Fong Law Group

Movement Grows to Add Dental Coverage to Medicare

Medicare does not offer much in the way of dental benefits. To get dental coverage, you need to purchase separate and often costly dental insurance or sign up for a Medicare Advantage plan that includes dental care. Advocates for Medicare beneficiaries are arguing for a change. 

Common dental procedures or supplies, such as cleanings, fillings, tooth extractions, dentures, dental plates, or other devices are currently not covered. Medicare Part A, the insurance for inpatient hospitalizations, will cover certain emergency or necessary dental procedures that are received in the hospital. For example, if you are hospitalized after an accident and require jaw reconstruction, Medicare Part A will pay for the dental work required as part of that procedure. In addition, Medicare Part A specifically covers oral examinations for patients who are in the hospital to receive a comprehensive workup for a kidney transplant or heart valve replacement.

Many Medicare Advantage plans offer dental coverage, but Medicare Advantage plans vary widely in what is covered and how much it costs. In addition, because Medicare Advantage is managed care, only certain providers are covered under each plan, and beneficiaries may need prior approval before receiving care. 

According to the Kaiser Family Foundation, most Medicare beneficiaries do not have dental coverage and go without care even though studies show there is a link between good oral health and good overall health. To take just one example, many infections can enter the body due to ongoing inflammation in the mouth and lead to more inflammation in other parts of the body like the heart. Kaiser also found that among Medicare beneficiaries who used dental services, the average annual out-of-pocket spending on dental care was $922.

The lack of coverage for oral health has prompted some groups to advocate for improving dental coverage for Medicare beneficiaries. Justice in Aging, a legal advocacy group fighting senior poverty, argues that adding oral health coverage to Medicare Part B would be the simplest and most cost-effective way to give all seniors dental benefits. The U.S. House of Representatives has passed a bill that would do just that, but it is unlikely to be taken up by the current Senate. Another possibility would be to add a separate optional dental benefit under Medicare, like the prescription drug benefit. 

For more information about the different options for improving dental coverage, click here.

New year, new tax updates. What you need to know for 2020

KEY POINTS

• Put up to $19,500 in your workplace 401(k) plan, plus another $6,500 if you’re 50 and over in 2020. This also lowers your taxable income.
• The standard deduction for single filers will be $12,400. It rises to $24,800 for married couples filing jointly.
• Giving away wealthy? An individual can transfer up to $11.58 million free of estate and gift taxes in 2020.

Standard Deduction

Pay attention to your standard deduction for the 2020 tax year.  The IRS has bumped it to $12,400 for singles, up from $12,200 in the prior year. 

The standard deduction for married joint filers will be $24,800 up from $24,400 in 2019. 

Workplace Retirement Savings

Resolve to save a few extra dollars in your retirement account at work. 

The IRS has raised the employee contribution limit for 401(k), 403(b) and most 457 plans to $19,500, up from $19,000 in 2019. 

If you’re 50 or older, you can save an additional $6,500.  That’s up from $6,000 in 2019. 

The contribution limit for individual retirement accounts, whether traditional or Roth, is holding steady at $6,000, plus another $1,000 for savers 50 and over. 

One caveat: The IRS limits high-income earners’ ability to make direct contributions to Roth IRAS-accounts in which you can save after-tax dollars, have the money grow tax-free and use it in retirement free of taxes. 

In 2020, if you adjusted gross income exceeds $124,000 and you are single ($196,000 for married couples filing jointly), you won’t be able to make a full contribution directly to a Roth IRA. 

Instead, those savers might consider using a strategy known as the “backdoor Roth”, where they make a nondeductible contribution with after-tax dollars to a traditional IRA and then covert it to a Roth. 

Health Saving Opportunities

Got a high deductible plan in 2020? You most likely have access to a health savings account. 

These accounts allow you to put away pretax or tax-deductible money and have it grow free of taxes.  You can take a tax-free withdrawal to cover qualified health expenses. 

In 2020, you can save up to $3,550 if you’re an individual with self-only health coverage.  That’s up from $3,500 in 2019.  Account holders with family plans can save up to $7,100 in this account (up from $7,000 in 2019). 

Gift and Estate Tax Savings

Good news for people sitting on millions of dollars: The Tax Cuts and Jobs Act nearly doubled the amount that decedents can bequeath in death-or gift over their lifetime-and shield it from federal estate and gift taxes, which are 40%.

Before the tax overhaul, the gift and estate tax exemption was $5.49 million per person. 

For 2020, the lifetime gift and estate tax exemption will be $11.58 million per individual, up from $11.4 million in 2019. 

Finally, the annual gift exclusion-the amount you can give to any other person without it counting against your lifetime exemption-will hold steady at $15,000 for 2020.

Feds Release 2020 Guidelines Used to Protect the Spouses of Medicaid Applicants

The Centers for Medicare & Medicaid Services (CMS) has released the 2020 federal guidelines for how much money the spouses of institutionalized Medicaid recipients may keep, as well as related Medicaid figures.

In 2020, the spouse of a Medicaid recipient living in a nursing home (called the "community spouse") may keep as much as $128,640 without jeopardizing the Medicaid eligibility of the spouse who is receiving long-term care. Known as the community spouse resource allowance or CSRA, this is the most that a state may allow a community spouse to retain without a hearing or a court order. While some states set a lower maximum, the least that a state may allow a community spouse to retain in 2020 will be $25,728.

Meanwhile, the maximum monthly maintenance needs allowance (MMMNA) for 2020 will be $3,216. This is the most in monthly income that a community spouse is allowed to have if her own income is not enough to live on and she must take some or all of the institutionalized spouse's income. The minimum monthly maintenance needs allowance for the lower 48 states remains $2,113.75 ($2,641.25 for Alaska and $2,432.50 for Hawaii) until July 1, 2020.

In determining how much income a particular community spouse is allowed to retain, states must abide by this upper and lower range. Bear in mind that these figures apply only if the community spouse needs to take income from the institutionalized spouse. According to Medicaid law, the community spouse may keep all her own income, even if it exceeds the maximum monthly maintenance needs allowance.

The new spousal impoverishment numbers (except for the minimum monthly maintenance needs allowance) take effect on January 1, 2020.

Home Equity Limits:

In 2020, a Medicaid applicant’s principal residence will not be counted as an asset by Medicaid if the applicant's equity interest in the home is less than $595,000, with the states having the option of raising this limit to $893,000.

New Law Makes Big Changes to Retirement Plans

President Trump has signed a spending bill that makes major changes to retirement plans. The new law is designed to provide more incentives to save for retirement, but it may require workers to rethink some of their planning. 

The Setting Every Community Up for Retirement Enhancement (SECURE) Act changes the law surrounding retirement plans in several ways:

• Stretch IRAS. The biggest change eliminates “stretch” IRAs. Under current law, if you name anyone other than a spouse as the beneficiary of your IRA, the beneficiary can choose to take distributions over his or her lifetime and to pass what is left onto future generations (called the "stretch" option). The required minimum distributions are calculated based on the beneficiary’s life expectancy. This allows the money to grow tax-deferred over the course of the beneficiary’s life and to be passed on to his or her own beneficiaries. The SECURE Act requires beneficiaries of an IRA to withdraw all the money in the IRA within 10 years of the IRA holder’s death. In many cases, these withdrawals would take place during the beneficiary’s highest tax years, meaning that the elimination of the stretch IRA is effectively a tax increase on many Americans. This provision will apply to those who inherit IRAs starting on January 1, 2020.  
• Required minimum distributions. Under prior law, you have to begin taking distributions from your IRAs beginning when you reach age 70 ½. Under the new law, individuals who are not 70 ½ at the end of 2019 can now wait until age 72 to begin taking distributions. 
• Contributions. The new law allows workers to continue to contribute to an IRA after age 70 ½, which is the same as rules for 401(k)s and Roth IRAs.
• Employers. The tax credit businesses get for starting a retirement plan is increased and the new law makes it easier for small businesses to join multiple-employer plans.
• Annuities. The newly enacted legislation removes roadblocks that made employers wary of including annuities in 401(k) plans by eliminating some of the fiduciary requirements used to vet companies and products before they can be included in a plan.
• Withdrawals. The new law allows an early withdrawal of up to $5,000 from a retirement account without a penalty in the event of the birth of a child or an adoption. Currently, there is a 10 percent penalty for early withdrawals in most circumstances. 

Given these changes, workers need to immediately reevaluate their estate plans. Some people have used stretch IRAs as an estate planning tool to pass assets to their children and grandchildren. One way of doing this has been to name a trust as the IRA’s beneficiary, and these trusts may have to be reformed to conform to the new rules. If a stretch IRA is part of your estate plan, consult with your attorney to determine if you need to make changes.

To read the legislation, click here.  For more on the new law, click here and here.

IRS Issues Long-Term Care Premium Deductibility Limits for 2020

The Internal Revenue Service (IRS) has announced the amount taxpayers can deduct from their 2020 income as a result of buying long-term care insurance.

Premiums for "qualified" long-term care insurance policies (see explanation below) are tax deductible to the extent that they, along with other unreimbursed medical expenses (including Medicare premiums), exceed 10 percent of the insured's adjusted gross income.  

These premiums -- what the policyholder pays the insurance company to keep the policy in force -- are deductible for the taxpayer, his or her spouse and other dependents. (If you are self-employed, the tax-deductibility rules are a little different: You can take the amount of the premium as a deduction as long as you made a net profit; your medical expenses do not have to exceed a certain percentage of your income.)  Additionally, these tax deductions allowed by the IRS for long-term care insurance premiums are generally not available with so-called hybrid policies, such as life insurance and annuity policies with a long-term care benefit. 

However, there is a limit on how large a premium can be deducted, depending on the age of the taxpayer at the end of the year. Following are the deductibility limits for tax year 2020. Any premium amounts for the year above these limits are not considered to be a medical expense.

Attained age before the close of the taxable year	Maximum deduction for year
40 or less	$430
More than 40 but not more than 50	$810
More than 50 but not more than 60	$1,630
More than 60 but not more than 70	$4,350
More than 70	$5,430

Another change announced by the IRS involves benefits from per diem or indemnity policies, which pay a predetermined amount each day.  These benefits are not included in income except amounts that exceed the beneficiary's total qualified long-term care expenses or $380 per day, whichever is greater.

For these and other inflation adjustments from the IRS, click here. 

What Is a "Qualified" Policy?

To be "qualified," policies issued on or after January 1, 1997, must adhere to certain requirements, among them that the policy must offer the consumer the options of "inflation" and "nonforfeiture" protection, although the consumer can choose not to purchase these features. Policies purchased before January 1, 1997, will be grandfathered and treated as "qualified" as long as they have been approved by the insurance commissioner of the state in which they are sold. 

Home Care Costs Rise Sharply in Annual Long-Term Care Cost Survey

When it comes to long-term care costs, the charges for home care are now rising faster than those for nursing home care, according to Genworth's 2019 Cost of Care survey. In the past year, the median annual cost for home health aides rose 4.55 percent to $52,624, while the median cost of a private nursing home room rose only 1.82 percent to $102,200.

Genworth reports that the median cost of a semi-private room in a nursing home is $90,155, up 0.96 percent from 2018, and the median cost of assisted living facilities rose 1.28 percent, to $4,051 a month. But home care services had sharper increases. The national median annual rate for the services of a home health aide rose from $22 to $23 an hour, and the cost of adult day care, which provides support services in a protective setting during part of the day, rose from $72 to $75 a day, up 4.17 percent annually.

Alaska continues to be the costliest state for nursing home care by far, with the median annual cost of a private nursing home room totaling $362,628. Oklahoma again was found to be the most affordable state, with a median annual cost of a private room of $67,525.

The 2019 survey, conducted by CareScout for the sixteenth straight year, was based on responses from more than 15,178 nursing homes, assisted living facilities, adult day health facilities and home care providers.  Survey respondents were contacted by phone during May and June 2019.

As the survey indicates, long-term care is growing ever more expensive. Contact your elder law attorney to learn how you can protect some or all of your family's assets from being swallowed up by these rising costs.

For more on Genworth’s 2019 Cost of Care Survey, including costs for your state, click here.

Medicaid's Treatment of the Home

Nursing home residents do not automatically have to sell their homes in order to qualify for Medicaid, but that doesn't mean the house is completely protected. The state will likely put a lien on the house while the resident is living and attempt to recover the property after the resident has passed away. 

Medicaid will not count a nursing home resident's home as an asset when determining eligibility for Medicaid as long as the resident intends to return home (in some states, the nursing home resident must prove a likelihood of returning home). In addition, the resident's equity interest in the home must be less than $585,000, with the states having the option of raising this limit to $878,000 (figures are adjusted annually for inflation; these are for 2019).

The equity value of the home is the fair market value minus any debts secured by the home, such as a mortgage or a home equity loan. For example, if your home has a fair market value of $400,000 and an outstanding mortgage of $100,000, the equity value is $300,000. Your equity interest depends on whether you own the home by yourself or with someone else.  If you own the home by yourself, your equity interest is the entire equity value.  If you own your home jointly with your spouse or someone else, your equity interest is only half of the home’s equity value.

The home equity rule does not apply if the Medicaid applicant's spouse or a child who is under 21 or is blind or disabled lives in the home. 

While the house may not need to be sold in order to qualify for Medicaid, state Medicaid agencies will likely place a lien on any real estate owned by a Medicaid beneficiary during his or her life. The state cannot impose a lien if a spouse, a disabled or blind child, a child under age 21, or a sibling with an equity interest in the house is living in the house.

Once a lien is placed on the property, if the property is sold while the Medicaid beneficiary is living, not only will the beneficiary cease to be eligible for Medicaid due to the cash from the sale, but the beneficiary would have to satisfy the lien by paying back the state for its coverage of care to date. In some states, the lien may be removed upon the beneficiary's death. In other states, the state can collect on the lien after the Medicaid recipient dies. Check with your attorney to see how your local agency handles this.

Even if the state did not place a lien on the home during the Medicaid beneficiary's life, the home may still be subject to estate recovery after the Medicaid recipient’s death, again depending on the state. 

There are steps you can take to protect your home . Contact your attorney to learn more. 

Medicare Premiums to Increase By Almost $10 a Month in 2020

After small or no increases the past couple of years, Medicare’s Part B premium will rise sharply in 2020. The basic monthly premium will increase $9.10, from $135.50 a month to $144.60. 

The Centers for Medicare and Medicaid Services (CMS) announced the premium increase on November 8, 2019. Not everyone will pay the whole increase, however. Due to a "hold harmless" rule around 70 percent of Medicare recipients' premiums will not increase more than Social Security benefits, and Social Security benefits are increasing only 1.6 percent in 2020. This “hold harmless” provision does not apply to about 30 percent of Medicare beneficiaries: those enrolled in Medicare but who are not yet receiving Social Security, new Medicare beneficiaries, seniors earning more than $87,000 a year, and "dual eligibles" who get both Medicare and Medicaid benefits.

Meanwhile, the Part B deductible will go from $185 to $198 in 2020, while the Part A deductible will go up by $44, to $1,408. For beneficiaries receiving skilled care in a nursing home, Medicare's coinsurance for days 21-100 will increase from $170.50 to $176. Medicare coverage ends after day 100. CMS attributed the sudden steep rise in Part B premiums and deductibles on the increased costs of physician-administered drugs.

Here are all the new Medicare payment figures:

• Part B premium: $144.60 (was $135.50)
• Part B deductible: $198 (was $185)
• Part A deductible: $1,408 (was $1,364)
• Co-payment for hospital stay days 61-90: $352/day (was $341)
• Co-payment for hospital stay days 91 and beyond: $704/day (was $682)
• Skilled nursing facility co-payment, days 21-100: $176/day (was $170.50)

So-called "Medigap" policies can cover some of these costs.

Premiums for higher-income beneficiaries ($87,000 and above) are as follows: 

• Individuals with annual incomes between $87,000 and $109,000 and married couples with annual incomes between $174,000 and $218,000 will pay a monthly premium of $202.40.
• Individuals with annual incomes between $109,000 and $136,000 and married couples with annual incomes between $218,000 and $272,000 will pay a monthly premium of $289.20.
• Individuals with annual incomes between $136,000 and $163,000 and married couples with annual incomes between $272,000 and $326,000 will pay a monthly premium of $376.00.
• Individuals with annual incomes above $163,000 and less than $500,000 and married couples with annual incomes above $326,000 and less than $750,000 will pay a monthly premium of $462.70.
• Individuals with annual incomes above $500,000 and married couples with annual incomes above $750,000 will pay a monthly premium of $491.60.

Rates differ for beneficiaries who are married but file a separate tax return from their spouse. Those with incomes greater than $87,000 and less than $413,000 will pay a monthly premium of $462.70. Those with incomes greater than $413,000 will pay a monthly premium of $491.60.

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 2018 tax return is used to determine whether the beneficiary must pay a higher monthly Part B premium in 2020. 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 decreased significantly in the past two years, she may request that information from more recent years be used to calculate the premium. You can also request to reverse a surcharge if your income changes.

Those who enroll in Meidcare Advantage plans may have different cost-sharing arrangements. CMS estimates that the Medicare Advantage  average monthly premium will decrease by 14 percent in 2020, from an average of $26.87 in 2019 to $23 in 2020.

For Medicare’s press release announcing the new premium and deductible amounts, click here.

What to Do If You Are Appointed Guardian of an Older Adult

Being appointed guardian of a loved one is a serious responsibility. As guardian, you are in charge of your loved one's well-being and you have a duty to act in his or her best interest.  

If an adult becomes mentally incapacitated and is incapable of making responsible decisions, the court will appoint a substitute decision maker, often called a "guardian," but in some states called a "conservator" or other term. Guardianship is a legal relationship between a competent adult (the "guardian") and a person who because of incapacity is no longer able to take care of his or her own affairs (the "ward").

If you have been appointed guardian, the following are things you need to know:

• Read the court order. The court appoints the guardian and sets up your powers and duties. You can be authorized to make legal, financial, and health care decisions for the ward. Depending on the terms of the guardianship and state practices, you may or may not have to seek court approval for various decisions. If you aren't sure what you are allowed to do, consult with a lawyer in your state. 
• Fiduciary duty. You have what's called a "fiduciary duty” to your ward, which is an extremely high standard. You are legally required to act in the best interest of your ward at all times and manage your ward's money and property carefully. With that in mind, it is imperative that you keep your finances separate from your ward's finances. In addition, you should never use the ward's money to give (or lend) money to someone else or for someone else's benefit (or your own benefit) without approval of the court. Finally, as part of your fiduciary duty you must maintain good records of everything you receive or spend. Keep all your receipts and a detailed list of what the ward's money was spent on. 
• File reports on time. The court order should specify what reports you are required to file. The first report is usually an inventory of the ward's property. You then may have to file yearly accountings with the court detailing what you spent and received on behalf of the ward. Finally, after the ward dies or the guardianship ends, you will need to file a final accounting. 
• Consult the ward. As much as possible you should include the ward in your decision-making. Communicate what you are doing and try to determine what your ward would like done. 
• Don't limit social interaction. Guardians should not limit a ward's interaction with family and friends unless it would cause the ward substantial harm. Some states have laws in place requiring the guardian to allow the ward to communicate with loved ones. Social interaction is usually beneficial to an individual's well-being and sense of self-worth. If the ward has to move, try to keep the ward near loved ones.  

For a detailed guide from the Consumer Financial Protection Bureau on being a guardian, click here. 

Home Care Costs Rise Sharply in Annual Long-Term Care Cost Survey

When it comes to long-term care costs, the charges for home care are now rising faster than those for nursing home care, according to Genworth’s 2019 Cost of Care survey. In the past year, the median annual cost for home health aides rose 4.55 percent to $52,624, while the median cost of a private nursing home room rose only 1.82 percent to $102,200.

Genworth reports that the median cost of a semi-private room in a nursing home is $90,155, up 0.96 percent from 2018, and the median cost of assisted living facilities rose 1.28 percent, to $4,051 a month. But home care services had sharper increases. The national median annual rate for the services of a home health aide rose from $22 to $23 an hour, and the cost of adult day care, which provides support services in a protective setting during part of the day, rose from $72 to $75 a day, up 4.17 percent annually.

Alaska continues to be the costliest state for nursing home care by far, with the median annual cost of a private nursing home room totaling $362,628. Oklahoma again was found to be the most affordable state, with a median annual cost of a private room of $67,525.

The 2019 survey, conducted by CareScout for the sixteenth straight year, was based on responses from more than 15,178 nursing homes, assisted living facilities, adult day health facilities and home care providers.  Survey respondents were contacted by phone during May and June 2019.

As the survey indicates, long-term care is growing ever more expensive. Contact your elder law attorney to learn how you can protect some or all of your family's assets from being swallowed up by these rising costs.

For more on Genworth’s 2019 Cost of Care Survey, including costs for your state, click here.