Obamacare: The Upcoming Medicare Tax Hike and What to Do About It

• 09-13-2012
  11:45
  AM
• Author:

  
  Jeramie Fortenberry
  

With the Supreme Court’s ruling that the Patient Protection and Affordable Care Act, informally called Obamacare, is constitutional, it will continue into effect in 2013.  Among the many provisions of the massive law is a 3.8 percent Medicare surtax on investment income.

While the recent Congressional banter has centered on whether to extend the Bush tax cuts, this Medicare surtax has not been widely discussed. Even if lawmakers extend the Bush tax cuts for 2013 (I think that they will), this new 3.8 percent tax will effectively raise the top tax rate on capital gains and dividends to 18.8 percent. If the Bush tax cuts do expire, the capital gains rate will increase to $23.8 percent in 2013.

About the Medicare Surtax

The new Medicare surtax is assessed on the lesser of (a) net investment income or (b) the excess of modified adjusted gross income (adjusted gross income plus foreign earned income) over a “threshold amount.” The threshold amount for married taxpayers filing jointly is $250,000.00.  For married taxpayers filing separately, it is $125,000.00, and for everyone else it is $200,000.00.

Note:  Your “investment income” includes interested, dividends, royalties, and annuities.

In other words, if your income is more than $200,000 for a single person, $125,000.00 for a married person that doesn’t file jointly, or $250,000.00 for a married couple filing jointly, you can expect to pay the tax.  It will be assessed on your net investment income or the excess of your modified adjusted gross income over the applicable amount.  If your income isn’t over the threshold that applies to you, you don’t need to worry about the tax.

Note: The amount of the surtax is based on your income before deductions are considered. Even if your deductions put you in a lower tax bracket, you could still pay the surtax on your investment income.

What You Can Do About It

If the Medicare surtax applies to you, there are a few steps that you can take now to reduce your tax liability beginning in 2013. Here are a few:

• Sell appreciated assets – If you have assets that you are thinking of selling, do it in 2012.  That will save 3.8 percent Medicare surtax, which doesn’t apply until January 1, 2013.
• Think about your real estate – The surtax could apply to your profit from sales of any real estate that is not a personal residence.  Any depreciation will increase the amount owned. If you are considering selling the real estate soon, do it in 2012.

Note: Taxes on your principal residence would not be affected by the Medicare surtax unless your gain exceeds the $250,000.00 ($500,000.00 for couples) home exclusion.  That would be a good problem to have in this market.

• Talk to your investment adviser about your investment portfolio – Will deferring income until 2013 push you over the threshold? Given that withdrawals from regular IRAs raise your adjusted gross income, should you consider a Roth conversion this year? Could the demand for tax-exempt bonds increase given that interest on them is exempt and won’t increase AGI?  These are all questions to discuss with your adviser.

No matter what happens in November, 2013 is on schedule to have the highest tax rates that we’ve seen in the past several years.  Begin taking steps now to prepare for it.

View more from Jeramie Fortenberry

About Jeramie Fortenberry

I am an attorney
practicing trust and estate law in Mississippi, Alabama, and Florida. I
offer free telephonic consultations to clients with questions about
probate and estate planning. Get yours today.

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Paying for Nursing Home Care with Medicare or Medicaid | How MassHealth Works

• 09-18-2012
  11:20
  AM
• Author:

  
  Tim J. McNamara
  

After visiting the hospital from a sudden fall, or some other unexpected medical event, an older or elderly patient almost always requires some extended time for recovery. But a hospital bed isn’t really the appropriate place for such a long recovery, since hospitals are intended mainly to care for those needing emergency attention, intensive care, or otherwise monitoring of a potentially unstable condition. So instead, the hospital usually refers such a patient to a long term care facility; a.k.a. nursing home or nursing facility. Here, the patient can obtain occupational and physical therapy, along with 24 hour care and assistance during that time.

Does Medicare Pay for Nursing Home Care in Massachusetts?

The answer to that is no . . . but sometimes. Reflecting on the situation we just described, Medicare doesn’t normally cover the type of care received in a nursing home, or “custodial care.” Again, this can be defined as that care required whenever assistance with activities of daily living is needed; e.g. eating, bathing, getting out of bed and getting dressed. And while Medicare does not offer benefits for such long term care needs, it does continue to provide insurance for traditional Medicare services like prescription drugs (Part D), hospital doctor visits (Parts A B) during the period of time someone is living or staying in a nursing facility.

Although Medicare doesn’t cover long term custodial care, it will in some instances cover temporary benefits at a “skilled nursing facility.” These facilities are in fact nursing homes in many instances. Medicare will cover services administered in a skilled nursing facility only if certain criteria are met, namely:

• The facility must be Medicare certified as a skilled nursing
  facility. Assisted living homes, by contrast, generally do not qualify.
• The patient/resident has Medicare Part A hospital coverage.
• The patient must have spent 3 days in the hospital as an
  admitted patient. Hospital visits deemed less necessary, for example staying
  merely “under observation” do not qualify.
• A doctor must recommend that skilled nursing services are
  necessary to recover for the illness that placed the patient in the hospital,
  or else an illness related to that placement.
• The resident may only be admitted on an inpatient basis, and
  not for long term care.

How Long Will Medicare Cover Nursing Home Care, and for How Much?

The length of time a patient’s nursing home stay is covered, and how much must be paid varies according to Medicare plans, any Medicare supplement plans, and long term care insurance, but the formula generally goes as follows:

• The first 20 days of care at a skilled nursing facility after a qualifying hospital visit (see above) will be 100 percent covered for the patient. This stay is granted on a “per illness” basis, which is addressed by regulations. In essence, going in and out of such a facility for the same illness will not reset the 20 days.
• The second 60 day term is covered with a daily co-payment that adjusts each year, that was $146 per day for 2012.
• The co-payment period may last as long as 80 days after the initial 20 day period, but days used in excess of the 60 day secondary term will be taken from a “lifetime amount.”

Again, these formulas can vary, and each patient needs to speak with the business office of the facility in order to determine coverage. More detailed information is available on the Medicare website with this guide. It is more important, however, that the patient be aware of his or her options after Medicare benefits run out. If there is little to no improvement, then the patient may need to consider long term residence at the nursing home.

Who Pays the Nursing Home After Medicare Runs Out?

The complete answer to this question depends, but the payment of Massachusetts nursing home care will either come directly from the patient, or else from Medicaid through MassHealth. What varies in this situation is how much the patient has in assets, and whether he or she can “spend down” assets in order to qualify.

Whether or not the resident chooses to spend down or private pay will be determined by factors such as how much the resident owns in assets, whether the resident is married or not, and whether the resident owns a home. As mentioned in the note above, such determinations need to be made with the assistance of someone familiar with the Medicaid application process in Massachusetts such as a Medicaid specialist or MassHealth lawyer.

If the resident has no assets, or if the decision is made to spend down in order to qualify for MassHealth, then the next step is to complete the MassHealth application for long term care. While the business office of a nursing home will often assist the family or resident in completing this application, these staff members are far from experts in the field. If the resident even made modest gifts in the past 5 years, for example, staff members will not know how to handle an appeal if benefits are denied. The safest bet when a Medicaid application is begun, is to hire an attorney in the field.

We are always available to answer your questions or legal concerns. For more specific information about your particular Medicaid situation, please feel free to call or email us at anytime at atty.mcnamara@comcast.net

View more from Timothy McNamara on the Probate Process, Estate Planning, and Medicaid Planning. 

Copyright © 2011 Law Office of William Yates. All rights reserved

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A Not-So-funny Riddle from Medicare: When Is Being in the Hospital Not Being in the Hospital?

• 10-16-2012
  06:52
  AM
• Author:

  
  karplaw
  

When is being admitted to the hospital, not being in the hospital? When you are admitted for observation.

This is not just a semantic distinction. If you are on Medicare, the way the hospital stay classifies your stay can have huge implications for your pocketbook, both during your stay and possibly after. Moreover, you might not even know that you are classified as “observation status” until the episode is over.

Observation status usually means that either the hospital is unable to determine what is wrong, or you don’t necessarily need inpatient services. For example, you might go to the emergency room complaining of nausea and chest pains. If you remain in the hospital for observation, your stay falls under Part B, not Part A. Medicare considers that to be an outpatient service, and thus will not pay for the hospital room. Although Medicare recommends that observation stays should be limited to 24 hours, such stays have been known to go well beyond this guideline.

Secondly, if you require sub-acute care following your hospital stay, Medicare will not pay for care in the nursing facility if you were in the hospital under observations status. Medicare will only pay if you have been in the hospital for a minimum of three days as an inpatient. Obviously, with nursing home care costing hundreds of dollars per day, many Medicare beneficiaries who have been on observation status and then require skilled nursing services, find themselves unable to pay for their rehabilitative care.

The number of observation stays is increasing. According to a recent study from Brown University published in Health Affairs, there has been a 25% increase in observation stays from 2007 to 2009. What’s in it for the hospital? Well, it’s simple arithmetic. Although the hospital receives more compensation for an inpatient stay, Medicare auditors who decide that an inpatient admission was not necessary can take back from the hospital all it’s received from Medicare. An observation stay pays the hospital less but it’s a safer bet. A bird in the hospital’s hand is worth two in the bush, you might say.

When you are admitted, you should find out how your stay is being classified.If you don’t know you’re on observation, you might not even realize you’re going to be on the hook for any post-discharge nursing home care.

Although it’s under most people’s radar, there is a pitched battle unfolding over this issue. Medicare, nursing homes, hospitals, consumer and health advocacy groups trying to figure out how to best resolved this complicated issue. Many groups want Medicare should cover all hospital stays, regardless of the nature of the classification. The Center for Medicare Advocacy has legally challenged the observation care classification in its entirety

Also, a bill introduced in 2011 by John Kerry (D-Mass) and Joe Cortney (D-Conn)  seeks to allow a three-day observation stay to qualify a patient for Medicare coverage for follow-up skilled nursing care, just as a three-day inpatient stay does.You can read a summary of HR 1453 here. Consider calling your congressional representatives to urge them to support the bill. Click here to find out who your representatives are and how to contact them. 

 

Attorney Joseph S. Karp is a
Florida Bar Certified and Nationally Certified Elder Law Attorney focusing on
Elder Law, Probate, Estate Planning, Asset Protection, Special Needs Planning
and Estate Litigation. He is AV rated by Martindale Hubbell. Mr. Karp is the
founder of The Karp Law Firm, a South Florida law firm with offices in Palm
Beach Gardens, Boynton Beach and St. Lucie, Florida.  Mr. Karp was named a
2011 SuperLawyer by SuperLawyer Magazine and a member of the 2011
Florida Legal Elite by Florida Trend Magazine. He is admitted to
practice law in New York as well as Florida. Visit Mr. Karp’s Florida Elder Law and Estate Planning
website. 

….

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A Not-So-funny Riddle from Medicare: When Is Being in the Hospital Not Being in the Hospital?

• 10-16-2012
  06:52
  AM
• Author:

  
  karplaw
  

When is being admitted to the hospital, not being in the hospital? When you are admitted for observation.

This is not just a semantic distinction. If you are on Medicare, the way the hospital stay classifies your stay can have huge implications for your pocketbook, both during your stay and possibly after. Moreover, you might not even know that you are classified as “observation status” until the episode is over.

Observation status usually means that either the hospital is unable to determine what is wrong, or you don’t necessarily need inpatient services. For example, you might go to the emergency room complaining of nausea and chest pains. If you remain in the hospital for observation, your stay falls under Part B, not Part A. Medicare considers that to be an outpatient service, and thus will not pay for the hospital room. Although Medicare recommends that observation stays should be limited to 24 hours, such stays have been known to go well beyond this guideline.

Secondly, if you require sub-acute care following your hospital stay, Medicare will not pay for care in the nursing facility if you were in the hospital under observations status. Medicare will only pay if you have been in the hospital for a minimum of three days as an inpatient. Obviously, with nursing home care costing hundreds of dollars per day, many Medicare beneficiaries who have been on observation status and then require skilled nursing services, find themselves unable to pay for their rehabilitative care.

The number of observation stays is increasing. According to a recent study from Brown University published in Health Affairs, there has been a 25% increase in observation stays from 2007 to 2009. What’s in it for the hospital? Well, it’s simple arithmetic. Although the hospital receives more compensation for an inpatient stay, Medicare auditors who decide that an inpatient admission was not necessary can take back from the hospital all it’s received from Medicare. An observation stay pays the hospital less but it’s a safer bet. A bird in the hospital’s hand is worth two in the bush, you might say.

When you are admitted, you should find out how your stay is being classified.If you don’t know you’re on observation, you might not even realize you’re going to be on the hook for any post-discharge nursing home care.

Although it’s under most people’s radar, there is a pitched battle unfolding over this issue. Medicare, nursing homes, hospitals, consumer and health advocacy groups trying to figure out how to best resolved this complicated issue. Many groups want Medicare should cover all hospital stays, regardless of the nature of the classification. The Center for Medicare Advocacy has legally challenged the observation care classification in its entirety

Also, a bill introduced in 2011 by John Kerry (D-Mass) and Joe Cortney (D-Conn)  seeks to allow a three-day observation stay to qualify a patient for Medicare coverage for follow-up skilled nursing care, just as a three-day inpatient stay does.You can read a summary of HR 1453 here. Consider calling your congressional representatives to urge them to support the bill. Click here to find out who your representatives are and how to contact them. 

 

Attorney Joseph S. Karp is a
Florida Bar Certified and Nationally Certified Elder Law Attorney focusing on
Elder Law, Probate, Estate Planning, Asset Protection, Special Needs Planning
and Estate Litigation. He is AV rated by Martindale Hubbell. Mr. Karp is the
founder of The Karp Law Firm, a South Florida law firm with offices in Palm
Beach Gardens, Boynton Beach and St. Lucie, Florida.  Mr. Karp was named a
2011 SuperLawyer by SuperLawyer Magazine and a member of the 2011
Florida Legal Elite by Florida Trend Magazine. He is admitted to
practice law in New York as well as Florida. Visit Mr. Karp’s Florida Elder Law and Estate Planning
website. 

….

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Online Legal Documents are Deficient

• 10-25-2012
  14:13
  PM
• Author:

  
  Gregory Herman-Giddens
  

A recent article in Consumers Reports featured a blind test of online legal documents by three law school professors.  Their conclusion:

Using any of the three services is generally better than drafting the documents yourself without legal training or not having them at all. But unless your needs are simple – say, you want to leave your entire estate to your spouse – none of the will-writing products is likely to entirely meet your needs. And in some cases, the other documents aren’t specific enough or contain language that could lead to “an unintended result.”

Bottom line is people don’t know what they don’t know, so they have no way to judge the quality of legal documents on their own.  This particularly a problem for Wills and Trusts, where the deficiencies may not come to light for many years. Caveat Emptor!

See this post on the article by attorney Robert Ambrogi.

Gregory Herman-Giddens, JD, LLM, TEP, CFP, Attorney at Law (NC, FL, TN), Board Certified Specialist in Estate Planning and Probate Law (NC). North Carolina Registered Guardian, Solicitor, England and Wales. Follow his blog, North Carolina Estate Planning Blog..

….

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For more information about LexisNexis products and solutions connect with us through our corporate site.

 

Online Legal Documents are Deficient

• 10-25-2012
  14:13
  PM
• Author:

  
  Gregory Herman-Giddens
  

A recent article in Consumers Reports featured a blind test of online legal documents by three law school professors.  Their conclusion:

Using any of the three services is generally better than drafting the documents yourself without legal training or not having them at all. But unless your needs are simple – say, you want to leave your entire estate to your spouse – none of the will-writing products is likely to entirely meet your needs. And in some cases, the other documents aren’t specific enough or contain language that could lead to “an unintended result.”

Bottom line is people don’t know what they don’t know, so they have no way to judge the quality of legal documents on their own.  This particularly a problem for Wills and Trusts, where the deficiencies may not come to light for many years. Caveat Emptor!

See this post on the article by attorney Robert Ambrogi.

Gregory Herman-Giddens, JD, LLM, TEP, CFP, Attorney at Law (NC, FL, TN), Board Certified Specialist in Estate Planning and Probate Law (NC). North Carolina Registered Guardian, Solicitor, England and Wales. Follow his blog, North Carolina Estate Planning Blog..

….

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LexisNexis Publications:

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Hook Law Center: Hospitalization as an Inpatient vs. "Under Observation:" If You’re Medicare Eligible, the Difference Can Be Very Costly

• 10-30-2012
  11:21
  AM
• Author:

  
  Hook Law Center
  

Hospital Admission Advisory

Do you know the difference between being admitted to a hospital as an INPATIENT or as someone UNDER OBSERVATION? If you’re eligible for Medicare, the difference can be very costly. Consider the scenario of Laraine Sickels, a retired teacher from Whidbey Island, Washington. At 71 she went to the hospital because she had fallen at a friend’s house. It was determined that she had 3 breaks to her pelvis. She spent 5 days in the hospital, but during that time she was only considered “under observation.” Unaware of this, when it came time to be discharged, she was released to a skilled nursing facility. That’s where the problem started. She got good care there, but because she had not been spent 3 days in a hospital as an inpatient, her 10-day stay at the skilled nursing facility was hers to pay. Medicare covers the first 20 days in a skilled nursing facility completely as long as you’ve been in the hospital at least 3 days classified as “inpatient”. In addition, that same patient who was classified as “inpatient” will pay for days 21-100 at the skilled nursing facility at the rate of $144.50, a fraction of the true cost. (Amanda Gengler, “This could hurt–a lot,” Money Magazine, August 2012, p. 72-3)

So what’s happening? Well, Medicare is attempting to trim expenses. One way they’ve decided to do this is that, for certain cases, the patient who may have only one ailment gets classified as “under observation” while tests are run. This classification allows them to reimburse hospitals at a lower rate. “In 2009, the most recent data available, observation stays topped 1 million, up 25% from 2007, according to a study published by researchers at Brown University.” (Gengler, p. 72) From their point of view, your care is the same. Medicare just winds up paying a lot less.

So how can you ensure that you will have the favorable classification of “inpatient?” Well, first of all, you must ask what your classification is. If it is not “inpatient” then you must ask that your doctor review your situation and possibly take it to a hospital review committee. The time to get your status changed is while you are in the hospital, not after discharge, when it is  impossible. Make sure everyone is aware of your past medical history or other risk factors which may favorably influence the classification. (Gengler, p. 74-75)

If you still remain “under observation,” you have the option upon discharge of receiving home help, if that is a workable option. Medicare will cover some in-home help, even if you weren’t “inpatient.” Also, if you must go to the nursing home to recuperate, you can ask the nursing home to bill Medicare. That gets you in the system. You will be denied by  Medicare, but after 2 denials, your case then goes to an administrative law judge. At that point, you will need the doctor involved in your care to testify or write a letter on your behalf. You may also want to consider help from an elder law attorney or from the nonprofit Center for Medicare Advocacy at medicareadvocacy.org. (Gengler, p. 74-75) The attorneys at Hook Law Center are experts in Medicare advocacy.     

Hook Law Center has been providing the highest quality of legal advice to the communities of Hampton Roads for more than 80 years. Our practice is dedicated to seniors, and disabled persons, their families and advocates. Our professional staff can respond to our client’s care needs on a 24 hour basis, and our Attorneys are available to provide expertise on every issue facing senior citizens from long-term and life care planning to estate and trust issues as well as financial, investment, public benefit, and insurance assistance. Visit their website for more information.

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