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Archive for February, 2019

Original Medicare vs. Medicare Advantage– Which is Right for You?

Posted on: February 15th, 2019 by Lawrence A. Friedman

The Choice is Yours

You have a choice whether to stick with Original Medicare or sign up for a Medicare Advantage Plan. Both Original Medicare and Medicare Advantage Plans cover most kinds of mainstream medical care like hospitalizations, speech therapy, physical therapy, occupational therapy, professional fees, and common preventive health care such as colonoscopies and certain screenings for heart disease or cancer. Also, prescription coverage is available whether you choose Original Medicare or a Medicare Advantage Plan.

What is the Difference?

If both Original Medicare and Medicare Advantage Plans cover mainstream health care, how do they differ? Original Medicare is single payer indemnity health insurance as was typical in the United States before managed care became popular with employers in the late twentieth century. As you probably can guess, Medicare Advantage Plans provide managed care similar to that offered in many employee benefit plans.

Indemnity and managed care are dramatically different approaches to funding health care. Indemnity plans pay a percentage of reasonable and customary charges for covered care. For instance Medicare Part B pays only 80% of most professional fees leaving you to pay the rest either directly or by purchasing Medicare supplement (also called Medigap) insurance. In contrast a Medicare Advantage Plan pays the full cost of covered care other than a (typically small) co-payment and perhaps an annual deductible. Some Medicare Advantage Plans also provide additional benefits like dental care, vision care, or gym membership subsidies.

Which Is Better?

If Original Medicare only covers 80% or so of many health care costs and can have hefty per diem charges for other care unless you buy costly Medigap supplemental insurance while Medicare Advantage Plans fund nearly the full cost of covered care and may even include extra benefits, why wouldn’t everybody choose a Medicare Advantage Plan? It all boils down to the age old tension between cost and quality.

There is little doubt that Medicare Advantage Plans typically offer lower cost health care than original Medicare. However, Medicare Advantage Plans bring with them the features of managed care that bother many people.

Many participants in Original Medicare also purchase Medicare Supplement (a.k.a. Medigap) insurance policies to cover Original Medicare’s deductibles and co-payments and expand coverage for blood and international travel. Unlike Original Medicare, Medicare Advantage Plans are sold by private insurers and are managed care plans (along the line of the employee benefit group health care plans provided by many employers). Medicare Advantage Plans provide the benefits of Original Medicare and sometimes add additional benefits (like vision care or gym subsidies).

Medicare Advantage Plans can cost less and include greater benefits than Original Medicare. But as usually is the case, the cost savings come at a price. While Original Medicare plus a Medigap policy may cost more than a Medicare Advantage Plan that provides comparable benefits, Medicare Advantage Plans have all the detriments of managed care.

Medicare Advantage Plans usually have networks and require referrals to see a specialist. Although strictly anecdotal, I sense that Medicare Advantage Plans are more likely than Original Medicare to try to avoid covering costly care like new cancer treatments that arguably are more effective than older less expensive kinds of care. Original Medicare has no networks or referral requirements.

The principal advantage to Original Medicare is greater control over your own care. You don’t have to convince a managed care organization to approve costly surgery or other care and can choose facilities and providers without worrying whether they are in-network. However, you also have to buy a Medigap supplemental policy unless you are willing to self insure. The principal advantages to Medicare Advantage Plans are lower total cost and avoidance of high deductibles and co-pays.

Medical Underwriting– the Hidden Danger

If you initially choose a Medicare Advantage Plan, you may not be able to buy a Medigap supplemental policy if you later switch to Original Medicare. If you are under Original Medicare but don’t have a Medigap supplemental policy, you may face potential high hospitalization deductibles, additional high costs for hospital stays beyond 61 days, Part B co-payments, and other costs.

During your Medigap open enrollment period (usually, but not always, when you first enroll in Medicare), insurers must offer to sell you a Medigap supplemental policy at standard premiums even if you have major pre-existing conditions. Thereafter, typically, insurers may refuse to sell you a Medigap policy or charge higher premiums if your health is bad. Provided you buy a Medigap supplemental policy during your Medigap open enrollment period, you can keep it at standard rates for the rest of your life even if your health becomes precarious.

If you switch from a Medicare Advantage Plan to Original Medicare, you risk medical underwriting when buying a Medigap policy. This can be a catastrophe for a Medicare Advantage Plan participant who becomes dissatisfied with his/her Plan.

Conclusion

So, are you better off with Original Medicare or a Medicare Advantage Plan? It depends which is more important to you cost or choice. While a Medicare Advantage Plan may cost less than Original Medicare plus a Medigap supplemental policy, do you want Medicare Advantage Plan administrators to decide what health care you can and can’t have? FriedmanLaw can apply our extensive knowledge of Medicare to help you choose coverage that is right for you.

Maximize Your Social Security Benefits

Posted on: February 9th, 2019 by Lawrence A. Friedman

The Social Security Administration administers several programs. Supplemental Security Income or SSI is a financial need based benefit to help people who can’t earn enough to get by due to disabilities or old age. Old age, survivors, and disability insurance (OASDI) is the official name for Social Security’s insurance programs. This article discusses options to increase benefits under the Social Security Administration’s OASDI program, which often is called simply Social Security.

OASDI is a comprehensive program that provides benefits to retirees, disabled people, spouses, divorced former spouses, surviving spouses, and children. Unlike Supplemental Security Income, Social Security is an insurance program that bases Social Security benefits on your work history or the work history of your spouse, divorced spouse, deceased spouse, parent, or deceased parent.

Social Security OASDI benefits are based on a primary insurance amount (PIA). The Social Security primary insurance amount is based on age, work history, and earnings that were taxed to fund Social Security or Railroad Retirement Benefits.

When an individual elects to start Social Security at his or her full retirement age (also called normal retirement age), Social Security Administration pays a monthly Social Security benefit equal to the PIA rounded down to a whole dollar amount. An individual who starts Social Security before or after reaching normal retirement age receives an adjusted PIA. Your benefit may be further reduced if it is based on the work history of a parent or current or former spouse rather than your own work history.

Originally, Social Security started at age 65. Eventually, Congress provided options to start an adjusted Social Security benefit anywhere from age 62 on up. However, Social Security benefits that start before normal retirement age are reduced while benefits that start after full retirement age increase up to age 70.

Originally age 65, Congress eventually increased Social Security normal retirement age to preserve the Social Security trust fund. For people born before 1938, Social Security full retirement age is still 65. However, full retirement age of folks born after 1937 ranges from 65 and two months to 67.

When benefits start before reaching full retirement age, the PIA is reduced 5/9 of one percent for each of the first 36 months before full retirement age plus 5/12 of one percent for each of the remaining months until normal retirement age. For example, where benefits start 60 months before reaching full retirement age, the benefit is reduced by 30 percent– 36 months times 5/9 of 1 percent plus 24 months times 5/12 of 1 percent.

On the other hand, when starting benefits after full retirement age, the monthly benefit equals the PIA plus delayed retirement credits of 8% per year if born after 1942. The delayed retirement credit is lower for folks born before 1943.

Obviously, Social Security benefits can vary dramatically depending on when you choose to start benefits. In addition, you may have options to take Social Security benefits on the work record of a current or former spouse rather than your own record. Your choice of Social Security start date also can affect how much Social Security your young or disabled children can receive because children also may be entitled to Social Security based on the work record of a parent who is receiving Social Security. Furthermore, Social Security benefits taken before full retirement age may be recaptured when earnings are high, and high earners also may pay more tax on Social Security.

You have the option to start Social Security anytime from age 62 on, but starting before full retirement age triggers reductions in Social Security. By the same token, delaying Social Security until after reaching Social Security normal retirement age results in a larger benefit. (However, there is no point to delaying Social Security beyond age 70 because the monthly Social Security benefit does not increase beyond age 70.)

Waiting until age 70 to start Social Security can result in substantially more lifetime Social Security benefits if you live a long time. However, for people who die comparatively young overall benefits will be higher if you start Social Security at age 62. In addition to life expectancy, spousal Social Security options, tax brackets, and other factors can impact when to start Social Security in order to maximize lifetime Social Security benefits. Depending on when spouses were born, it can make sense for one spouse to collect a spousal benefit while delaying his or her own benefit to age 70, but this may not be an option for younger people due to recent law.

Clearly, many factors play into the decision of when to start Social Security, and errors can leave thousands of dollars (or more) on the table. With so many variables at play it is hard to imagine seat of the pants evaluations being very accurate. Working with a nationally recognized Social Security expert and sophisticated software, FriedmanLaw can evaluate options and help you develop a Social Security benefit strategy that meets your needs.

2019 NJ Medicaid income limits

Posted on: February 6th, 2019 by Mark R. Friedman

New Jersey’s Department of Human Services, Division of Medical Assistance and Health Services (DMAHS), the state agency that administers Medicaid, released 2019 NJ Medicaid income eligibility standards today.

The new standards raise the income limits for a variety of Medicaid programs.  Managed Long Term Services and Supports (MLTSS) is the program that can pay for long term care, whether with home health aides, or in a nursing home or assisted living facility.  The MLTSS income “cap” was raised to $2,313.  People with gross monthly income over this figure may still qualify for Medicaid using a Qualified Income Trust (QIT).

In addition, the limits for other aspects of MLTSS were revised as well.  If one spouse needs long term care but the other does not, the healthy spouse is allowed to keep part of the couple’s assets, within certain limits.  The amount the healthy spouse can keep is called a Community Spousal Resource Allowance, or CSRA, by many elder law attorneys.

The CSRA is calculated using a complicated formula, and you should contact FriedmanLaw to find out more information about your specific situation.  That said, New Jersey has a minimum and maximum figure for the CSRA.  In 2019, the minimum is $25,284.00, and the maximum is $126,420.00.  This is a significant increase, and should be welcomed by Medicaid applicants.

Finally, when one spouse needs long term care but the other does not, the healthy spouse may be able to keep part of the ill spouse’s income.  This also is subject to a complex formula, and the numbers that govern that formula were revised upward with the other 2019 changes, in line with the rising cost of living.

If you or a loved one is interested in Medicaid, long term care, asset protection planning or other elder care law needs, please call or email FriedmanLaw today.

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Homepage photo: Cows grazing at Meadowbrook Farm, Bernardsville, NJ by Siddharth Mallya. October 23, 2012. http://en.wikipedia.org/wiki/File:Autumn_Leaves_13.jpg.
Interior photo: Somerset hills pastoral scene by Lawrence Friedman.