Fong Law Group

How the $1.9 Trillion COVID-19 Relief Bill Aids Seniors

President Biden has signed the latest COVID-19 relief bill, which in addition to authorizing stimulus checks, funding vaccine distribution, and extending unemployment benefits, also provides assistance to seniors in a number of ways. 

The $1.9 trillion American Rescue Plan Act (ARPA) delivers a broad swath of relief, covering families, employers, health care, education, and housing. The following are the provisions that most directly affect older Americans:

• Relief checks. The ARPA provides $1,400 direct payments to individuals earning up to $75,000 in annual income and couples with incomes up to $150,000. The payments phase out for higher earners, and there are no payments for individuals earning more than $80,000 a year or couples making more than $160,000. Eligible dependents, including adult dependents, also receive $1,400. People collecting Social Security, railroad retirement, or VA benefits will automatically receive the payment even if they don’t file a tax return. The checks will not affect eligibility for Medicaid or Supplemental Security Income as long as any amount that pushes recipients above the programs’ asset limits is spent within 12 months.  
• Medicaid home care. The Act provides more than $12 billion in funding to expand Medicaid home and community-based waivers for one year. This funding will allow states to provide additional home-based long-term care, which could keep people from being forced into a nursing home. The money will also allow states to increase caregivers’ pay. 
• Nursing homes. Nursing homes have been hit hard during the pandemic. The Act supports the deployment of strike teams to help nursing homes that have COVID-19 outbreaks. It also provides funds to improve infection control in nursing homes. 
• Pensions. Many multi-employer pension plans are on the verge of collapse due to underfunding. The Act creates a system to allow plans that are insolvent to apply for grants in order to keep paying full benefits. 
• Medical deductions. If you have a large number of medical expenses, you may be able to deduct some of them from your taxes, including long-term care and hospital expenses. The Act permanently lowers the threshold for deducting medical expenses. Taxpayers can deduct unreimbursed medical expenses that exceed 7.5 percent of their income. The threshold was lowered to 7.5 percent under the 2017 tax law, but was set to revert to 10 percent for some taxpayers in 2021.  
• Older Americans Act. The ARPA provides funding to programs authorized under the Older Americans Act, including vaccine outreach, caregiver support, and the long-term care ombudsman program. It also directs funding for the Elder Justice Act and to improve transportation for older Americans and people with disabilities. 

For more information about what is in the ARPA, click here and here.

Long-Term Care Benefits for Veterans and Surviving Spouses

Long-term care costs can add up quickly. For veterans and the surviving spouses of veterans who need in-home care or are in a nursing home, help may be available.

The Veterans Administration (VA) has an underused pension benefit called Aid and Attendance that provides money to those who need assistance performing everyday tasks. Even veterans whose income is above the legal limit for a VA pension may qualify for the Aid and Attendance benefit if they have large medical expenses for which they do not receive reimbursement. 

Aid and Attendance is a pension benefit, which means it is available to veterans who served at least 90 days, with at least one day during wartime. The veteran does not have to have service-related disabilities to qualify. Veterans or surviving spouses are eligible if they require the aid of another person to perform an everyday action, such as bathing, feeding, dressing, or going to the bathroom. This includes individuals who are bedridden, blind, or residing in a nursing home.

To qualify a veteran (or spouse) must have a net worth limit of $130,773 (in 2021), which will increase each year with cost-of-living adjustments. But in the case of the VA, this number will include both the applicant's assets and income. It will be indexed to inflation in the same way that Social Security increases. An applicant's house (up to a two-acre lot) will not count as an asset even if the applicant is currently living in a nursing home. Applicants will also be able to deduct medical expenses from their income. This can include Medicare, Medigap, and long-term care insurance premiums; over-the-counter medications taken at a doctor's recommendation; long-term care costs, such as nursing home fees; the cost of an in-home attendant that provides some medical or nursing services; and the cost of an assisted living facility. These expenses must be unreimbursed (in other words, insurance must not pay the expenses). The expenses should also be recurring, meaning that they should recur every month.

There is also a three-year look-back to determine if the veteran transferred assets in order to qualify for benefits. Applicants will have to disclose all financial transactions they were involved in for three years before the application. Applicants who transferred assets to put themselves below the net worth limit within three years of applying for benefits will be subject to a penalty period that can last as long as five years. This penalty is a period of time during which the person who transferred assets is not eligible for VA benefits. There are exceptions to the penalty period for fraudulent transfers and for transfers to a trust for a child who is unable to "self-support."

The VA will determine a penalty period in months by dividing the amount transferred that would have put the applicant over the net worth limit by the maximum annual pension rate (MAPR) for a veteran with one dependent in need of aid and attendance. For example, assume the net worth limit is $130,773 and an applicant has a net worth of $117,773. The applicant transferred $30,000 to a friend during the look-back period. If the applicant had not transferred the $30,000, his net worth would have been $147,773, which exceeds the net worth limit by $17,000. The penalty period will be calculated based on $17,000, the amount the applicant transferred that put his assets over the net worth limit (147,773-130,773).

Annual Pension Rate (MAPR). Following are the MAPRs for 2021:

Single veteran	$23,238
Veteran with one dependent	$27,549
Single surviving spouse	$14,934
Surviving spouse with one dependent	$17,815

How it works. The amount a person receives depends on his or her income. The VA pays the difference between the veteran's income and the MAPR. John, a single veteran, has income from Social Security of $16,500 a year and a pension of $12,000 a year, so his total income is $28,500 a year. He pays $20,000 a year for home health care, $1,122 a year for Medicare, and $1,788 a year for supplemental insurance, so his total medical expenses are $22,910. Subtracting his medical expenses from his income ($28,500 - $22,910), John's countable income is $5,590. John could qualify for $17,648 ($23,238 - $5,590) in Aid and Attendance benefits.

To find out if you are eligible for Aid & Attendance benefits, contact your attorney.

To apply, contact a VA office near you.

For the VA's Guide to Long-Term Care, click here.

What to Do With Your Stimulus Check if You Are in a Nursing Home

As the second (and maybe third) round of stimulus checks go out, it is important to know that nursing home residents are not required to turn their checks over to their nursing home. And Medicaid recipients need to spend the cash within a year if it puts them over Medicaid’s resource limit. 

In December 2020, Congress approved $600 stimulus checks for individuals making less than $75,000 a year. And Congress is currently considering whether to approve another round of $1,400 stimulus checks. Those checks should be sent to everyone eligible, including individuals on Medicaid and in a nursing home or assisted living facility. 

The Federal Trade Commission (FTC) is reminding nursing home and assisted living residents that their stimulus checks are for them, not their facility. With the first round of stimulus checks, there were reports that facilities were taking the checks without residents’ permission. The FTC says that if nursing homes ask for a resident’s check, the resident should contact the state attorney general and the FTC. 

Medicaid recipients who receive a stimulus check that puts them above Medicaid’s resource limit will need to spend down the money within a year or risk losing benefits. The Social Security Administration has said that it will not consider stimulus payments as income, and that the payments will be excluded from a Medicaid recipient’s resources for 12 months. The following are examples of what a Medicaid recipient may be able to spend the money on without affecting their eligibility:

• Make a payment toward paying off debt.
• Make small repairs around the house. 
• Update personal effects. Buy household goods or personal comfort objects. Buy a new wardrobe, electronics, or furniture.
• Buy needed medical equipment, see a dentist or get eyes checked if those items aren't covered by insurance.

If you have questions about how you or a family member in a nursing home can spend the money, contact your elder law attorney. 

Congress Fixes Some, But Not All, Medicare Enrollment Problems

Tucked in the federal spending bill that passed at the end of December 2020 are some changes aimed at simplifying Medicare enrollment and addressing coverage gaps. But Congress chose not to deal with the biggest problem.

Currently, Medicare enrollment begins three months before the month of your 65th birthday and continues for three months after your birthday month (for a total of seven months). Medicare Part A has no premiums, but if you do not enroll in Medicare Part B or Medicare Part D (prescription drug coverage) during the initial enrollment period, you will face penalties (with exceptions; read on). For example, your Medicare Part B premium may go up 10 percent for each 12-month period that you could have had Medicare Part B, but did not take it.  (You can delay signing up for Part B and Part D without penalty for a number of reasons, including if you have valid coverage through an employer with 20 or more employees that you still work for, or, in the case of Part D, you have private insurance that is at least as good as Medicare’s. Check with your employer or insurer to find out whether you can safely delay enrolling.) 

In addition, if you fail to enroll during the seven-month initial enrollment period, you will have to wait for the general enrollment period, which usually runs between January 1 and March 31 of each year. If you enroll during the general enrollment period, your coverage does not start until July 1. This means that you may have to wait up to seven months before you can get Medicare coverage. And, to make matters even more confusing, the general enrollment period for Part B is different from the enrollment period for Part D and Medicare Advantage plans. 

Congress has now taken a stab at ending these coverage gaps and clearing up some of the confusion. Under the new law, starting in 2023, whether you enroll during your initial enrollment period or you enroll during the general enrollment period, Medicare coverage will begin the month after enrollment. The law also allows Medicare to make exceptions for people who delay enrollment because of an “exceptional circumstance,” such as a natural disaster. Finally, the new law directs the federal government to align the Medicare Part B, Medicare Advantage, Medicare Part D enrollment periods by 2023.

While these changes will help eliminate coverage gaps, there are still problems. As tax and retirement policy expert Howard Gleckman points out, Medicare beneficiaries often miss the initial enrollment period because they are not aware of it. An earlier version of the law would have required the Social Security Administration to send notifications to individuals who are turning 65 to alert them of their eligibility for Medicare, but that provision was dropped from the final version.

Medicare Premiums to Increase Slightly in 2021

Medicare premiums are set to rise a modest amount next year, but still cut into any Social Security gains. The basic monthly premium will increase $3.90, from $144.60 a month to $148.50.

The Centers for Medicare and Medicaid Services (CMS) announced the premium and other Medicare cost increases on November 6, 2020. The hike could have been much worse due to rising costs during the coronavirus pandemic, but the bipartisan budget bill passed in October capped the increase. While the majority of beneficiaries will pay the added amount, a "hold harmless" rule prevents Medicare recipients' premiums from increasing more than Social Security benefits, which are going up only 1.3 percent in 2021. This “hold harmless” provision does not apply to Medicare beneficiaries who are enrolled in Medicare but who are not yet receiving Social Security, new Medicare beneficiaries, seniors earning more than $88,000 a year, and "dual eligibles" who get both Medicare and Medicaid benefits.

Meanwhile, the Part B deductible will rise from $198 to $203 in 2021, while the Part A deductible will go up by $76, to $1,484. For beneficiaries receiving skilled care in a nursing home, Medicare's coinsurance for days 21-100 will increase from $176 to $185.50. Medicare coverage ends after day 100.  

Here are all the new Medicare payment figures:
•    Part B premium: $148.50 (was $144.60)
•    Part B deductible: $203 (was $198)
•    Part A deductible: $1,484 (was $1,408)
•    Co-payment for hospital stay days 61-90: $371/day (was $352)
•    Co-payment for hospital stay days 91 and beyond: $742/day (was $704)
•    Skilled nursing facility co-payment, days 21-100: $185.50/day (was $176)

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

Premiums for higher-income beneficiaries ($88,000 and above) are as follows: 

• Individuals with annual incomes between $88,000 and $111,000 and married couples with annual incomes between $176,000 and $222,000 will pay a monthly premium of $207.90.
• Individuals with annual incomes between $111,000 and $138,000 and married couples with annual incomes between $222,000 and $276,000 will pay a monthly premium of $297.
• Individuals with annual incomes between $138,000 and $165,000 and married couples with annual incomes between $276,000 and $330,000 will pay a monthly premium of $386.10.
• Individuals with annual incomes above $165,000 and less than $500,000 and married couples with annual incomes above $330,000 and less than $750,000 will pay a monthly premium of $475.20.
• Individuals with annual incomes above $500,000 and married couples with annual incomes above $750,000 will pay a monthly premium of $504.90.

Rates differ for beneficiaries who are married but file a separate tax return from their spouse. Those with incomes greater than $88,000 and less than $412,000 will pay a monthly premium of $475.20. Those with incomes greater than $412,000 will pay a monthly premium of $504.90.

The Social Security Administration uses the income reported two years ago to determine a Part B beneficiary's premium. So the income reported on a beneficiary's 2019 tax return is used to determine whether the beneficiary must pay a higher monthly Part B premium in 2021. 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 Medicare Advantage plans may have different cost-sharing arrangements. CMS estimates that the Medicare Advantage average monthly premium will decrease by 11 percent in 2021, from an average of $23.63 in 2020 to $21 in 2021.

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

Husbands Usually Don’t Consider Their Wives’ Future When Deciding When to Take Social Security Benefits

The amount of Social Security benefits a surviving spouse receives depends, in part, on when their deceased spouse began claiming benefits. However, husbands usually don’t take survivor’s benefits into account when claiming benefits, according to a recent study, meaning that many widows will needlessly experience a significant drop in income. 

Because women typically live longer than men and men are often the higher earners, most married women will be widowed and will have their income drop below what they need to maintain their accustomed standard of living. Spouses of a worker who has died are entitled to the worker's full retirement benefits once they reach their full retirement age. If the worker delayed retirement, the survivor's benefit will be higher. Husbands have the option of increasing their surviving spouse’s income by delaying Social Security benefits, but according to a study by the Center for Retirement Research at Boston College, most husbands do not take their wives’ future needs into consideration. 

The study looked at whether greater awareness of Social Security Survivor’s benefits would affect claiming decisions. The study found that husbands tend to take more immediate concerns into consideration, such as their health and whether they have another pension, rather than their wives’ Survivor’s Benefits. Giving the husbands information about how they could improve their wives’ financial well-being by claiming benefits later did not change their claiming decisions. 

The study concludes that in order to protect widows, the government should consider providing Survivor’s Benefits in a way that doesn’t tie the surviving spouse’s benefits to the decision of when to claim benefits. As things stands now, however, if you are the higher earner and are nearing retirement, you may want to take into account how your decision on when to claim benefits will affect your spouse if he or she survives you. 

To come up with a plan that will best protect you and your spouse, contact your attorney. 

To read the study, click here. 

A Modest Social Security Increase for 2021

The Social Security Administration has announced a 1.3 percent rise in benefits in 2021, an increase even smaller than last year’s. 

Cost-of-living increases are tied to the consumer price index, and a modest upturn in inflation rates and gas prices means Social Security recipients will get only a slight boost in 2021. The 1.3 percent increase is similar to last year’s 1.6 percent increase, but much smaller than the 2.8 percent rise in 2019. The average monthly benefit of $1,523 in 2020 will go up by $20 a month to $1,543 a month for an individual beneficiary, or $240 yearly. 

The cost-of-living change also affects the maximum amount of earnings subject to the Social Security tax, which will grow from $137,700 to $142,800.

For 2021, the monthly federal Supplemental Security Income (SSI) payment standard will be $794 for an individual and $1,191 for a couple.

Some years a small increase means that additional income will be entirely eaten up by higher Medicare Part B premiums. But this year, that shouldn’t be the case. The standard monthly premium for Medicare Part B enrollees is forecast to rise $8.70 a month to $153.30. However, due to the coronavirus pandemic, under the terms of the short-term spending bill the increase for 2021 will be limited to 25 percent of what it would otherwise have been.

Most beneficiaries will be able to find out their specific cost-of-living adjustment online by logging on to my Social Security in December 2020. While you can still receive your increase notice by mail, you have the option to choose whether to receive your notice online instead of on paper.

For more on the 2021 Social Security benefit levels, click here.

How Will the Coronavirus Pandemic Affect Social Security?

The coronavirus pandemic is having a profound effect on the current U.S. economy, and it may have a detrimental effect on Social Security’s long-term financial situation. High unemployment rates mean Social Security shortfalls could begin earlier than projected. 

Social Security retirement benefits are financed primarily through dedicated payroll taxes paid by workers and their employers, with employees and employers splitting the tax equally. This money is put into a trust fund that is used to pay retiree benefits. The most recent report from the trustees of the Social Security trust fund is that the fund’s balance will reach zero in 2035. This is because more people are retiring than are working, so the program is paying out more in benefits than it is taking in. Additionally, seniors are living longer, so they receive benefits for a longer period of time. Once the fund runs out of money, it does not mean that benefits stop altogether. Instead, retirees’ benefits would be cut, unless Congress acts in the interim. According to the trustees’ projections, the fund’s income would be sufficient to pay retirees 77 percent of their total benefit. 

With unemployment at record levels due to the pandemic, fewer employers and employees are paying payroll taxes into the trust fund. In addition, more workers may claim benefits early because they lost their jobs. President Trump issued an executive order deferring payroll taxes until the end of the year as a form of economic relief, which could negatively affect Social Security and Medicare funds.  

Some experts believe that the pandemic could move up the depletion of the trust fund by two years, to 2033, if the COVID-19 economic collapse causes payroll taxes to drop by 20 percent for two years. Other experts argue that it could have a greater effect and deplete the fund by 2029. However, as the Social Security Administration Chief Actuary morbidly noted to Congress, this pandemic different from most recessions: the increased applications for benefits will be partially offset by increased deaths among seniors who were receiving benefits. 

It remains to be seen exactly how much the pandemic affects the Social Security trust fund, but the experts agree that as soon as the pandemic ends, Congress should take steps to shore up the fund.

Seniors Affected by the Coronavirus Pandemic Have More Time to Apply for Medicare or Change Plans

The closure of Social Security offices has caused problems and worries for recently unemployed seniors who need to apply for Medicare after losing their employer coverage. In response, the federal government has announced that seniors affected by the crisis have additional time to enroll in Medicare or change plans.

With millions of people out of work and losing their employer health insurance due to the coronavirus pandemic, the need for Medicare coverage is critical. While it is possible for some seniors to apply for Medicare online, others need to provide more information, including individuals who did not sign up for Medicare Part B initially because they had health insurance through an employer. Seniors who are applying for Medicare Part B after losing their job need to provide proof of their employer policy along with their Medicare application to ensure they aren’t subject to substantial penalties. With Social Security offices closed, Medicare applicants may have difficulty figuring out how to submit the necessary information or getting answers to their questions about their application. 

The Centers for Medicare and Medicaid Services (CMS) has announced changes to Medicare enrollment periods to help seniors affected by the coronavirus pandemic. Those who missed their opportunity to enroll in Medicare will have additional time to apply. CMS is providing “equitable relief” to seniors who:

• were in their Initial Enrollment Period (IEP), General Enrollment Period (GEP), or Special Enrollment Period (SEP) between March 17, 2020, and June 17, 2020; and
• did not submit an enrollment request to the Social Security Administration (SSA).

Seniors have until June 17, 2020, to submit an application. Applications can be submitted via fax to 1-833-914-2016 or mailed to the local SSA field office. Although SSA offices are closed for in-person service, offices are still processing applications received by mail. For the SSA’s Social Security Office Locator, go here: https://secure.ssa.gov/ICON/main.jsp. 

For questions and answers on how to submit a Medicare application and what information is needed, click here.

In addition, CMS has announced an SEP for people to make changes to their Medicare Advantage and prescription drug plans if they missed the open enrollment period or a special enrollment period due to the coronavirus pandemic. The SEP is available until July 13, 2020. 

For more information from CMS, click here.

Should Seniors Who Lose Their Job During the Coronavirus Pandemic Claim Social Security Benefits Early?

In the wake of the coronavirus pandemic, unemployment is skyrocketing. Seniors who lose their jobs may be tempted to claim Social Security benefits early, but should they, given the resulting reduction in future benefits? The answer depends on your situation, but you may be able to claim and not sacrifice much in terms of future benefits.  

While you can claim Social Security benefits as early as age 62, the better financial decision is usually to wait to take benefits as long as you are able. If you take Social Security between age 62 and your full retirement age, your benefits will be permanently reduced to account for the longer period you will be paid. Individuals who file at age 62 this year will receive 72 percent of their full benefit. On the other hand, if you delay taking retirement beyond your full retirement age, depending on when you were born, your benefit will increase by 6 to 8 percent for every year that you delay, in addition to any cost of living increases. This extra income could be very welcome, especially if you live into your 80s or beyond.

Unfortunately, many seniors who lose their job due to the coronavirus pandemic may find it necessary to apply for benefits early, potentially losing hundreds of thousands in future benefits. Before rushing to apply for early retirement benefits, you should consider all of your options. If you are lucky enough to have substantial savings, it may make sense to spend your savings rather than take benefits early. You may also be able to apply for unemployment benefits to allow you to further delay taking benefits. 

If you do not have any savings or unemployment benefits to fall back on, your only option may be to claim benefits. However, if you do claim early and then go back to work, you may have the ability to increase those benefits. If you are able to stop the benefits within 12 months of starting, you can withdraw the application, repay the benefits collected, and then still be eligible for the higher benefit amount at full retirement age or older. It is essentially a one-year interest-free loan.

If you take benefits early but are not able to stop the benefits within 12 months of starting, you can still suspend your benefits in order to earn higher benefits. For example, if you start collecting at age 62 but no longer need the income once you reach your full retirement age, you could suspend benefits until age 70. You won't get a complete do-over, but between your full retirement age and 70 you would earn delayed retirement credits, which would increase your ultimate benefit amount when you collect at age 70. 

Whatever you decide, consider all of your options carefully and talk things over with your attorney before making any rash decisions. 

For a New York Times article about taking benefits early, click here.