Start Thinking about End-of-Year Tax Planning Now

David Garcia

David L. Garcia, CPA, CFP®, ADPA® Principal, Wealth Manager

Most folks hate to think about paying taxes, let alone end-of-year tax planning strategies. Unfortunately, ignoring tax planning can lead to paying Uncle Sam more than is required. The last four years have seen the introduction of new income-based Medicare premium increases along with increases in the top income tax, capital gains, and dividend rates. Starting to plan as early as possible is crucial since most strategies need to be completed prior to year end. Depending on your situation, it may make sense to either accelerate or delay deductions and income. This blog post briefly discusses some of the most often used tax planning strategies, but is by no means an exhaustive list. Tax planning strategies can be complex and should always be considered in close consultation with your accountant and financial advisor to make sure decisions are made with your unique tax situation in mind.

Harvesting Losses

At first glance, it may seem silly to intentionally sell an investment for a loss. However, opportunistic tax loss harvesting can boost after-tax returns. Suppose you have a $50,000 investment in the U.S. stock market via a broad market index fund that loses 10% of its value this year. You can sell this index fund and turn around at the same time and buy a very similar U.S. index investment, losing no market exposure but banking a $5,000 loss for tax purposes. This can be a beneficial tool for reducing taxes while maintaining your asset allocation and risk/return profile. Even if you do not have any gains to apply the loss to in the year of sale, up to $3,000 can be used against ordinary income items such as wages. Further, any excess unused loss is carried forward to be used in future tax years.

There are some important limitations to tax loss harvesting that should be kept in mind. The IRS will not let you sell an investment and at the same exact time buy back that identical investment just to create a tax loss. IRS rules state you must wait 30 days to purchase the identical investment sold for the loss or you violate what is commonly referred to as the “wash sale rule.” A wash sale disallows the loss for tax purposes. However, IRS rules do allow you to purchase a very similar investment, preferably one that is highly correlated with the investment sold for a loss, without breaking the wash sale rule. For example, selling the S&P 500 SPDR and replacing it with the Vanguard total stock market index would give almost identical market exposure while not violating the wash sale rule.

The bottom line is that actively managing capital gains and losses near year end can increase after-tax returns over time. Just be sure to consult with your accountant or investment advisor to make sure you do not run afoul of any limitations.

Medicare Premiums for High-Income Earners

In 2016, some Medicare recipients began to see an additional 16% base premium increase set into motion by two different laws. One law says that ordinary recipients can’t have their standard premium go up by more than the Social Security cost of living increase for that year. Since there was no cost of living increase in 2016, this benefited about 70% of beneficiaries. Unfortunately, another law shifted the burden of increasing Medicare costs onto the remaining 30% of beneficiaries. This unlucky 30% includes folks who don’t deduct Medicare premiums from their Social Security checks, those who didn’t receive Social Security in 2015, and high-income earners.

If that wasn’t bad enough, on top of the 16% base increase, Medicare also penalizes about 5% of high-income beneficiaries with premium surcharges. The surcharges begin at adjusted gross income levels above $85,000 for singles and $170,000 for married folks filing jointly. To make matters worse, the income thresholds are currently not indexed for inflation, so more people will be affected by the surcharges in coming years. Tax planning can help reduce the bite of surcharges.

The Medicare surcharges are determined by a taxpayer’s modified adjusted gross income (MAGI). For most folks, this is adjusted gross income plus tax-exempt interest. This number is calculated before itemized deductions, so the usual deductions like charitable donations and mortgage interest won’t help. However, if you are charitably inclined, there is one strategy that might help reduce your MAGI. If you have to make a required minimum distribution (RMD) from your IRA every year, the distribution goes on your 1040 as ordinary income and increases your MAGI. The IRS allows you to give up to $100,000 of your RMD to charity and have it avoid your 1040 all together, thereby directly reducing your MAGI. Other strategies beneficiaries may want to consider include harvesting capital losses to offset gains that increase MAGI, moving forward or putting off income events in the current tax year, and utilizing Roth accounts for income. The bottom line is that a little planning could save you a lot in Medicare premiums.

Roth Conversions

In 2010 Congress repealed the income limit on Roth IRA conversions affording taxpayers, regardless of their income, the opportunity to pay off the embedded tax liabilities in their IRAs. Taxpayers who take advantage of Roth conversions should consult with their tax professionals and financial advisors to make sure converting to a Roth IRA makes sense for their particular situation. Even though converting traditional IRA assets to a Roth IRA creates current income tax, there are several situations where it may make sense to perform a Roth conversion. Perhaps you have retired recently and find yourself in a low tax bracket, making a Roth conversion less expensive. Many people convert IRA assets because they want to create a tax-free retirement asset for their heirs or to use up operating losses from their business. Whatever your reason, your future tax bracket, time horizon, estate plans, and whether you have cash outside of your IRA to pay the conversion taxes should all figure into your decision.

Conclusion

Tax planning is an important part of everyone’s financial plan. Most people approach tax issues in a reactive manner instead of being proactive. By starting to think about your current tax circumstances before year end, you may save yourself taxes and take advantage of opportunities on which you may otherwise miss out.

Feel free to contact David Garcia with any questions by phone 305.448.8882 ext. 224 or email: DGarcia@EK-FF.com.

 

Kitces, Michael E. “Planning for the New 3.8% Medicare Tax on Unearned (Portfolio) Income.” Nerd’s Eye View. N.p., Apr. 2010. Web. <www.kitces.com>.

“Medicare Premiums: Rules for Higher-Income Beneficiaries.” Social Security Administration. N.p., Jan. 2016. Web. <www.socialsecurity.gov>.

“Advanced Tax Strategies Using a Roth IRA Conversion.” Putnam Investments. N.p., n.d. Web. 19 July 2016. <www.putnamwealthmanagement.com>.

Cubanski, Juliette, Tricia Neuman, Gretchen Jacobson, and Karen E. Smith. “Raising Medicare Premiums for Higher-Income Beneficiaries: Assessing the Implications.” Kaiser Family Foundation. N.p., Jan. 2014. Web. <www.kff.org>

Medicare Premiums for High-Income Earners

David Garcia

David L. Garcia, CPA, CFP®, ADPA® Principal, Wealth Manager

In 2016 some Medicare recipients will see an additional 16% base premium increase set into motion by two different laws.  One law says that ordinary recipients can’t have their standard premium go up by more than the Social Security cost of living increase for that year.  Since there will be no cost of living increase in 2016, that’s good for about 70% of beneficiaries.  Unfortunately, another law shifts the burden of ever-increasing Medicare costs onto the remaining 30% of beneficiaries.  The unlucky 30% includes folks who don’t deduct Medicare premiums from their Social Security checks, didn’t receive Social Security in 2015, or are high-income earners.

If that weren’t bad enough, on top of the 16% base increase, Medicare also penalizes about 5% of high-income beneficiaries with premium surcharges.  The surcharges begin at income above $85,000 for singles and $170,000 for married folks filing jointly.  To make matters worse, the income thresholds are currently not indexed for inflation, so more people will be affected by the surcharges in coming years.  Tax planning can help reduce the bite of these surcharges on high-income Medicare beneficiaries.

Medicare surcharges are determined by a taxpayer’s modified adjusted gross income (MAGI).  For most folks, this is adjusted gross income plus tax-exempt interest.  This number is calculated before itemized deductions, so the usual deductions such as charitable donations and mortgage interest won’t help.  However, there is one charitable strategy that might help reduce your MAGI.  If you must make a required minimum distribution (RMD) from your IRA every year, the distribution goes on your 1040 as ordinary income and increases your MAGI.  The IRS allows you to give up to $100,000 of your RMD to charity and have it avoid your 1040 all together, directly reducing your MAGI.  Other strategies beneficiaries may want to consider are harvesting capital losses to offset gains that increase MAGI, moving up or putting off income events, and utilizing Roth accounts for income.  The bottom line is a little planning could save you a lot in Medicare premiums.

Feel free to contact David Garcia with any questions by phone 305.448.8882 ext. 224 or email: DGarcia@EK-FF.com

[1] Laura Saunders, “A New Medicare Charge Is Coming: Here’s How to Lessen the blow” WSJ, Aug. 5, 2016.

[2]  Ashlea Ebeling, “It’s Official: Medicare Part B Premiums Will Rise 16% IN 2016 for Some Seniors”, Forbes, Nov. 16. 2016.

[3]  Medicare Premiums:  Rules For Higher-Income Beneficiaries, www.socialsecurity.gov

What You Need to Know About Medicare – Part 8 of 8

Josh Mungavin, CFP® Principal, Wealth Manager

Josh Mungavin, CFP®
Principal, Wealth Manager

Unforeseen healthcare costs can be one of the most destructive forces to an individual’s financial and retirement plan.  With appropriate forethought, one may reduce the risk of the financial devastation that a large health care bill can cause.  This article discusses the steps one should take to compare Medicare plans and some of the basic plan details with which one will need to be familiar in order to make an informed decision.

Please send this article out to friends and family so that they can forward it to the people in their lives that need this information.  The following will be useful to anyone who is over 60, disabled, has kidney failure, or Lou Gehrig’s disease.

Medicare Appeals

Ideally Medicare will always pay what it is supposed to when it is supposed to, but this is the real world and unfortunately Medicare doesn’t always work the way it is supposed to.  When Medicare doesn’t work the way it should, you can file an appeal.

Medicare Advantage Appeals – While filing an appeal with Medicare is relatively straight forward, filing an appeal with Medicare Advantage is dependent on the insurance provider and is one of the major reasons to ensure that you have chosen the right Medicare Advantage provider (if that is the plan you choose).  If you have a Medicare Advantage plan you will need to contact your insurance provider to inquire about instructions for its appeals process.  If you think the Medicare Advantage program’s refusal is jeopardizing your health, ask for a “fast decision.”  This request legally compels the provider to respond to your request within 72 hours.

Original Medicare Appeals – If you have Original Medicare you will need to do the following to file an appeal:

  • You must file the appeal within 120 days of the date you get the MSN (Medicare Summary Notice).  Make sure to follow all the appeal instructions on the back of the MSN.
  • Circle the items you disagree with on your MSN and write an explanation on the MSN of why you disagree. Your MSN is the statement you get every 3 months that lists all the services billed to Medicare and tells you if Medicare paid for the services.
  • Sign, write your telephone number, and provide your Medicare number on the MSN. Keep a copy for your records.
  • Send the MSN or copy to the Medicare contractor’s address listed on the MSN along with any additional information you have about the appeal.
  • Expect to hear back within about 60 days from the day the Medicare contractor receives your appeal.

Medicare Part D Appeals – Much like Medicare Advantage appeals, the process of appealing to Medicare Part D varies by insurance provider and you should contact your provider for specific instructions.  In general the steps you will need to take are as follows:

  • Talk to your doctor about the situation and make sure that the uncovered drug can’t be substituted for a drug that is covered by your plan.
  • If you can’t substitute drugs ask your doctor to write an explanation as to why the drug is necessary and cannot be substituted, then submit your request to the Medicare Part D plan provider.  The provider will generally provide you with a coverage decision within three days, although you can request a faster decision.
  • If your insurance provider denies your request you can file a formal appeal. Depending on your plan you will usually have to file a formal appeal within 60 days of the original coverage determination.  If you need help filing a formal appeal your state’s Health Insurance Assistance Program can help you through the process.  The plan must respond to a formal appeal within a week.
  • If your formal appeal is denied you can appeal again, but this time your appeal goes to an independent organization that works for Medicare. Your insurance provider can give you instructions on how to file a second formal appeal.

Where to Go For Extra Information

The Medicare Handbook http://medicare.gov/publications/pubs/pdf/10050.pdf

New Enrollee Checklist http://www.medicare.gov/welcometomedicare/checklist.html

The State Health Insurance Assistance Program (SHIP) is funded through grants to help provide information, counseling, and assistance to Medicare beneficiaries and their families with questions related to Medicare, Medigap, Medicare Advantage, Medicare Savings programs, Medicaid, Long Term Care Insurance, and other health insurance issues.

Your State Department of Insurance can be a good source of information with regard to Medicare policies available in your area.

Medicare provides informational resources online at www.Medicare.gov or over the phone at (800) 633-4227.

National PACE Association www.npaonline.org.

The Social Security Administration provides information on Extra Helpwww.socialsecurity.gov/extrahelp or by phone at (800) 772-1213.

As always feel free to contact Josh Mungavin with any questions by phone 305.448.8882 or email: JMungavin@ek-ff.com 

What You Need to Know About Medicare – Part 7 of 8

Josh Mungavin, CFP® Principal, Wealth Manager

Josh Mungavin, CFP®
Principal, Wealth Manager

Unforeseen healthcare costs can be one of the most destructive forces to an individual’s financial and retirement plan.  With appropriate forethought, one may reduce the risk of the financial devastation that a large health care bill can cause.  This article discusses the steps one should take to compare Medicare plans and some of the basic plan details with which one will need to be familiar in order to make an informed decision.

Please send this article out to friends and family so that they can forward it to the people in their lives that need this information.  The following will be useful to anyone who is over 60, disabled, has kidney failure, or Lou Gehrig’s disease.

PACE Coverage

The PACE program was created to provide an alternative for those who prefer not to move into a nursing home, but whose medical problems make it impossible to stay at home without medical help.  PACE is provided by a not-for-profit or public entity for those who are frail enough to meet their state’s standards for nursing home care. PACE is a relatively small program (not available in all states) that is intended to allow patients to continue living at home while they receive service instead of being institutionalized.  A PACE application can take nine months to be approved but enrollment in the program is effective on the first day of the calendar month following the date the PACE organization receives the signed enrollment agreement.  However, any services provided are not considered PACE services until the effective date of enrollment after approval.  Services provided by PACE before the effective date of enrollment will only be covered to the extent that the patient’s health care insurance covers them.  Once enrolled you will be charged a monthly premium to cover the long term care portion of the PACE benefit and a premium for prescriptions.  There is never a deductible or co-payment for any drug, service, or care approved by the PACE team.  If a PACE enrollee joins a separate Medicare drug plan they will lose their PACE health and prescription drug benefits.

You can join PACE if:

  • You are 55 years old or older.
  • You live in the service area of a PACE organization.
  • You are certified by your state as meeting the need for nursing home level care.
  • You are able to live safely in the community with the help of PACE services when you join.

PACE services generally include but are not limited to:

  • Support for family members and other caregivers with caregiver training, support groups, and respite care to help families keep their loved ones in the community
  • Primary Care (including doctor, dentist, and nursing services)
  • Hospital, Home, Nursing Home, and Adult Day Care
  • Medical Specialty, Mental Health, Emergency, Social, Laboratory, and X-ray Services
  • Physical, Occupational, and Recreational Therapy
  • Nutritional and Social Work Counseling
  • Prescription Drugs
  • Meals
  • Transportation

For a listing of PACE organizations visit http://www.npaonline.org/custom/programsearch.asp?id=209&title=Find_PACE_Programs

Where to Go For Extra Information

The Medicare Handbook http://medicare.gov/publications/pubs/pdf/10050.pdf

New Enrollee Checklist http://www.medicare.gov/welcometomedicare/checklist.html

The State Health Insurance Assistance Program (SHIP) is funded through grants to help provide information, counseling, and assistance to Medicare beneficiaries and their families with questions related to Medicare, Medigap, Medicare Advantage, Medicare Savings programs, Medicaid, Long Term Care Insurance, and other health insurance issues.

Your State Department of Insurance can be a good source of information with regard to Medicare policies available in your area.

Medicare provides informational resources online at www.Medicare.gov or over the phone at (800) 633-4227.

National PACE Association www.npaonline.org.

The Social Security Administration provides information on Extra Helpwww.socialsecurity.gov/extrahelp or by phone at (800) 772-1213.

Check out our next blog post for more on Medicare. As always feel free to contact Josh Mungavin with any questions by phone 305.448.8882 or email: JMungavin@ek-ff.com 

What You Need to Know About Medicare – Part 6 of 8

Josh Mungavin, CFP® Principal, Wealth Manager

Josh Mungavin, CFP®
Principal, Wealth Manager

Unforeseen healthcare costs can be one of the most destructive forces to an individual’s financial and retirement plan.  With appropriate forethought, one may reduce the risk of the financial devastation that a large health care bill can cause.  This article discusses the steps one should take to compare Medicare plans and some of the basic plan details with which one will need to be familiar in order to make an informed decision.

Please send this article out to friends and family so that they can forward it to the people in their lives that need this information.  The following will be useful to anyone who is over 60, disabled, has kidney failure, or Lou Gehrig’s disease.

Medicare Advantage

Medicare Advantage is a private health insurance plan that replaces Medicare and can be setup as a HMO, PPO, Private Fee for Service Plan, or Special Needs Plan and usually combines some of the benefits of Medicare Part A, B, and D.  If you have a Medicare Advantage plan, also known as Medicare Choice or Medicare Part C, you can’t be sold a Medigap policy, and if you move from a Medigap plan to an Advantage plan you may lose the Medigap plan permanently.  Because this type of plan replaces Medicare, Medicare has agreed to pay a part of the premiums every month for any member who elects this type of plan.  You can join anytime during your initial enrollment period at age 65.  After your initial enrollment period you can change your coverage twice per year.  Between October 15 and December 7 each year you can make any changes you would like.  Between January 1st and February 14 you can make some changes but your flexibility in changing plans is restricted as you can’t:

  • Switch from Original Medicare to Medicare Advantage.
  • Switch to a different Medicare Advantage plan.
  • Switch Medicare Prescription Drug Plans.
  • Join, switch, or drop a Medicare Medical Savings Account plan.

You may be able to make changes at times after the enrollment periods if one of the following applies:

  • You move out of your plan’s service area.
  • You qualify for Extra Help.
  • You live in a nursing home.

Keep in mind that these plans are heavily sold and have a high internal overhead cost, so it is important to very closely scrutinize any Medicare Advantage plan before electing to go that route.  A high percentage of Medicare Advantage enrollees are underprivileged seniors who enrolled in lower rated plans to save on up front costs without accounting for coverage levels, restrictions on the network of care providers, and out-of-pocket costs.  Attrition rates for Medicare Advantage plans range from 4% to 59% per year with an average of 9% yearly attrition and a 25% increase in yearly attrition for those 85 and older.  This is not to say that Medicare Advantage plans are to be avoided, just carefully scrutinized.  Remember, a doctor can choose to stop accepting Medicare Advantage at any time and Medigap does not have to accept an applicant after the initial enrollment period.

Types of Plans

Health Maintenance Organization (HMO) Plans generally require you to get non-emergency health care and services from doctors or hospitals in the plan’s network.  If you are enrolled in an HMO plan you will usually have to go to your primary care physician to get a referral so you can see a specialist.  You may also have to get plan approval before receiving certain services or treatments.  If your doctor leaves the plan, you will have to choose another plan doctor or pay full cost for all services performed by your out- of-network doctor.

Preferred Provider Organization (PPO) Plans have a network of providers but will generally allow you  to receive care from out-of-network doctors and hospitals at a higher cost.  You do not have to choose a primary care physician and you do not have to have a referral to see a specialist (although some specialists will require a referral to treat you).   Depending on where you live you may be able to purchase a regional plan based on one of Medicare’s 26 regions or you may be able to purchase a local PPO plan focused on serving your local area.

Private Fee-for-Service (PFFS) Plans allow you to visit any doctor or hospital that accepts the plan’s payment terms and agrees to treat you.  A doctor or hospital can decide not to accept the plan’s payment terms at any time and refuse to treat you even if they have treated you in the past.  This means that you have to present a current enrollment card before each visit or service to make sure that the doctor or hospital will accept your PFFS plan for that visit.  Because a doctor may not charge you more that the payment terms, which can be lower than the Medicare rate for the same service, some doctors choose not to accept PFFS plans.

Special Needs Plans (SNP) generally require you to get non-emergency health care and services from doctors or hospitals in the plan’s network.  Enrollees generally have to go to their primary care physician to get a referral to see a specialist.  Special Needs Plans are generally limited to people who live in nursing homes or who require nursing care at home, people who are eligible for both Medicare and Medicaid, or people who have specific chronic, severe, or disabling conditions. They are specifically designed to improve coordination and continuity of care for vulnerable groups with special needs that are challenging and costly to treat.

Benefits

Medicare Advantage plan coverage can vary widely, as they do not have to cover every benefit in the same way.  This means that some plans may pay more than or less than Medicare would normally pay.  Plans can offer dental coverage, vision coverage, out-of-pocket spending limits, and other services not normally covered by Medicare.  Be sure to fully consider any Medicare Advantage election because you may be limited to using a specific network of providers and may be required to get extra permissions or pay additional fees for services provided out-of-network.

Medicare Medical Savings Account Plan

The Medicare Medical Savings Account Plan is a type of Medicare Advantage plan available in certain areas that pairs a high deductible Medicare Advantage plan with a medical savings plan.  The general details about Medicare Medical Savings Account Plans are as follows:

  • The medical savings account is tax-free if used for qualified medical expenses (there are taxes and penalties on funds used for non-qualified expenses) and is solely funded by a yearly contribution from the Medicare Advantage plan.
  • Any funds left in the medical savings account at the end of the year can be carried over to the next year.
  • The deductible and yearly account contribution vary by plan but the contribution will always be much lower than the deductible and you cannot contribute any money to the medical savings account.
  • This type of plan differs from the standard Medicare Advantage plan in that you have to continue paying for Medicare Part B and you may keep a preexisting Medigap policy if you choose (Medigap policies are not permitted to cover any of the deductible).
  • If you choose a plan with benefits not normally covered by Medicare you will pay extra for the coverage beyond what is normally covered by Medicare.

You are not eligible for a Medicare Medical Savings Account if any of the following apply:

  • You have outside health coverage that would cover the Medicare Advantage deductible.
  • You get benefits through the Department of Defense (TRICARE) or the Department of Veterans Affairs.
  • You are a retired Federal government employee and part of the Federal Employee Health Benefits Program (FEHBP).
  • You are eligible for Medicaid.
  • You have end stage renal disease, unless you are a former Medicare Advantage enrollee that left the Medicare program and you haven’t yet joined another Medicare Advantage Plan.
  • You are currently receiving hospice care.
  • You live outside the United States more than 183 days a year.

Where to Go For Extra Information

The Medicare Handbook http://medicare.gov/publications/pubs/pdf/10050.pdf

New Enrollee Checklist http://www.medicare.gov/welcometomedicare/checklist.html

The State Health Insurance Assistance Program (SHIP) is funded through grants to help provide information, counseling, and assistance to Medicare beneficiaries and their families with questions related to Medicare, Medigap, Medicare Advantage, Medicare Savings programs, Medicaid, Long Term Care Insurance, and other health insurance issues.

Your State Department of Insurance can be a good source of information with regard to Medicare policies available in your area.

Medicare provides informational resources online at www.Medicare.gov or over the phone at (800) 633-4227.

National PACE Association www.npaonline.org.

The Social Security Administration provides information on Extra Helpwww.socialsecurity.gov/extrahelp or by phone at (800) 772-1213.

Check out our next blog post for more on Medicare. As always feel free to contact Josh Mungavin with any questions by phone 305.448.8882 or email: JMungavin@ek-ff.com 

What You Need to Know About Medicare – Part 5 of 8

Josh Mungavin, CFP® Principal, Wealth Manager

Josh Mungavin, CFP®
Principal, Wealth Manager

Unforeseen healthcare costs can be one of the most destructive forces to an individual’s financial and retirement plan.  With appropriate forethought, one may reduce the risk of the financial devastation that a large health care bill can cause.  This article discusses the steps one should take to compare Medicare plans and some of the basic plan details with which one will need to be familiar in order to make an informed decision.

Please send this article out to friends and family so that they can forward it to the people in their lives that need this information.  The following will be useful to anyone who is over 60, disabled, has kidney failure, or Lou Gehrig’s disease.

Medigap

Medigap is a “Supplemental Insurance” policy that is sold and administered by a private company meant to fill the gaps in the coverage provided by Part A and Part B.  Most plans will help with Medicare co-payments and will help with paying for care not otherwise covered by Medicare.  Usually, if you decide to drop Medigap you will not be able to get the same policy again.  You can directly compare Medigap plans by going to  http://www.medicare.gov/find-a-plan/questions/medigap-home.aspx. When considering a Medigap plan:

  • Be sure to buy your chosen Medigap plan within six months of getting Medicare Part B. Enrolling during the six month open enrollment period will mean you are guaranteed to get the policy you want; otherwise the company can charge you more for the same coverage or can turn you down for coverage all together.
  • Make sure to keep your existing insurance coverage until your Medigap policy is in place to make sure you are not excluded from treatment or charged more for any preexisting conditions. If you do not sign up for coverage during the open enrollment period and have not had six months of medical insurance without a 63 day lapse immediately before enrollment you can be charged more if you have preexisting health problems or they can exclude preexisting condition coverage for up to six months.
  • Medigap plans are labeled A through N and offer different levels of coverage. Each of the letters stands for a standardized plan so you know that you are getting the same coverage with one company’s plan G as you will get with another company’s plan G.  This does not mean that you will pay the same premium with both companies or that the customer experience will be the same, so be sure to compare insurance providers.  The cost will also vary depending on your location and age.

Where to Go For Extra Information

The Medicare Handbook http://medicare.gov/publications/pubs/pdf/10050.pdf

New Enrollee Checklist http://www.medicare.gov/welcometomedicare/checklist.html

The State Health Insurance Assistance Program (SHIP) is funded through grants to help provide information, counseling, and assistance to Medicare beneficiaries and their families with questions related to Medicare, Medigap, Medicare Advantage, Medicare Savings programs, Medicaid, Long Term Care Insurance, and other health insurance issues.

Your State Department of Insurance can be a good source of information with regard to Medicare policies available in your area.

Medicare provides informational resources online at www.Medicare.gov or over the phone at (800) 633-4227.

National PACE Association www.npaonline.org.

The Social Security Administration provides information on Extra Helpwww.socialsecurity.gov/extrahelp or by phone at (800) 772-1213.

Check out our next blog post for more on Medicare. As always feel free to contact Josh Mungavin with any questions by phone 305.448.8882 or email: JMungavin@ek-ff.com 

What You Need to Know About Medicare – Part 4 of 8

Josh Mungavin, CFP® Principal, Wealth Manager

Josh Mungavin, CFP®
Principal, Wealth Manager

Unforeseen healthcare costs can be one of the most destructive forces to an individual’s financial and retirement plan.  With appropriate forethought, one may reduce the risk of the financial devastation that a large health care bill can cause.  This article discusses the steps one should take to compare Medicare plans and some of the basic plan details with which one will need to be familiar in order to make an informed decision.

Please send this article out to friends and family so that they can forward it to the people in their lives that need this information.  The following will be useful to anyone who is over 60, disabled, has kidney failure, or Lou Gehrig’s disease.

Medicare Part D

Medicare Part D is the “Prescription Drug Insurance” portion of Medicare.  Anyone who is eligible for Part A or Part B is eligible for Part D.  The premiums are at their base (usually around $32.42 (as of 2014) depending on coverage and region) for someone who earned under $85,000 and is filing single or $170,000 if filing joint and can be increased according to earnings by as much as $69.30 (as of 2014) for someone who earned over $214,000 and is filing single or $428,000 if filing joint.  If you don’t enroll when you are first eligible or go for more than 63 days without qualified prescription insurance coverage you will have to pay a monthly penalty of about $0.30 per month you went without coverage for the rest of your life.  The open enrollment period is October 15th to December 7th every year, during which time you can change plans.

Benefit Coverage

While Medicare Part D is regulated by the Medicare program, it is actually designed and administered by private health insurance companies and so is not standardized.  Plans can choose which drugs they wish to cover, the level of coverage for each drug, and which pharmacies (including mail order pharmacies) they will work with.  Medicare fully excludes coverage for benzodiazepines, cough suppressants, barbiturates, and some other controlled substances.  If the plan chooses to cover specifically excluded drugs the cost cannot be passed to Medicare.  The standard yearly deductible is $310 (as of 2014) and must be met before your yearly coverage begins.  One very common gap in Part D plans is a called a “donut hole” in which the patient will be responsible for 72% of plan covered generic drug costs and 47.5% of plan covered name brand drug costs once they reach $2,850 per year in drug costs (as of 2014), but once yearly costs exceed $4,550 (as of 2014) Part D begins to pay again.   After this point is reached you will pay the greater of 5% of drug cost or $2.55 for plan covered generic drugs and the greater of 5% of drug cost or $6.35 for plan covered brand name drugs.  The Health Care Reform Law has scheduled a yearly decrease in the “donut hole” which is scheduled to disappear in 2020.  When comparing plans:

  • Check Coverage – Make sure the drugs you need are covered by the plan by using the Part D plan finder by visiting http://plancompare.medicare.gov/pfdn/formularyfinder/drugsearch.  Even if a drug is listed sometimes a plan may not cover the dose and quantity that you need or may require you to get prior authorization from your doctor before the drug will be covered.
  • Compare the Costs – While the premium is important, its overall effect on total cost can pale in importance to the effect of deductibles, co-payments, pharmacy convenience, and drug coverage.
  • Check the Pharmacies – Each plan has a list of pharmacies that support the plan participants. Make sure that your pharmacy, a nearby pharmacy, or mail order pharmacy is supported by the plan you choose.  It doesn’t make sense to save $50 a month in premiums if the plan ends up costing $50 in additional gas every month.

Extra Help

Extra Help (also known as LIS) is a program to help people with limited resources pay for monthly premiums, annual deductibles, and prescription co-payments related to a Medicare prescription drug plan.  Recipients are eligible to pay no more than $2.55 for generic drugs and $6.35 for name brand drugs (as of 2014).  The Centers for Medicare and Medicaid estimate that there are more than 1.8 million people who are eligible and not receiving benefits.  For those who qualify for the program, savings can add up to almost $4,000 per year so it important to know if you meet the requirements.  In order to qualify for Extra Help:

  • Your resources must be limited to $13,440 for an individual or $26,860 for a married couple living together (as of 2014). Resources include investment real estate, bank accounts, stocks, bonds, mutual funds, IRA accounts, and cash but do not include a primary residence, car, life insurance policies, personal possessions, property you need for self support such as rental property or land you use to grow your food, resources not easily converted to cash such as jewelry or home furnishings, burial spaces, as well as a number of specific exclusions you can inquire about through Social Security.
  • Your annual income must be limited to $17,335 for an individual or $23,265 for a married couple living together (as of 2014). There are some exclusions if you support other family members who live with you, have earnings from work, or live in Alaska or Hawaii. Annual income does not include food stamps, economic recovery payments, victims compensation, scholarships and education grants, and certain help you receive for food, shelter, heating, electricity, water, and property taxes.

Where to Go For Extra Information

The Medicare Handbook http://medicare.gov/publications/pubs/pdf/10050.pdf

New Enrollee Checklist http://www.medicare.gov/welcometomedicare/checklist.html

The State Health Insurance Assistance Program (SHIP) is funded through grants to help provide information, counseling, and assistance to Medicare beneficiaries and their families with questions related to Medicare, Medigap, Medicare Advantage, Medicare Savings programs, Medicaid, Long Term Care Insurance, and other health insurance issues.

Your State Department of Insurance can be a good source of information with regard to Medicare policies available in your area.

Medicare provides informational resources online at www.Medicare.gov or over the phone at (800) 633-4227.

National PACE Association www.npaonline.org.

The Social Security Administration provides information on Extra Help www.socialsecurity.gov/extrahelp or by phone at (800) 772-1213.

Check out our next blog post for more on Medicare. As always feel free to contact Josh Mungavin with any questions by phone 305.448.8882 or email: JMungavin@ek-ff.com 

What You Need to Know About Medicare – Part 3 of 8

Josh Mungavin, CFP® Principal, Wealth Manager

Josh Mungavin, CFP®
Principal, Wealth Manager

Unforeseen healthcare costs can be one of the most destructive forces to an individual’s financial and retirement plan.  With appropriate forethought, one may reduce the risk of the financial devastation that a large health care bill can cause.  This article discusses the steps one should take to compare Medicare plans and some of the basic plan details with which one will need to be familiar in order to make an informed decision.

Please send this article out to friends and family so that they can forward it to the people in their lives that need this information.  The following will be useful to anyone who is over 60, disabled, has kidney failure, or Lou Gehrig’s disease.

Medicare Part B

Medicare Part B is the “Medical Insurance” portion of Medicare.  Medicare Part B coverage is paid for by a monthly premium that is based on your Modified Adjusted Gross Income from two years before you enroll.   If you do not sign up for Medicare Part B when you are first eligible you may pay a late enrollment penalty of 10% per year that your application was delayed.  This penalty lasts for as long as you have Medicare. If you are late at all you are deemed late for the year.  The penalty does not apply if you or your spouse are still working and covered by medical insurance through work.   If you are receiving Social Security and do not want Part B you must opt out; otherwise you will be automatically enrolled and the premium will be deducted from your Social Security check. The premiums can be as low as $104.90 (as of 2014) for someone who earned under $85,000 and is filing single or $170,000 if filing joint and they can be as high as $335.70 (as of 2014) for someone who earned over $214,000 and is filing single or $428,000 if filing joint.  This means that each year of delayed filing can add up to $34 per month per person to the premiums for life.  While this amount may not sound like a lot, it adds up to $12,240 per person over a 30-year time span.  The open enrollment period for Part B is between January 1st and February 14th every year during which time you can change plans.  Any changes made during the open enrollment period will go into effect July 1st of the same calendar year as the changes are made.

Benefit Coverage

Medicare Part B helps pay for some of the products and services not covered by Part A.  After your monthly premium and a $147.00 deductible (as of 2014) Part B coverage generally requires a 20% co-payment of patient bills and can include:

X-rays Lab & Diagnostic Tests (some lab services do not require a co-pay)
Influenza & Pneumonia Vaccinations  Blood Transfusions
Renal Dialysis Outpatient Hospital Procedures
Outpatient Mental Health (may require a 45% co-pay) Limited Ambulance Transportation
Immunosuppressive Drugs (for organ transplant recipients) Chemotherapy
Medication (administered by a physician during and office visit) Canes
Walkers Wheelchairs
Mobility Scooters Prosthetic Devices
Oxygen One Pair of Eyeglasses (following cataract surgery)
In Some Cases, Occasional Home Health Care Services (0% co-payment)

Keep in mind that Medicare has decided what they will pay for specific services; if your doctor accepts what Medicare pays, it is said that they “accept assignment.” If the doctor chooses to charge more than Medicare pays, you will have to pay the difference.

Where to Go For Extra Information

The Medicare Handbook http://medicare.gov/publications/pubs/pdf/10050.pdf

New Enrollee Checklist http://www.medicare.gov/welcometomedicare/checklist.html

The State Health Insurance Assistance Program (SHIP) is funded through grants to help provide information, counseling, and assistance to Medicare beneficiaries and their families with questions related to Medicare, Medigap, Medicare Advantage, Medicare Savings programs, Medicaid, Long Term Care Insurance, and other health insurance issues.

Your State Department of Insurance can be a good source of information with regard to Medicare policies available in your area.

Medicare provides informational resources online at www.Medicare.gov or over the phone at (800) 633-4227.

National PACE Association www.npaonline.org.

The Social Security Administration provides information on Extra Help www.socialsecurity.gov/extrahelp or by phone at (800) 772-1213.

Check out our next blog post for more on Medicare. As always feel free to contact Josh Mungavin with any questions by phone 305.448.8882 or email: JMungavin@ek-ff.com 

What You Need to Know About Medicare – Part 2 of 8

Josh Mungavin, CFP® Principal, Wealth Manager

Josh Mungavin, CFP®
Principal, Wealth Manager

Unforeseen healthcare costs can be one of the most destructive forces to an individual’s financial and retirement plan.  With appropriate forethought, one may reduce the risk of the financial devastation that a large health care bill can cause.  This article discusses the steps one should take to compare Medicare plans and some of the basic plan details with which one will need to be familiar in order to make an informed decision.

Please send this article out to friends and family so that they can forward it to the people in their lives that need this information.  The following will be useful to anyone who is over 60, disabled, has kidney failure, or Lou Gehrig’s disease.

Medicare Part A

Medicare Part A is the “Hospital Insurance” portion of Medicare.  For most people who have paid Medicare taxes throughout their working life, there is no premium for Medicare Part A coverage.  If you do not qualify for premium free Medicare Part A it can be purchased for $426 per month (as of 2014).  If you do have to pay and do not sign up when you are first eligible you will have to pay a 10% premium above your normal monthly payment for twice the number of years you have been eligible for Medicare.

Benefit Coverage

Hospital Inpatient Stays – Medicare Part A covers inpatient hospital overnight stays, including a semiprivate room, food, tests, blood (after you have paid for the first 3 units per calendar year), supplies considered medically necessary to treat a disease or condition, and doctor’s fees.  For hospital stays Medicare pays covered costs as follows:

  • All costs for the first 60 days after the deductible is met ($1,216 for 2014).
  • All costs after a co-payment ($304 per day for 2014) for days 61-90.
  • All costs after a co-payment ($608 per day for 2014) for days 91-150 if the patient has not used any of their Lifetime Reserve Days.
  • No costs after 150 days.

Each person has 60 days categorized as Lifetime Reserve Days to provide some coverage if hospital stays should exceed 90 days; once the Lifetime Reserve Days have been used Medicare will limit hospital stay coverage to 90 days.

Skilled Nursing Facility Stays – Even though Medicare Part A is a “Hospital Insurance,” there are a few very notable things that are excluded such as custodial, non-skilled care, long term care and activities of daily living.  It can, however, help pay for stays up to 100 days in a nursing facility if certain criteria are met:

  • You must have been formally admitted to the hospital within the last 30 days for at least 3 days and nights (not counting the discharge date).
  • The reason for the nursing facility stay must correspond to the reason for hospitalization or it must be a condition diagnosed at the hospital.
  • You must require either five-day or six-day per week rehabilitation or seven-day per week skilled care.
  • The care provided in the nursing facility must require skilled labor and the facility must be Medicare-certified.

Medicare will pay the first 20 days of a skilled nursing facility stay in full but the remaining 80 days require a co-payment of $152 per day (as of 2014).  Medicare Part A’s 100-day clock resets after you go 60 days without receiving facility-based, skilled nursing services.

Home Health Care – Medicare Part A provides for some home health care under limited circumstances. A visit can be from a nurse, physical therapist, occupational therapist, speech therapist, or four hours from a home health aide.  Medicare will also pay 80% of the Medicare-approved amount for durable medical equipment. Your doctor and home health team must review your plan of care as often as necessary, but at least once every 60 days.

In order to qualify for home health care coverage you must meet all the following conditions:

  • You must be under the care of a doctor, and you must be getting services under a plan of care established and reviewed regularly by a doctor.
  • You must need, and a doctor must certify that you need, one or more of the following.
    • Intermittent skilled nursing care
    • Physical therapy
    • Speech-language pathology services
    • Continued occupational therapy
  • The home health agency caring for you must be approved by Medicare.
  • You must be homebound, and a doctor must certify that you’re homebound. To be homebound means the following:
  • Leaving your home isn’t recommended because of your condition.
  • Your condition keeps you from leaving home without help (such as using a wheelchair or walker, needing special transportation, or getting help from another person).
  • Leaving home takes a considerable and taxing effort.

Medicare pays your Medicare-certified home health agency one payment for covered services you get during a 60-day period. This 60-day period is called an “episode of care.” The payment is based on your condition and care needs.

Long-Term Care Hospitals – Medicare will cover some benefits you receive if you have to into a long term care hospital.  Long term care hospitals specialize in treating patients who have serious conditions but potentially can improve and return to their homes.  Under this arrangement eligible participants would be responsible for paying a deductible for the benefit period.

Under Medicare, you’re only responsible for one deductible for any benefit period. This applies whether you’re in an acute care hospital or a long-term care hospital.

You don’t have to pay a second deductible for your care in a long-term care hospital if:

  • You’re transferred to a long-term care hospital directly from an acute care hospital
  • You’re admitted to a long-term care hospital within 60 days of being discharged from an inpatient hospital stay

If you’re admitted directly to the long-term care hospital more than 60 days after any previous hospital stay, you pay the same deductibles and coinsurance as you would if you were being admitted to an acute care hospital.

Hospice Care – Medicare will cover some hospice benefits for those who are terminally ill.  This coverage is normally provided in the patient’s home and does not include the cost of room and board where the patient lives, but if the normal caregiver needs a break, a hospice facility will be 95% paid for by Medicare.  Medicare hospice care also provides outpatient prescription drug benefits for pain and symptom management with a $5 co-payment.

Where to Go For Extra Information

The Medicare Handbook http://medicare.gov/publications/pubs/pdf/10050.pdf

New Enrollee Checklist http://www.medicare.gov/welcometomedicare/checklist.html

The State Health Insurance Assistance Program (SHIP) is funded through grants to help provide information, counseling, and assistance to Medicare beneficiaries and their families with questions related to Medicare, Medigap, Medicare Advantage, Medicare Savings programs, Medicaid, Long Term Care Insurance, and other health insurance issues.

Your State Department of Insurance can be a good source of information with regard to Medicare policies available in your area.

Medicare provides informational resources online at www.Medicare.gov or over the phone at (800) 633-4227.

National PACE Association www.npaonline.org.

The Social Security Administration provides information on Extra Help www.socialsecurity.gov/extrahelp or by phone at (800) 772-1213.

Check out our next blog post for more on Medicare. As always feel free to contact Josh Mungavin with any questions by phone 305.448.8882 or email: JMungavin@ek-ff.com 

What You Need to Know About Medicare – Part 1 of 8

Josh Mungavin, CFP® Principal, Wealth Manager

Josh Mungavin, CFP®
Principal, Wealth Manager

Unforeseen healthcare costs can be one of the most destructive forces to an individual’s financial and retirement plan.  With appropriate forethought, one may reduce the risk of the financial devastation that a large health care bill can cause.  This article discusses the steps one should take to compare Medicare plans and some of the basic plan details with which one will need to be familiar in order to make an informed decision.

Please send this article out to friends and family so that they can forward it to the people in their lives that need this information.  The following will be useful to anyone who is over 60, disabled, has kidney failure, or Lou Gehrig’s disease.

General Medicare Overview

Making the right Medicare decisions at the right time can save you thousands of dollars. This, however, is no easy task due to the complexity of the Medicare system, timelines, and an uncertain future.  An enrollee should begin to research available plans four or even five months before he or she is eligible to enroll.  As benefits generally do not begin until the month following enrollment, it is important to be ready to enroll as soon as you are eligible so that your benefits kick in as soon as possible.  After enrollment, you should set aside time every October to review your plan and make sure it remains the appropriate plan for your specific circumstances.

Eligibility

You are first able to sign up for Medicare:

  • Three months before your 65th birthday. Coverage should automatically begin the first day of the month in which you turn 65 years old if you are receiving Social Security, but it is important to research the available plans to ensure the default enrollment is appropriate for you.  If you are delaying Social Security, you will need to sign up for Medicare and make appropriate payment arrangements.
  • Three months before your 25th month of disability. Coverage will begin on the first day of your 25th month of disability.
  • If you are diagnosed with Lou Gehrig’s disease (ALS).
  • If you are diagnosed with end stage renal disease and require dialysis.

Step by Step Strategy

While I am able to give you some general information, I can’t tell you which Medicare plan is right for you.  The best approach for someone else may be the worst for you.  To find the best plan for your circumstances:

  • Input your information on Medicare’s website at https://www.medicare.gov/find-a-plan/questions/home.aspx. Use this tool to find the best options for original Medicare and the best Medicare Advantage plan for comparison.
  • Go to http://www.medicare.gov/find-a-plan/questions/medigap-home.aspx to find a Medigap policy to complement the original Medicare policy you have chosen for the comparison.
  • Once you have chosen a Medicare Advantage plan and a Medigap policy in coordination with original Medicare, you can compare the two options directly.
  • Elect either Medicare Advantage or original Medicare with or without Medigap.

Keep in mind that once you make a Medicare plan election, it generally can not be changed until the next open enrollment period.  Not all doctors accept Medicare so it is important to speak with your doctors before deciding on which plan or combination of plans is appropriate for you.  It is also very important to note that Medicare does not provide a nursing home benefit.

Where to Go For Extra Information

The Medicare Handbook http://medicare.gov/publications/pubs/pdf/10050.pdf

New Enrollee Checklist http://www.medicare.gov/welcometomedicare/checklist.html

The State Health Insurance Assistance Program (SHIP) is funded through grants to help provide information, counseling, and assistance to Medicare beneficiaries and their families with questions related to Medicare, Medigap, Medicare Advantage, Medicare Savings programs, Medicaid, Long Term Care Insurance, and other health insurance issues.

Your State Department of Insurance can be a good source of information with regard to Medicare policies available in your area.

Medicare provides informational resources online at www.Medicare.gov or over the phone at (800) 633-4227.

National PACE Association www.npaonline.org.

The Social Security Administration provides information on Extra Help www.socialsecurity.gov/extrahelp or by phone at (800) 772-1213.

Check out our next blog post for more on Medicare. As always feel free to contact Josh Mungavin with any questions by phone 305.448.8882 or email: JMungavin@ek-ff.com