MEDICARE DRUG PLAN ADVISORY: Upgrades May Require Action for 65+ Wage Earners with Employee Prescription Plans

If you’ve delayed signing up for Medicare prescription drug coverage (Part D) because you’re still working and have health insurance through your employer, you must know about some changes that may affect your budget in 2025.

Working people who qualify for Medicare sometimes delay applying, which is fine if you meet the requirements. Your employer’s prescription plan must pay as much on average as the standard Medicare plan for prescription drugs. Simple enough, right?

However, changes are coming because of upgrades that are part of the Inflation Reduction Act, which takes effect on January 1, 2025. Some employer plans that qualified because benefits were as good as Part D before this change may no longer be eligible. One example: the out-of-pocket maximum under Part D will be $2,000 yearly, starting on January 1.

If your private plan doesn’t cap the amount you need to pay at $2,000 a year or less, the policy may no longer qualify as a substitute for Part D, which means it won’t let you delay signing up for Part D without a penalty.

If you are working and eligible for Medicare and your job prescription plan is deemed not credible, you must immediately apply for Part D coverage. If you are not enrolled in Medicare, you must apply for Part A regardless of your employer’s health plan. If the plan does not provide credible coverage, you must also apply for Part D. If you delay enrolling, you may face a substantial penalty.

The penalty will hit your Medicare bill if, after your initial enrollment period, you have 63 or more sequential days without Medicare drug coverage or another creditable prescription drug plan.

What will the penalty be? Multiply 1% of the “national base beneficiary premium” — $34.70 – by the number of whole months you didn’t have Part D or creditable coverage rounded to the nearest 10 cents. Your monthly Part D premium is increased by this amount for life.

Take a breath – Medicare-eligible policyholders must be notified by law whether their prescription drug coverage meets the standard for being “creditable.” But if you are 65+, working and getting health benefits through your employer, and haven’t heard from your employer or the insurance company, now would be an excellent time to determine whether you need to make any coverage decisions when the Part D rules change.

When Decoration Day Became Memorial Day, and Why It Still Matters  

Memorial Day is a topic I return to every May because it is important to honor the Americans who gave their lives in service to our great nation. It’s a national holiday with a somber and respectful history, and we need, especially now, to keep that in mind.

Our activities on Memorial Day should include remembering and honoring the lives and sacrifices of our veterans—and their families.

For me, this last weekend of May will always be Decoration Day.

Decoration Day began in 1868 when General John A. Logan called for a holiday to honor the soldiers who died in the Civil War. Women placed flowers on the graves of their husbands, sons, and brothers. On the first Decoration Day, 5,000 people helped decorate the graves of the over 20,000 soldiers buried in Arlington National Cemetery – both Union and Confederate soldiers.

Similar ceremonies inspired the event in cities around the country. Soldiers would decorate the graves of fallen comrades with flags, wreaths, and flowers. By 1890, every Union state had a Decoration Day.

After World War I, the purpose of Decoration Day expanded to honor all soldiers who died in all American wars. It was considered a day of civic duty to honor the dead and remember why they gave their lives.

In 1971, Congress declared a national holiday on the last Monday in May.

Some civic groups and veterans’ groups continue to honor our servicemen and women by taking the time to attend ceremonies and decorate the graves of soldiers. Flags should be flown at half-mast until noon on Memorial day and a national moment of silence takes place at 3:00 pm.

Here on Long Island, we have two large military cemeteries – Long Island National Cemetery in Farmingdale and Calverton National Cemetery. We have a large population of veterans and families who know all too well the impact of the ultimate sacrifice their loved ones made for their country.

As the years and wars have come and gone, Decoration Day became Memorial Day. Unlike Veterans Day, which honors all who serve, the traditions of Memorial Day honor those who gave their lives in service to our nation.

I encourage you to find out where your town’s wreath ceremony is taking place and take the time to show your support. On Long Island, ceremonies take place at town halls, fire departments and other civic centers. Your presence will be appreciated.

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Hand of a senior woman reaching to place tomatoes on checkout conveyer belt at supermarket

Social Security Administration Releases Final Rule Omitting Food from In-Kind Support and Maintenance Calculation for SSI      

The most important takeaway from the Social Security Administration’s rule change is that any purchases of food for Supplemental Security Income recipients from Special Needs Trusts and families will not decrease the SSI payment. The new rule was approved on March 27 and effective September 30, 2024.

This new ruling makes Special Needs Trusts (SNTs) even better for those who depend on SSI benefits.

Food will no longer be considered in the calculation of In-Kind Support and Maintenance (ISM). The definition of income will be changed to align with this, which will make it far less cumbersome to administer and more accessible for the general public to understand. The goal is to improve the equitable treatment of food assistance within the SSI program.

The SSA traditionally included in-kind receipt of food in its ISM calculations because food assistance helps people meet a basic need, but the rule needed to be revised for several reasons. One is to make policies easier to understand, and another is to promote equity by treating food assistance equally, regardless of the source. The goal is not to harm an already vulnerable population when receiving food assistance.

SSI recipients historically have low income and resources, facing barriers across a wide range of social and economic outcomes. Disabled individuals are more likely to be food insecure, and this will remove barriers to receiving informal food assistance from friends, family, and community networks of support.

SSI recipients will still be asked about their food sources to determine specific values about other benefits, including shelter, as part of their maintenance calculations.

For disabled family members who depend on SSI benefits, this makes a Special Needs Trust even more valuable. When trust assets are used to buy food, they will not be countable against the recipient’s SSI benefits.

Please contact the office if you have questions about the impact of the rule change.

Source: Federal Register (March 27, 2024) Social Security Administration Final Rule

What are the New IRA and Retirement Saving Rules for 2024?

If your New Year’s resolutions included increasing your retirement savings efforts in 2024, there are a few changes to rules about IRAs, 401(k)s, and even 529 College Savings Plans you’ll want to know about.

Contribution limits for 2024 have gone up. Annual contributions for IRAS in 2024 are now $7,000, up from $6,500 in 2023. It applies to the total contributions to all traditional and Roth IRAs. For those 50 and older, the contribution limit is $8,000 because of the $1,000 “catch-up” contribution allowed for older savers.

401(k) annual contributions are now $23,000. It applies to similar employer-sponsored retirement accounts, including 403(b) plans, most 457 plans, and the Thrift Savings Plan for federal government workers. Older savers (50-plus) may contribute up to $30,500 this year to a 401(k), 403(b), and most 427 plans and Thrift Savings Plans.

Funds in a 529 college savings account may now be rolled over into a Roth IRA for the beneficiary with no penalty. This tax-free rollover rule is part of SECURE 2.0. Individuals may roll over as much as $35,000 from 529 savings accounts, subject to annual Roth IRA limits. There are rules to follow: the account must be owned for at least 15 years before you can roll over the funds, and you may only roll over money that’s been in the account for at least five years. The account holder, typically a child’s parent or grandparent, may roll no money into their own Roth IRA – it can only go into an account established for the beneficiary of the 529 plan.

Rules about emergency withdrawals have changed. Previously, if you had an immediate financial emergency, you could get an early distribution from 401(k)s and IRAs. You’d have to pay income tax on the withdrawal, and if you were younger than 59 ½, you’d also get hit with a 10% penalty.

In 2024, you may make one withdrawal of $1,000 per year to pay for an emergency expense without owing the 10% penalty, as long as you “self-certify” that you need the money for an emergency.

There is another penalty-free withdrawal allowed to victims of domestic abuse under age 59 1/2, who may withdraw up to $10,000 from IRAs and 401(k)s.

“Starter 401(k)s” were introduced in 2024. These leaner plans have lower costs, fewer administrative burdens, and are designed specifically for small business employers. Employees may contribute up to $6,000 yearly, and small businesses have until tax time to set up the plans. The goal is to expand access to workplace retirement plans for people who work in small businesses.

2024 Bringing Big Savings for Medicare Patients Relying on Expensive Drugs

There is good news for Medicare recipients in 2024 who count on costly prescriptions. The Inflation Reduction Act passed in 2022 puts an annual ceiling of $3,300 in 2024 for Part D drugs. The number could shift slightly depending on whether they take brand-name or generic medications.

In 2025, the news is even better: the cap changes to a flat $2,000.

Here’s how it worked: people who pay for their medications through Medicare Plan D, the government insurance plan covering most prescription drugs, paid thousands for medications until they reach what’s known as the “catastrophic zone of spending.” After that, they pay a 5% deductible for the rest of the year, often in the thousands.

In 2024, the IRA eliminates the 5% coinsurance. And once patients spend roughly $3,300, they have met the “catastrophic zone.” And they won’t have to pay any more out of pocket for Part D drugs.

Here’s an example of the new rules. Let’s say a 69-year-old man has a plan with a $505 deductible. He takes a blood cancer drug that costs $200,000 per year—roughly $16,600 monthly. In 2023, he pays his full deductible, plus 25% coinsurance, until he hits the $3,100 catastrophic limit for 2023, plus 5% coinsurance after. On his next refill, as he has remained in the catastrophic zone, he paid only the 5% deductible–roughly $830. He’ll pay about $830 every time he fills his prescription, spending more than $12,000 out of pocket for the year.

In 2024, the same man taking the same drug will save a few hundred dollars the first time he fills the prescription, topping out at around $3,300. Subsequent refills will cost nothing. He will not pay for the blood cancer drug, or any other drug, for the year. In 2025, his first trip to the pharmacy will cost him $2,000, the cap for the year, unless he wants to participate in a “cost-smoothing” program and spread the $2,000 over 12 months.

The Inflation Reduction Act lets Medicare officials negotiate the price of drugs. By doing away with the 5% coinsurance, the law forces insurers and drugmakers to pick up part of the tab. Part D covers most outpatient prescription drugs, although some medications, including physician-administered infusions, are covered under Part B.

The downside is that premiums may go up, and Part D paperwork may become more complex. Premiums for stand-alone Part D plans were up an average of 20% in 2023. Because Part D plans are paying for more medications, they may be motivated to use techniques pushing patients to less expensive drugs or requiring them to get insurers’ approval before filling prescriptions. They may also change the list of drugs covered.

It’s always important for Medicare recipients to check their plans and medications, but these changes make it even more important.

Reference: The Wall Street Journal, January 15, 2024, “Medicare Patients on Pricey Drugs Are Saving Big This Year”

NAELA News Article on QLACs Is Top Pick for 2023

This past year, I’ve enjoyed contributing articles to prestigious professional journals, including one of our field’s most respected publications, NAELA News, by the National Academy of Elder Law Attorneys. With great pride, I announce that my article, “SECURE 2.0 Opens the Door for Qualified Longevity Annuity Contracts (QLACs),” has been recognized as the most-read article in NAELA News for 2023!

A Qualified Longevity Annuity Contract is an annuity purchased from an insurance company with a portion of the assets of an IRA. Before SECURE 2.0, the maximum premium was set very low, limiting the benefit of the QLAC.

SECURE 2.0 removed the percent limitation and raised the maximum premium to $200,000, making the QLAC a viable planning strategy. A QLAC allows an individual to defer distribution from a QLAC until age 85. Since the QLAC is structured as a Medicaid Qualified Annuity, it is not a resource for Medicaid purposes, even in states that count an IRA as an available resource. Also, if there is a surviving spouse and the account holder dies before payments begin or the balance of the annuity, they take priority over any state Medicaid recovery.

Click here to read the full article. If you have any questions, please feel free to contact me at sjs@sjslawpc.com.

Thank you to my colleagues at NAELA, who share my passion for an admittedly complex area of the law – and our shared commitment to improving the lives of our clients.

Here’s to a year filled with health, happiness, and innovative estate planning!

Seniors Beware – Medicare Advantage Plans – Part 1

Seniors who sign up for a Medicare Advantage plan may find themselves in a world of trouble – the complete opposite of what they expected.

Once you turn 65, you are eligible to sign up for health coverage under Medicare. You can choose traditional Medicare (Parts A, B, and D) or Medicare Advantage (Part C).

Traditional Medicare is administered by the federal government while Medicare Advantage allows insurance companies to manage their policies. The insurance companies spend enormous amounts on marketing Medicare Advantage plans. Ad campaigns focus on how your out-of-pocket spending will be much smaller with an Advantage plan than with original Medicare. Last year, the Center for Medicare and Medicaid Services (CMS – the government agency that administers Medicare and Medicaid) found the television advertising for Medicare Advantage to be misleading and confusing. This year, CMS imposed severe restrictions on how Medicare Advantage plans are marketed.

The better choice is to go with traditional Medicare and purchase a Medigap policy. Here’s why.

With traditional Medicare, you can see any doctor who accepts Medicare, but Medicare Advantage plans limit your healthcare providers to a specific network of hospitals, doctors, and pharmacies. Go out of network, and your costs could skyrocket.

Provider networks for Advantage plans can change from one year to the next. So just when you’ve finally found a doctor you like one year, they can be out of network the following year.

Other benefits heavily marketed to seniors include supplemental benefits, like dental coverage, fitness club benefits, and meal delivery services. But to qualify for some benefits, you need a documented medical condition justifying your ability to receive them. If you have diabetes, for instance, you may qualify for meal delivery services. But if you don’t, you’re paying for something you can’t use.

Most Medicare Advantage programs require prior authorizations for many services. Medicare doesn’t have this requirement. You are paying more for an additional level of stress, which could lead to delayed essential treatment or diagnosis because of this extra step.

What if your local hospital system doesn’t accept your Advantage plan? Many hospital systems are dumping Medicaid Advantage because of high prior authorization denial rates and slow insurer payments. Last year, Mayo Clinic dropped Advantage plans in certain states, and Scripps recently notified patients it’s terminating many Medicare Advantage contracts. The Hospital for Special Surgery and Memorial Sloan Kettering do not participate in Medicare Advantage.

Do your research before you make this critical decision. It could affect not only your wallet but your health.

Reference: The Motley Fool “4 Pitfalls You Might Encounter With a Medicare Advantage Plan”

Stephen J. Silverberg Speaking at Nassau County Bar Association on November 17th.

Seniors aren’t the only ones who find Medicare options confusing. On Friday, November 17, Stephen J. Silverberg will present “Medicare Supplement vs. Medicare Advantage,” a program examining the different programs to help attorneys better assist their eligible senior clients.

The program, a joint meeting of the Senior Attorney and Elder Law, Social Services, and Health Advocacy Committees, will take place at the Founders Room at the Nassau County Bar Association, starting with networking at 12:30 – 1:00 pm and Mr. Silverberg’s presentation from 1:00 to 2:00 pm. The Nassau County Bar Association is located at 15 West Street, Mineola.

“In our Elder Law practice, we always ask clients to bring their Medicare information with them to the office, especially during Open Enrollment season,” said Mr. Silverberg. “Our reviews almost always find something that’s either outright wrong or that can be better. I’m hoping my colleagues at the Bar Association will be able to use the information from the presentation to help their clients.”

Are You One Medical Crisis Away from Losing Control of Your Life?

If nothing else has you calling our office to ensure your Power of Attorney and Power of Attorney for Healthcare documents are in order, this recent article from The Washington Post will do it.

It is the story of an 80-year-old retired pilot driving his Ford Mustang convertible into a gas station. Someone thought he looked very distressed and called 911. He was placed in the responding ambulance and taken to the hospital, where doctors said he had suffered a stroke.

Most people do not realize the appointment of a guardian is a request to strip the incapacitated individual of their civil rights to manage their affairs. The United States Constitution requires a full court proceeding is necessary as Section 1 of the 14th Amendment to the Constitution provides in part:

No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

Because he lived alone and there was no evidence of family, when he didn’t improve, hospital officials went to court and told the judge he needed a guardian. The judge agreed, and the formerly independent man lost his civil rights and many freedoms, including the right to vote, how to spend his money, and where to live.

More than a million Americans are in guardianship, many of whom are elderly. Despite many horror stories, there seems to be no end to the abuse. Excessive billing, missing funds, and disposition of personal possessions occur with no penalty.

As America continues to age, there’s a little more focus on this arrangement, especially in Florida, where so many seniors go to retire. Florida has 2 million residents aged 75 or older – more than the population of 14 other states. They move to Florida from different parts of the country, away from families, and when they show up in emergency rooms, they are vulnerable.

What happened to the pilot? His family in Pennsylvania began searching for him. After his stroke, he couldn’t tell anyone to call his family, and it’s not clear how hard the hospital tried to reach any relatives. He lived alone, had never married, or had children, but he had a niece who he had regularly visited with other family members in the Philadelphia region.  

When he was finally ready to be discharged from the hospital, a staff member of the Orlando hospital signed a petition to the court stating the pilot had no one to take care of his finances or medical decisions. He ended up in a nursing home.

The attorney hired by the hospital made a recommendation for a guardian. The attorney for the hospital was the guardian’s attorney. There is no rule in Florida prohibiting an attorney from representing both the hospital and the guardian recommended by the hospital in the same case.

It’s a long, ugly story where no one responded to the family’s search for their uncle, the court delayed responding to the niece’s query about her uncle’s whereabouts, and the real estate agents undersold the home by more than $100,000. The pilot died two days after Florida declined to pursue a criminal investigation despite a preponderance of evidence of fraud, intent to deceive, and elder abuse.

Takeaways for seniors and their children:

Regular check-ins – by phone, online video chats, and in-person visits, are the best way to keep an eye on family members. Even an estranged family member deserves some regular contact – no matter how grouchy they are.

Estate planning documents are necessary. Everyone, especially seniors living alone, should have their estate planning documents prepared long before they expect to need them. We never know when a stroke or heart attack will happen. These are the important documents everyone should have:

  • Durable Financial Power of Attorney – you appoint a person you know and trust to manage your money, pay bills, and manage your household.
  • Healthcare Power of Attorney – names a person you know to make medical decisions on your behalf.
  • Last Will and Testament – A Will directs the distributions of your property to your beneficiaries. It also names an executor, who is legally responsible for marshaling your assets and paying any debts, taxes, and expenses. The executor is also responsible for making sure the beneficiaries receive their legacies.
  • Trusts – can hold assets in case of incapacity, when only the named trustee will have access to funds and as much or as little discretion as you wish to use the funds.
  • HIPAA Release – The Release names an individual(s) who can discuss your medical issues with your medical team. Federal law prohibits medical professionals from discussing and accessing your medical records and history without the Release.
  • DNR – Do Not Resuscitate – declares your wish not to have CPR performed in the event of a heart attack.
  • MOLST (Medical Orders for Life-Sustaining Treatment) – a medical order form signed by a doctor or nurse practitioner to tell others the patient’s wishes for life-sustaining treatment. It is the only document used to document DNR and Do Not Intubate (DNI) orders in a non-hospital setting. Most states allow MOLSTs, but the form may vary from state to state.
  • Living Will – A Living Will is a document expressing your wishes if you cannot communicate your wishes yourself. In an end-of-life situation, i.e., if you are in a persistent vegetative state or have a terminal illness, the Living Will expresses your wishes regarding everything from painkillers, artificial nutrition and hydration, dialysis, organ donation, and life-prolonging treatments.

If you don’t have these documents in order, call our office to get things started to protect yourself and your family.

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Reference: The Washington Post (November 4, 2023) “The retired pilot went into the hospital. Then his life went into a tailspin.”

The IRS Offers Tax Prep Software – Free – Is it For You?

It’s been a long time coming, but next year, for the first time, some taxpayers will have a new filing option: a free tax prep software program created by the IRS and named “Direct File.”

The roll-out will be slow. Direct File will be available only in thirteen states, including New York. Note that the IRS warns that it’s not suited for all taxpayers. You’ll need a special invitation to use Direct File in the first cohort. The IRS expects to send the invitations around mid-February.

If all goes well with the early filers, the program will slowly open up to more users. The goal is to have the program available to anyone who wants to use it in the thirteen states by the tax deadline in April 2024.

The IRS created Direct File following research reflecting potential users’ preference to use an IRS program only if it can process federal and state returns. For the first year, Direct File will be available only to taxpayers in the nine states without a state income tax, plus four states that agreed to work with the IRS to integrate Direct File with their state websites to file tax returns. New York, Massachusetts, Arizona, and California are among the states participating in the program.

The IRS says it’s open to any state willing to participate and expects more states to join if the 2024 filing season is a success.

There are limitations to be aware of. You can’t itemize deductions, which over 10% of taxpayers still do. Also, only certain tax credits and forms of income will be allowed. You won’t be eligible to use the software if you claim a credit for child-care expenses or have interest income above $1,500. And self-employment income isn’t listed as one type to be processed, which means freelancers and gig workers are not eligible.

Direct File will process three major tax credits: Earned Income Credit, Child Tax Credit, and Credit for Other Dependents. It will also let users deduct teacher’s expenses and student loan interest. But that’s it, at least for now.

There are options if you aren’t eligible for Direct File but are searching for a way to file your taxes for free. You can complete your taxes and submit them electronically or on paper. People with an annual income below $73,000 can get free access to some commercial tax software through the Free File program. Older adults and those with an annual income below $63,000 can have volunteers prepare taxes free at Volunteer Income Tax Assistance programs supported by the IRS nationwide.

Because only 3% of Americans use the Free File program, even though 70 percent of Americans are eligible, it will be interesting to see how Direct File does.

We are taking a wait and see position on this. New software of any kind is subject to unexpected glitches, given the complexity of the tax laws. We recommend waiting until the completion of the first tax year of Direct File to see its success. While we’re always excited about new technology, we will wait and see.

Reference: The Washington Post (October 17, 2023) “IRS to offer a new option to file your tax return”