Fong Law Group

What Is a Health Savings Account? Will Medicare Affect Mine?

A health savings account may help you save money on medical expenses, depending on your insurance type. If you are eligible, you can use your health savings account (HSA) to cover certain medical costs, according to HealthCare.gov.

How Does an HSA Work?

If you have a high deductible health plan, you can contribute to an HSA and use the untaxed money to cover medical costs, decreasing your total medical expenses.

High deductible health plans typically have lower monthly premiums than other insurance plans. However, individuals may pay more for medical services before coverage starts, per HealthCare.gov.

What Do Health Savings Accounts Cover?

You can use an HSA to pay for deductibles, copayments, and coinsurance.

Examples of typical expenses for which you can use a health savings account include:

• Acupuncture
• Ambulance costs
• Doctor visits
• Hearing aids
• Medications
• Psychiatric care and psychological therapy
• Certain long-term care services

However, you generally cannot use money from an HSA for monthly insurance premiums, unless you receive Medicare, health care continuation coverage, or unemployment compensation.

For long-term care insurance, you may be able to pay your premiums through a health savings account.

The Benefits of Health Savings Accounts

The advantage of using a health savings account is that funds are not subject to federal taxes when you contribute or withdraw money to pay for qualified medical expenses. You can also earn tax-free interest.

Should you have money left over in your account at the end of the year, it rolls over. The funds stay active, remaining in your account until you need them. Even if you change jobs or retire, you can keep your HSA.

In some cases, you can use your health savings account to cover your spouse’s and dependents’ medical expenses, even if they are not on your plan.

Health Savings Account Rules

2023 Contribution Amounts

The Internal Revenue Service sets contribution limits on HSA’s.

• For 2023, individuals can contribute up to $3,850, and families can put up to $7,300 into a health savings account, Investopedia reports.
• People who are 55 and older by the end of the tax year can make an additional $1,000 catch-up contribution.

Other Insurance Types

Other insurance plans can disqualify you from contributing funds to an HSA.

• Individuals with dollar-first insurance plans – in which the insurer takes care of its share of an included service before the insured individual pays deductibles or copayments – cannot put funds into a health savings account for their outstanding health care fees.
• Those on Medicare cannot add money to health savings accounts, though they can withdraw capital from their accounts to pay medical expenses that Medicare does not cover. While people using health savings accounts typically cannot use the funds to cover monthly premiums, there is an exception for Medicare beneficiaries.

Penalties

Although health savings accounts have several advantages, they also impose restrictions on how you use your money.

Taking money from your account for nonmedical or unqualified expenses before you reach 65 results in a 20 percent tax penalty. The 20 percent tax penalty for ineligible withdrawals does not apply if you are 65 and older. Still, you must pay income tax.

Opening a Health Savings Account

There are several ways to open an HSA.

• Employers can offer them, with the employer and the employee jointly funding the account.
• Some health insurance companies provide health savings accounts with high deductible health plans.
• Banks and financial institutions offer accounts for individuals.

How Does Medicare Affect Your Health Savings Account?

When you enroll in Medicare, you can no longer contribute pre-tax dollars to your health savings account. To put untaxed money in an HSA, you must have high deductible health insurance without additional disqualifying coverage, such as Medicare. Once you have Medicare, you can no longer add tax-free funds to your account.

After you enroll in Medicare, however, you can still access your health savings account. One of the advantages of health savings accounts is that they are vested. As a Medicare beneficiary, you can continue using untaxed funds to cover the medical expenses your insurance does not bear, such as deductibles, coinsurance, and copayments. You cannot, however, use tax-free money to pay for Medicare supplemental insurance.

While the Internal Revenue Service (IRS) prohibits people from using untaxed capital for high deductible health insurance plan premiums, the rule differs for Medicare. When you enroll, you can use your HSA to pay your Medicare premiums without taxes.

Withdrawing Money From Your HSA

People over 65 can withdraw funds from their health savings accounts for nonmedical expenses. Although these withdrawals are no longer tax-free, older adults do not incur the 20 percent tax penalty the IRS imposes on younger people taking funds HSA’s for ineligible expenses.

Since medical costs tend to increase with age, many prefer to keep their money in their health savings accounts to cover eligible medical expenses tax-free.

Delaying Medicare Enrollment

Some people with health savings accounts enroll in Medicare when they initially become eligible, forfeiting the ability to make HSA deposits for Medicare’s coverage. Others delay enrollment in order to continue making health savings account contributions.

• According to the Journal of Accountancy, only individuals with employer-sponsored high deductible health insurance as their primary coverage can continue adding to their health savings accounts past retirement age by delaying Medicare enrollment.
  
  Individuals with private insurance, continuation of health coverage (COBRA), or a health care exchange cannot fund their HSA’s after reaching retirement age.
   
• People who continue to work at small companies after becoming eligible for Medicare must enroll in the program immediately to have any health insurance coverage.
  
  Per MedicareInteractive.org, Medicare must be the primary insurance for those working at companies with fewer than 20 employees. Since the small employer’s health plan does not have to pay until after Medicare contributes, these individuals risk losing health coverage if they delay enrolling in Medicare. Deferment also results in a late penalty.
   
• Those with health insurance from businesses with 20 or more employees can put off Medicare enrollment and continue placing funds into their health savings accounts. Because the company insurance would remain the primary insurer when they join Medicare, they can continue receiving health insurance coverage without Medicare.

Individuals who wish to delay enrolling in Medicare should not accept Social Security payments. This is because Social Security automatically registers beneficiaries for Medicare Part A, rendering them unable to make HSA deposits.

Medicare and the IRS recommend that people who have delayed enrollment after becoming eligible should cease health savings account contributions six months before joining Medicare to avoid a tax penalty. A six-month lookback period applies, as Medicare’s coverage is retroactive.

If you have an HSA, whether you should delay Medicare enrollment depends on your situation. The decision could significantly impact your finances. Speak to your elder law attorney to learn more about your options for your health savings account as you approach retirement age.

Will Medicare Pay for Housekeeping Services?

Medicare is federal health insurance for people over 65, some younger people with disabilities, and those with end-stage renal disease. Coverage of housekeeping services under Medicare can depend on several factors.

Coverage Under Original Medicare?

Medicare is comprised of Part A and Part B coverage. It is often referred to as “original Medicare.”

Part A is free for most people and covers a certain number of days related to hospital inpatient stays, care in a skilled nursing facility, hospice care, and some home health care.

Part B covers doctors’ services, outpatient care, medical supplies, and preventive services. There is a monthly premium for Part B Medicare, plus cost sharing of any care received pursuant to Part A or B.

Original Medicare does not generally cover housekeeping services. Original Medicare labels these services as “homemaker” services, which also include shopping, cleaning, and laundry. If you cannot clean your home for medical reasons, then these costs would be out of pocket.

Coverage Under Medicare Advantage?

However, some Medicare Advantage plans may cover cleaning services. A Medicare Advantage Plan — also commonly referred to as Medicare Part C — is another way to get your Medicare coverage, except through a private insurance company. Many Medicare Advantage plans will cover things original Medicare may not cover and provide additional benefits. However, these companies must follow the rules set by Medicare.

Medicare now allows these private insurers to pay for some limited housecleaning if it is linked to a specific health issue. For example, if you suffer from asthma or breathing conditions, these plans may cover filtration or air cleaners, periodic washing of linens, vacuuming and carpet cleaning, and other similar services. If you suffer from an immune deficiency condition, it may be possible to get coverage for periodic disinfectant cleaning services. However, ongoing or regular services are not likely to be covered.

A senior’s eligibility for Medicare Advantage plan options will depend on what plan options are offered in their area. For more information on Medicare coverage, reach out to your attorney.

Getting Medicare Food Benefits

As people age, accessing healthy meals can become more challenging. According to Feeding America, one in five older adults was food-insecure in 2020. Some older adults struggle with affording healthy foods, whereas others have difficulty going to the grocery store and preparing meals when recovering from an illness or injury.

Although original Medicare does not offer food benefits, some Medicare Advantage plans provide a grocery allowance or cover meal delivery. Some programs also include nutrition education and cooking classes.

Certain Medicare Advantage plans may provide Part C food benefits in addition to Part A hospital, Part B medical, and Part D prescription drug coverage. They may also supply vision, dental, and hearing coverage. The Medicare Advantage plans available to you depend on your state.

Medicare Advantage

Medicare Advantage differs from traditional Medicare, as private companies contract with Medicare to offer Medicare Advantage plans. Plans vary, and finding insurance that fits your unique needs is essential.

Potential enrollees should also be wary of predatory marketing practices and evaluate their options before committing to a plan. Even if you qualify for a Medicare Advantage plan with food benefits, traditional Medicare could be a better option for you, depending on your circumstances.

Special Needs Plans

Special needs plans, which tailor membership to beneficiaries who meet specific criteria, offer grocery and meal benefits options.

Qualifying for grocery benefits through a special needs plan generally requires an individual to have an underlying condition. Examples of conditions that can qualify a person for Medicare Advantage food benefits include diabetes, cancer, heart disease, kidney disease, end-stage renal disease, arthritis, an autoimmune disorder, and obesity.

Grocery Benefits

When Medicare Advantage plans have grocery benefits, they typically give beneficiaries a card that they can use to check out at approved stores like Kroger and Walmart.

The benefits only cover whole foods such as vegetables, legumes, meat, and dairy, as well as pantry staples and water. Only covered food items can go on the card. Enrollees must pay out of pocket for soda, baked goods, and processed foods like chips.

Meal Delivery Services

Instead of grocery benefits, some Medicare Advantage Part C plans cover meal delivery services. Meal delivery services can benefit those who face challenges getting to the grocery store and preparing meals. A service must meet Medicare’s nutritional guidelines for Medicare Advantage to cover it.

Many Medicare Advantage plans only supply meal delivery for a set period. This type of plan can suit those discharged from a hospital or skilled nursing facility who only need help with meals for a set time.

Less common is long-term meal delivery coverage for those homebound with chronic medical conditions.

Other Meal Delivery Options

For older adults who do not qualify for a special needs program with meal benefits or who do not elect to enroll in original Medicare, alternative meal resources are available.

• Meals on Wheels is a federally funded meal delivery program for people aged 60 and above who meet location-specific eligibility requirements.
• You use the Administration for Community Living’s Elder Care Locator to find meal delivery organizations.

Speak with your attorney to access your options before selecting a Medicare Advantage program with grocery or meal benefits.

Majority of Adult Children Cannot Support Boomer Parents, Surveys Find

A recent survey by the American Advisors Group (AAG) finds that 55 percent of adult children say they are not financially prepared to help their Baby Boomer parents cope with rising inflation and living expenses.

“Americans want to see their parents age with grace and dignity and have the resources they need to live comfortably, but for many families the current economy is making that difficult,” AAG Chief of Marketing Martin Lenoir said in a news release.

AAG surveyed more than 1,500 adult children, ages 40 to 55, across the country. Known as the “sandwich generation,” this group faces the responsibilities not only of raising their children, but also of serving as caregivers for their aging parents.

Among the survey’s other key findings:

• More than a third of adult children say they worry that their parents will become a financial burden for them.
• Nearly 60 percent say they cannot afford any kind of professional elder care for their parents.
• Yet almost half admit they have never broached the subject of finances with their senior parents.
• A full 50 percent of them do not know how much debt their parents are carrying.

1 in 3 Adult Children Already Assisting Their Parents Financially

Another survey, conducted in 2020 by GoHealth, Inc., explored GenXers’ and millennials’ involvement in their parents’ financial and health care needs. It found that one in three GenXers and millennials are supporting their parents financially. Nearly the same number are managing, or helping to manage, their parents’ health care.

The survey’s 2,000 GenX and millennial respondents also reported the following:

• On average, they spend 11.5 hours per week managing their parents’ health care by providing transportation, scheduling doctor visits, and explaining insurance claims. They also estimate they’ll spend 14 to 16 years continuing to do so.
• 2 in 5 spent more than $10,000 of their own money supporting their parents in 2020.
• The vast majority (86 percent of GenXers and 82 percent of millennials) worry about having enough money to support themselves and their parents.

Squeezing the Sandwich Generation

Adult children will continue to feel the pressure for the foreseeable future. Every day, on average, 10,000 Boomers (those born between 1946 and 1964) reach age 65, and another 10,000 of them turn 75. According to research by the Blackstone Group, an independent research firm, nearly 80 percent of middle-income Boomers do not have any savings designated to cover their retirement care.

Meanwhile, 30 million Boomers retired from the workforce amid the COVID-19 pandemic. Saddled with college debt, as well as rising inflation and housing costs, those GenXers and millennials who still depend on their parents for financial assistance or housing may no longer be able to count on that support.

Have ‘The Talk’

It’s important for families to have an honest and respectful financial conversation before a medical event occurs or the need for care arises. Talking about money with aging parents can be a delicate matter, but it’s necessary to understand both the degree of care that may be needed and the financial resources available to provide it.

For help planning for the future of your Boomer parents, or for your GenXer and millennial children, consult your attorney.

It Pays to Be a Smart Shopper When Buying a Medigap Insurance Policy

Medigap premiums for plans from insurance companies offering the same benefits vary widely, so it pays to be a smart shopper.

Federal law requires that each insurance company offers the same benefits for each of the Medigap plans lettered A through M, but each company sets its own premium rates.

A Medigap insurance company sets premiums in three ways:

• Community-rated, where the premiums are the same, regardless of age
• Issue or entry age-related, where premiums are cheaper if purchased at a younger age
• Attained-age-related, where premiums are based on your age at the time of purchase

When choosing a Medigap plan, compare the different benefits each plan offers and the price for each company’s plan. Consider your current health status, what your health care needs might be in the years to come, as well as your future health care budget.

Insurers will also consider the state and city where you live. The American Association for Medicare Supplement Insurance Price Index reports found the cost in 2022 of a Plan G policy, the most popular Medigap plan, was $99.24 per month in Dallas, Texas, versus $278.25 per month in New York City.

When shopping for a Medigap policy, get quotes from two or more insurance agents working for different insurance brokers. Every insurance broker may not represent all the insurers offering a plan in the state or city where you live.

It may take time to shop around, but the money you save can be worth it.

What to Do If Your Medicaid Application Is Denied

If you apply for long-term care assistance through Medicaid and your application is denied, the situation may seem hopeless. The good news is that you can appeal the decision. 

Medicaid is a program for low-income individuals, so it has strict income and asset eligibility requirements. Qualifying for Medicaid requires navigating the complicated application process, which has many potential stumbling blocks. However, a Medicaid denial does not mean you will not eventually qualify for benefits. 

The Medicaid agency may deny a Medicaid application for a number of reasons, including the following: 

• Missing documentation. You need to show proof that you are eligible for benefits, which usually means providing Social Security statements, bank records, property deeds, retirement accounts, and insurance records, among other things. 
• Excess assets. In order to be eligible for Medicaid benefits a nursing home resident may have no more than $2,000 in "countable" assets (in most states). 
• Transferred assets. If you transferred assets for less than market value within five years before applying for benefits, you may be subject to a penalty period before you become eligible for benefits. 

The Medicaid agency is required to issue the denial notice with 45 days of the application (or 90 days if you filed for benefits on the basis of a disability). When you get a denial notice, read it carefully. The notice will explain why the application was denied and specify how to file an appeal. 

Before filing a formal appeal, you can try informally asking the agency to reverse the decision. If you made a mistake on the application, this is the easiest and quickest way to proceed. If the caseworker made a mistake, it may be more complicated and require escalation to a supervisor or a formal appeal. 

Appealing a Decision
The denial notice will tell how long you have to file an appeal—the deadline may be as short as 30 days or as long as 90 days after the denial notice. It is important to file the appeal before the deadline. Whether the denial notice requires it or not, you should submit your request for an appeal in writing, so that there is a record of it.

Once your appeal is submitted, the Medicaid agency will set a hearing date. Applicants must attend the hearing or their cases will be dismissed. You have a right to have witnesses testify at the hearing and to question the Medicaid agency’s witnesses. It is a good idea to have an attorney to help you through the appeal process. An attorney can make sure you have all the correct documentation and information to present at the hearing. 

If you win the appeal, your benefits will be retroactive to the date of your eligibility—usually the date of your application. If you lose the appeal, the notice will explain how to appeal the decision. The next step in the appeal process usually involves submitting written arguments. If the next appeal is unsuccessful, then you will have to appeal to court. It is crucial to have the assistance of an attorney for this. 

Reapplying for Benefits
If your application was denied correctly due to excess assets or income, there are steps you can take to spend down your assets or put your income in a trust. Contact an attorney to find out what actions you can take to qualify for benefits. Once you do this, you can then reapply for benefits. Note that when you reapply for benefits, your eligibility date will change to the date of the new application. 

Should You Prepare a Medicaid Application Yourself?

Navigating the Medicaid application process can be complicated, especially if you are applying for long-term care benefits. Hiring an attorney to help you through the process can be extremely helpful. 

Whether you should prepare and file a Medicaid application by yourself or should hire help depends on answers to the following questions:

• How old is the applicant?
• How complicated is the applicant's financial situation?
• Is the individual applying for community or nursing home benefits?
• How much time do you have available?
• How organized are you?

Medicaid is the health care program for individuals who do not have another form of insurance or whose insurance does not cover what they need, such as long-term care. Many people rely on Medicaid for assistance in paying for care at home or in nursing homes.

For people under age 65 and not in need of long-term care, eligibility is based largely on income and the application process is not very complicated. Most people can apply on their own without assistance.  

Matters get a bit more complicated for applicants age 65 and above and especially for those of any age who need nursing home or other long-term care coverage. In these cases, availing yourself of the services of an attorney is practically essential.

Medicaid applicants over age 65 are limited to $2,000 in countable assets (in most states). It's possible to transfer assets over this amount in order to become eligible, but seniors need to be careful in doing so because they may need the funds in the future and if they move to a nursing home, the transfer could make them ineligible for benefits for five years. Professional advice is also crucial because there is a confusing array of different Medicaid programs that may be of assistance in providing home care, each with its own rules.

All of that said, the application process itself is not as complicated for community benefits (care that takes place outside of an institutional setting, such as in the beneficiary’s home). In short, those over 65 may need to consult with an elder law attorney for planning purposes, but they or their families may be able to prepare and submit the Medicaid application themselves.

But submitting an application for nursing home benefits without an attorney's help is not a good idea. This is because Medicaid officials subject such applications to enhanced scrutiny, requiring up to five years of financial records and documentation of every fact. Any unexplained expense may be treated as a disqualifying transfer of assets, and many planning steps -- such as trusts, transfers to family members, and family care agreements -- are viewed as suspect unless properly explained. Finally, the process generally takes several months as Medicaid keeps asking questions and demanding further documentation for the answers provided.

Many elder law attorneys offer assistance with Medicaid applications as part of their services. This has several advantages, including expert advice on how best to qualify for benefits as early as possible, experience in dealing with the more difficult eligibility questions that often arise, and a high level of service through a long, grueling process. The one drawback of using an attorney rather than a lay service is that the fee is typically substantially higher. However, given the high cost of nursing homes, if the law firm's assistance can accelerate eligibility by even one month that will generally cover the fee. In addition, the payments to the attorney are generally with funds that would otherwise be paid to the nursing home -- in other words, the funds will have to be spent in any event, whether for nursing home or for legal fees.

Medicare Now Covers the Cost of COVID At-Home Tests

If you have Medicare, you can now receive up to eight free rapid at-home Covid-19 tests a month at participating pharmacies. 

The free tests are available without a prescription to all Medicare beneficiaries with Part B, including those enrolled in a Medicare Advantage plan. If you only have Medicare Part A, Medicare won’t cover the cost. 

To get the tests, you can visit one of the pharmacies participating in the program.  (For a partial list of participating pharmacies, click here.) You do not have to be a current customer of the pharmacy in order to receive the tests, and Medicare Advantage plan enrollees may use an out-of-network pharmacy. You should bring your red, white, and blue Medicare card (even if you have a Medicare Advantage or Medicare Part D plan), but the pharmacy may be able to get the information it needs to bill Medicare without the card. 

Unlike with private insurance, there is no upfront cost for the tests. As long as you do not order more than eight tests in a calendar month, you will not pay anything. Note that tests are often packaged with two in each box, so eight tests may not mean eight boxes. If you pay for a test yourself, Medicare will not reimburse you. Medicare enrollees who order tests from covidtests.gov do not need to count those tests against Medicare's eight-test-per-month limit.

When the Biden administration originally announced it was requiring private insurers to reimburse the cost of up to eight rapid at-home Covid tests a month purchased at retail stores and pharmacies, this news left out the nation’s 62 million Medicare beneficiaries – seniors and people with disabilities who are at the highest risk of death from Covid-19. If paid for out-of-pocket, tests typically cost more than $20 for a package of two, which can discourage many Americans from getting tested. 

The problem in the case of tests for Medicare beneficiaries was that the federal program’s rules did not permit coverage of over-the-counter tests. Amid pressure from Congress and advocacy groups, officials scrambled to find a regulatory workaround.  

For more information about the free COVID tests from the Centers for Medicare & Medicaid Services, click here.

What Documents Are Required for a Medicaid Application?

Medicaid applicants must prove that they have limited income and assets in order to be eligible for long-term care services. Before beginning the application process, it is helpful to understand what information you will be required to provide to prove your eligibility. 

Medicaid is a state-run program, so the rules can vary from state to state, but in general applicants are not eligible for Medicaid benefits if the applicant's income exceeds $2,523 a month (for 2022). Applicants can also have no more than $2,000 in assets in most states.  

States require Medicaid applicants to provide the necessary information to prove that they are eligible for benefits. The burden of proof is on the Medicaid applicant—not on the state. In addition to needing to provide identifying information such as a birth certificate and proof of citizenship, following are some of the documents that you may have to provide to the Medicaid agency when you apply for benefits:

• Proof of income. A copy of any pay stubs, Social Security statements, and/or pension checks; income tax returns for the past five years; and verification of any other sources of income, for example, rental income or dividends. 
• Bank records. Copies of bank statements for the past five years. 
• Property. A copy of the deed to any property owned within the past five years and a copy of the most recent property tax bill. 
• Retirement accounts. Statements for the past five years of retirement accounts. 
• Insurance. Copies of any insurance policies, including health insurance, life insurance, and/or long-term care insurance.
• Car registration. Registration information for any cars owned by you. 
• Burial arrangements. Copies of any prepaid funeral contracts or deeds to burial plots.

The state may use an electronic database to verify some of the information. Intentionally giving false information is a serious offense. 

The state looks back five years to determine whether you transferred assets for less than market value within five years of applying for Medicaid. Applicants who gave away assets may be subject to a period of ineligibility. 

Not all assets will be counted against you for the purposes of Medicaid eligibility. Personal possessions, one vehicle, your principal residence, and prepaid funeral plans are “noncountable” assets. However, the state will likely still request information about these assets. 

After you begin receiving benefits, you are not done. Medicaid reviews your income and assets every year to ensure that you are still eligible. This could involve electronic verification or submitting more documentation. 

The Medicaid application process is complicated, and submitting an application without an attorney's help, particularly if you are applying for nursing home benefits, is not a good idea.  The process generally takes several months as Medicaid keeps asking questions and demanding further documentation for the answers provided. Before applying, contact your attorney. 

Hiring a Caregiver: Should You Employ One Yourself or Go Through an Agency?

Most seniors prefer to stay at home as long as possible rather than move into a nursing home. For many families, this means eventually hiring a caregiver to look after an aging relative. There are two main ways to hire someone: directly or through a home health agency.

Hiring directly
When you hire a caregiver directly, you need to consider all the tax and liability issues. As an employer, you are responsible for filing payroll taxes, tax forms, and verifying that the employee can legally work in the United States. If you pay $2,300 or more in wages in 2021 to any one employee, you need to withhold and pay Social Security and Medicare taxes. If you pay more than $1,500 in wages in 2021, you need to pay unemployment taxes. In addition, a private caregiver may not carry his or her own liability insurance or workers' compensation. If an accident occurs on the job, you could be responsible.

The benefit of hiring a caregiver directly is that you have more control over whom you hire and can choose someone whom you feel is right for your family. Another benefit is that hiring privately is usually cheaper than hiring through a home health agency. For more information from Caring.com on hiring a caregiver directly, click here.

The agency route
When you hire through a home health agency, the agency is the employer, so you don't need to worry about tax and liability issues. The agency takes care of screening the employees, doing background checks, and providing insurance. In addition, a licensed home care agency must provide ongoing supervision to its employees. It can help the employees deal with difficult family situations or changing needs. The agency may also be able to provide back-up if a regular caregiver is not available.

The downside of going through an agency is not having as much input into the selection of the caregiver. Another consideration is that caregivers may change or alternate, causing a disruption in care and confusion. To find a home health care agency near you, click here.