Medicare

When to Opt for Alternatives to Traditional Long Term Care Insurance.

March 3, 2016 by Frank West

Some 15% of those who don’t currently have or plan to purchase long term coverage in the next five years have an alternate plan in place, according to a new survey by Genworth.

“The good news for the nearly three-quarters of Americans who are willing to make some concessions to ensure they are properly prepared for long term care is that there are options for funding long term care,” said Pam Nelson, vice president of consumer insights with Genworth.

“We are using annuities with long term care riders attached for some of our clients that would be uninsurable under a traditional plan due to their current or past medical issues,” said Brian Gordon, president of MAGA, a national long term care brokerage firm in Chicago.

There are also hybrid life insurance plans with long term care riders attached from insurers such as Lincoln, Mass Mutual and Guardian.

“The benefit of hybrid long term care insurance plans is being able to hedge multiple risks with the same dollar,” said Yan J. Katz, insurance specialist with the Bulfinch Group. “And if the policy holder does not end up needing the long term care rider, premiums paid could be recouped and passed to the beneficiary through the death benefit rather than being lost.”

Although single premium whole life insurance policies with long term care rider options attached only require a one time deposit rather than ongoing contributions, the downside is steep upfront costs to buy it.

“Less money is available to pay for long-term care under these hybrid policies,” said Mike Piershale, president of the Piershale Financial Group.

Although they may cover the same levels as traditional long term care policies for home care, assisted living and nursing home care, hybrid long term care life insurance policies aren’t perfect, because many hybrid life insurance policies with riders attached cap the amount for long-term care benefits at 50% of the face value of the policy.

“Thus if you have a death benefit of $100,000 you may be limited to $50,000 available for nursing home care,” Piershale told MainStreet. “This could leave you with a serious shortfall of funds if you have a long stay in a nursing home.”

Other alternatives are those with critical and chronic care riders that can also be attached; however, the way the benefits trigger are different from traditional long term care insurance policies.

“Long term care policies are triggered by the need for long term care after a specified waiting period regardless of whether or not the disability is permanent,” sad Piershale. “Critical care riders are usually limited to specific diagnosis and may require a physician to certify that the condition is permanent.”

Certified by a physician, the chronically ill individual typically has a severe cognitive impairment or requires substantial assistance with at least two activities of daily living (ADLs) for the rest of his lifetime. ADLs include bathing, continence, dressing, eating, transferring and toileting.

Medicare Part B premiums increasing up to 30%.

May 12, 2015 by Frank West

When the Medicare Access and CHIP Reauthorization Act of 2015, commonly known as the “doc-fix” legislation, becomes law, some Medicare participants will pay 30% more for their Part B premiums. The legislation, which was decisively passed by the House on March 26 and the Senate on April 14 is expected to be signed by President Obama soon.

The bill replaces the current physician Medicare reimbursement schedule with payment increases for doctors for the next five years. It will be financed by higher Medicare Part B premiums for individuals whose income exceeds specified thresholds beginning in 2018.

Lower to moderate income households unaffected

Medicare Part B covers doctor and outpatient visits. Premium amounts are determined using modified adjusted gross income, or MAGI, per one’s federal income tax return two years prior to the current year. MAGI is adjusted gross income plus tax-exempt interest.

There are currently five MAGI brackets. Each of the married filing joint bracket amounts is double the corresponding single bracket amounts. Annual premiums range from $1,258.80 to $4,028.40 per person depending upon your bracket.

Individuals in the first two brackets, that is, those whose MAGI doesn’t exceed $107,000 using single filing status or $214,000 filing joint, will continue to pay the premiums they’re paying now.

New income bracket

The third MAGI bracket, which is currently $107,001 up to $160,000 for single individuals, with an associated annual Part B premium of $2,517.60, will be split into two brackets with a premium of $3,272.40 for the fourth bracket per the table below. Per the table, single individuals with MAGI between $133,501 and $160,000 will pay an additional $754.80, or 30%, for their Medicare Part B premiums beginning in 2018.

An annual premium of $3,272.40 is currently paid by single individuals whose MAGI is between $160,001 and $214,000. Beginning in 2018, those who fall into this bracket will pay $4,028.40. This represents an increase of $756.00, or 23.1%. The top premium of $4,028.40 is currently paid by single and joint filing status individuals whose MAGI exceeds $214,000 and $428,000, respectively.

Medicare Part D prescription drug premiums

The new Medicare Part B income brackets will also apply to Medicare Part D prescription drug premiums beginning in 2018. Once again, single individuals with MAGI between $133,501 and $214,000 will be affected as will joint filers with MAGI between $267,001 and $428,000.

The Part D premium increases for individuals whose income falls into the foregoing ranges will vary depending upon the specific Part D plan. While the monthly amounts are less than those for Part B, the percentage increases for affected individuals will be as much as 61%.

Income brackets not adjusted for inflation

Individuals who are impacted by the income bracket changes and associated higher premiums will initially be in the minority. More people will be adversely affected each year going forward, however, since the new legislation includes no provision for income bracket inflation adjustments.

Narrower brackets that would result in significantly greater numbers of individuals paying higher Medicare Part B and D premiums are a distinct possibility in the future. Had a bipartisan committee proposal been enacted, the top end of the lowest MAGI bracket would have been reduced for single and joint filing taxpayers from $85,000 and $170,000, respectively, to a maximum of $45,000 and $90,000, respectively. The other MAGI brackets would have seen similar reductions.

Look for planning opportunities

Given the fact that Medicare Part B and D premiums are determined by one’s income, it’s important to be aware of the various income thresholds and plan accordingly. Any reduction in Medicare premiums should also result in a reduction in income tax liability since both are income driven.

Finally, given the fact that 2016 MAGI will be used to calculate 2018 premiums, it isn’t too early to start planning. This includes individuals who are turning 62 in 2015 since they will be eligible for Medicare in 2018.

When to Opt for Alternatives to Traditional Long Term Care Insurance.

Medicare Part B premiums increasing up to 30%.

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