Illinois Estate Planning & Elder Law Blog

The basic premium for Medicare Part B will be $115.40 a month in 2011, up from $110.50 in 2010 (a 4.4 % increase). But because there will be no cost of living benefit increase for Social Security recipients for 2011, most beneficiaries will be exempted from paying this increase and will instead pay the same $96.40 premium amount they have paid since 2008.

A “hold-harmless” provision in the Medicare law prohibits Part B premiums from rising more than that year’s cost of living increase in Social Security benefits. Since there is no Social Security increase, most beneficiaries – about 73 percent – will not have to pay any increased Part B premiums because of the hold-harmless provision. Those covered by the provision will continue to pay Part B premiums of $96.40 per month in 2011.

But this hold-harmless protection does not apply to the other 27 percent of beneficiaries – about 12 million in all – who either: do not have their Part B premiums withheld from their Social Security checks; or pay a higher Part B premium surcharge based on high income; or are newly enrolled in Part B.

The Social Security Administration uses the income reported two years ago to determine a Part B beneficiary’s premiums. So the income reported on a beneficiary’s 2009 tax return is used to determine whether the beneficiary must pay a higher monthly Part B premium in 2011. Income is calculated by taking a beneficiary’s adjusted gross income and adding back in some normally excluded income, such as tax-exempt interest, U.S. savings bond interest used to pay tuition, and certain income from foreign sources. This is called modified adjusted gross income (MAGI). If a beneficiary’s MAGI decreases significantly in the past two years, he may request that information from more recent years be used to calculate the premium.

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Two federal courts in the past two months have ruled that Medicare’s coverage of skilled care does not require a beneficiary to show improvement. Instead, both courts said that Medicare can pay for skilled care if it is needed simply to preserve a patient’s current functioning or prevent further decline.

Home health agencies and nursing homes that contract with Medicare routinely terminate the Medicare coverage of a beneficiary who has stopped improving, adhering to what Medicare advocates have referred to as an “urban legend” that such beneficiaries are receiving “custodial care”, which Medicare does not cover. These beneficiaries could include those with chronic conditions and disabilities like multiple sclerosis, Alzheimers disease, ALS and broken hips.

In terminating the coverage, the Medicare contractors are not following the Medicare statute or its regulations, neither of which states that improvement is required for continued skilled care.

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During the annual open enrollment period for Medicare which runs from November 15 to December 31, you may switch Medicare drug or health care plans. This year it is particularly important because of changes brought on by the new health care law.

As the health care reform law goes into effect, there are a number of changes affecting seniors. Even if the new health law will not affect your plan, you should still review your options for 2011. Prescription drug plans can change their premiums, deductibles and the list of drugs they cover. Medicare Advantage plans – private managed care plans that compete with traditional Medicare – can change their entire benefits package as well as their provider network. Many plans are also consolidating options and closing some policies. If you take no action, you will remain in your current plan.

Under the new health law, Medicare will now pay 100 percent of preventive care. That means beneficiaries will not have to pay deductibles or co-pays for certain preventive services, such as annual wellness exams. While many Medicare Advantage plans already offered this benefit, it is not mandatory for all types of Medicare plans. If you had a Medicare Advantage plan primarily because of its preventive care coverage, you may want to reassess whether that or any other Medicare Advantage plan is still the best option for you.

In addition, under the new health reform law, subsidies to Medicare Advantage plans are being phased out. In response, Medicare Advantage plans may stop covering extra benefits like dental and vision. Check your Medicare Advantage plan to make sure you will still receive the benefits you want.

The biggest change for Medicare prescription drug plan beneficiaries is the lowering of prescription drug costs for those who reach the “doughnut hole”. In 2010, after meeting a $310 deductible, beneficiaries pay only 25 percent of drug costs until the costs total $2830. Coverage then stops completely until total out-of-pocket spending for covered drugs reaches $4550. This lack of coverage is called the “doughnut hole”. In 2011, beneficiaries in the doughnut hole will receive a 50 percent discount on brand-name drugs and a 7 percent discount on generic drugs. Medicare will continue to count the full retail price of medications in computing the coverage gap, so seniors will pay a lot less to get through the doughnut hole. The health reform law also eliminates the doughnut hole by the year 2020.

You will also want to make sure that your Part D plan still covers the drugs that you need because the list of drugs that each plan covers changes from year to year.

In the past, if you regretted your Medicare Advantage or regular Medicare decision, you could change things from January 1 through the end of March of the following year. But in 2011, this period will last only from January 1 to February 15, and the only change that will be allowed is if you want to shift from a Medicare Advantage plan to traditional Medicare.

To evaluate plans, go to https://www.medicare.gov/find-a-plan/questions/home.aspx?AspxAutoDetectCookieSupport=1.

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A durable power of attorney for property and a health care power of attorney are two very important estate planning documents. Both allow other people to make decisions for you in the event you are incapacitated. Because the individuals chosen will have to coordinate your care, it is important to pick two people who will get along.

A power of attorney for property allows a person you appoint – your agent or “attorney-in-fact” – to act in your place for financial purposes when and if you ever become incapacitated. A health care power of attorney is a document that gives an agent the authority to make health care decisions for you if you are unable to communicate such decisions.

While the agent under the health care power of attorney is the one who makes the health care decisions, the agent under the power of attorney for property is the one who needs to pay for the health care. If the two agents disagree, it can spell trouble. For example, suppose your health care agent decided that you need 24-hour care at home, but your property agent thinks a nursing home is the best option and refuses to pay for the at-home care. Any disagreements would have to be settled in court, which will take time and drain your resources in the process.

The easiest way to avoid conflicts is to choose the same person to do both jobs. But this may not always be feasible – for example, perhaps the person you would choose as agent for health care is not good with finances. If you pick different people for each role, then you should think about picking two people who can get along and work together. You should also talk to both agents about your wishes for medical care so that they both understand what you want.

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