’s disease, Parkinson’s disease, multiple sclerosis or patients that have had a stroke.

The potential for more Medicare paid services will be limited to skilled care, which is care provided by licensed professionals like physical therapy, respiratory therapy, speech therapy or care from registered nurses. There will be no restrictions on the types of diseases that will be covered.

The lawsuit was brought by a class of individuals receiving Medicare services and other organizational plaintiffs like the National Multiple Sclerosis Society and the Paralyzed Veterans of America. The case’s defendant was Kathleen Sebulius, U.S. Secretary of Health, and Human Services who represents the federal government’s Medicare program.

The ruling will not expand other Medicare services today. For example, nursing home coverage will still be limited to 100 days. Medicare costs for skilled care services are expected to rise in the short term, but longer-term costs for nursing homes and hospitals could be lower if more people receive better care at home and avoid more costly care later.

Why does this case matter? People with chronic illnesses and accidents have been denied skilled care under Medicare because their condition was not improving. Now there is the likelihood that these people will receive more robust care that has eluded them in the past.

The final settlement of the case must be approved by the court which is expected to take several more weeks. Stay tuned!

Boomer: Are there tax benefits available for small business owners who want to buy long-term care insurance?

Quinlan: Yes, there are federal tax benefits when you purchase long term care insurance (LTCI) as a business owner. If you are:

• Self employed: you can deduct 100% of your long-term care insurance premiums up to the IRS’s “Eligible Premium” amounts. For example, the 2012 tax deduction limit is $350 starting at age 40 or less, going to $3,500 if you are age 61 but not yet age 71 and $4,370 for people age 71 and older.
• Partnership, LLC or subchapter S corporation: The partnership, LLC or Subchapter S pays the LTCI premium. You may deduct up to 100% of the age-based Eligible Premium like the self employed person with no age criteria.
• Subchapter C corporation – entitled to a 100% deduction of the LTCI premium as a business expense on the total premium paid. The deduction is not limited to the “Eligible Premium” schedule.
• Individuals:  LTCI premiums are considered medical expenses for individuals . For a person who itemizes tax deductions, medical expenses are tax deductible if they exceed 7.5% of the person’s adjusted gross income in tax year 2012. The amount that can be deducted as a medical expense is limited to the IRS’s “Eligible Premium” that is referred in the above “Self Employed” section.

In addition to these federal tax benefits, your state may also have a tax benefit for LTCI premiums. For example, New York State permits tax payers to take a 20% tax credit (better than a tax deduction) on the LTCI premiums with no 7.5% adjusted gross income rule or age threshold. For example, if you paid an annual premium of $4,000 for your long term care insurance, you would receive $800 tax credit ($4,000 times 20%) on your NYS tax bill.

The above information is only intended as general information. As in all tax matters, check with your own tax/financial advisor before taking action.

Boomer: I have seen many ads about Medicare insurance plans since September, and I have noticed that some Medicare insurance plans offered by private insurance companies have zero or low premiums, namely Medicare Advantage plans (Part C). How is that possible? Do these plans offer comprehensive coverage like coverage in original Medicare Parts A and B?

Quinlan: Medicare Advantage plans are provided by private insurance companies that are required by law to have comparable services as the original Medicare Parts A (hospital insurance) and B (medical insurance). Plus they also offer additional services like prescription drug coverage and vision care. Some plans will also pay for membership in gyms. The premiums for these Medicare Advantage plans are often low premiums or no premiums (not a misprint). How is this possible? The federal government pays the private insurance companies to offer these services to local communities across the US. About 25% of Medicare eligible Americans are covered by these plans today.

Your doctors and hospitals must be part of the network in your Medicare Advantage plan. You will pay more money for out of network services. Insurance companies may not offer these plans in every county in your state. Check with your local insurance company or insurance agent/broker if these plans are offered in your county. You must also be enrolled in Medicare Parts A and B to enroll in these Medicare Advantage plans. You will not need to purchase a Medicare supplement plan.

Now until December 7, 2012 is a good time to review your current Medicare coverage to make any plan changes during this year’s Medicare open enrollment period. New plan coverage will become effective January 1, 2013.

“The Boomer” is a column written for adults nearing retirement age and those already in their “golden years.” It will also promote reader interaction by posting e-mail responses and answering reader questions. E-mail your questions or topic ideas to thefoxboomer@gmail.com.