Affordable Care Act: More Affordable AND more Effective Health Care for Seniors

What does the new, federal health care law, the Affordable Care Act, mean for seniors? How will it affect Medicare recipients? Throughout the health care reform debate of the past few years, Medicare has been a significant issue. The Affordable Care Act (“Act”), the law passed by Congress and signed by President Obama this spring, seeks to provide better quality and more affordable care to seniors and Medicare recipients.

To make health care more affordable for seniors, the Act addresses the Medicare Part D prescription drug coverage gap, otherwise known as the “donut hole.” In 2007, over 8 million seniors fell into the “donut hole” and could not receive coverage for their prescription drugs. Under the Act, any seniors who fall into the donut hole this year will receive a $250 rebate check from the government. In 2011, the Act institutes a 50 percent discount on all prescriptions drugs in the “donut hole,” and by 2020, the Act will completely close that gap.

Starting in 2011, the Act provides for free wellness checkups as a preventive care measure. It also eliminates all deductibles, copayments, and other cost-sharing for preventive care in Medicare, in an effort to make preventive care more accessible and attractive to seniors with modest means. The Act also creates a voluntary, long-term care insurance program that will provide a cash benefit to seniors and people with disabilities seeking certain types of long-term care that will allow them to stay in their homes.

In other efforts to make health care more affordable for seniors, the Act will reduce unwarranted subsidies to insurance companies by putting Medicare Advantage payments more in line with the costs of Medicare programs. This will ultimately save Medicare more than $150 billion over the next 10 years. The Act also seeks to reduce fraud and waste within the health care system by expanding the efforts the Department of Health and Human Services and the Department of Justice have already made in the past few years, and giving law enforcement officers more authority to crack down on those engaging in health care fraud. In fiscal year 2009, $2.51 billion acquired through these anti-fraud efforts was deposited in the Medicare Trust Fund, a 29 percent increase over fiscal year 2008. This Act provides more tools to continue and expand the anti-fraud efforts already in place, saving Medicare recipients billions of dollars in the coming years.

The Act does not only seek to make health care more affordable; it also seeks to make health care more effective for seniors. To achieve this goal, the Act seeks to improve the quality of care seniors receive in nursing homes and other long-term care facilities. It creates a standardized form for filing complaints with the State concerning long-term care facilities, and it requires states to develop and implement resolution processes for these complaints. It also establishes a program for national and State background checks of all long-term care facilities employees that have direct access to patients.

This entry is only a brief summary of various parts of the new law. More information can be found here. Current Medicare recipients will be receiving an informational brochure in the next few weeks regarding these programs.

Obama’s Middle Class Task Force Recommendations Include Caregiver Initiative and Retirement Funds Security

One year ago, President Obama appointed a Task Force on the Middle Class to create a plan to help middle class families get back on their feet and bring our economy out of recession. Recently, this task force announced its recommendations, which included a $102.5 million Caregiver Initiative, and a plan to secure your retirement funds.

Support for Family Caregivers:
It is estimated that 38 million Americans provide unpaid care for an aging relative. Many of these caregivers have other jobs and small children to care for as well. The $102.5 million Caregiver Initiative would add $52 million to the Department of Health and Human Service’s budget for caregiver support programs and $50 million to programs that provide transportation help, adult day care, and in-home services for the elderly. Providing more government support for these programs will hopefully help lower costs so that caregivers of aging relatives can get the help they need and focus more on their jobs and immediate families. The Caregiver Initiative will also allow more seniors to stay in their homes with safe, reliable care, without placing an undue burden on their loved ones.

Retirement Security:
It is estimated that 78 million working Americans lack employer-based retirement plans. This means that about one half of all working Americans are either not saving for retirement or are being forced into doing so through private mechanisms that do not afford them certain key benefits. The task force is recommending that the Obama Administration establish a system of automatic IRA direct deposits where employers will be required to enroll their employees in an IRA program unless the employees opt out. Under the recommendation, eligible families will receive funds matching their contributions through the Savers Tax Credit. For families making under $65,000, the Savers Tax Credit will match 50% of the first $1,000 contributions, and a partial credit will be allowed for families making up to $85,000. This credit will also be a refundable credit, meaning that even if the taxpayers do not owe any taxes, they will be able to reap the full benefit of the credit.

Finally, the task force developed other recommendations to improve the transparency of 401(k) plans. This heightened level of transparency is meant to ensure that workers and plan sponsors have information they need to ensure that they are receiving investment, record-keeping, and other services at a fair price. Obviously, the first question here is: what information will be provided? Will workers receive invoices that show where all their fees are being spent? Or, will these documents show where their fees are being spent AND what other plans charge for the same services? How much will these recommendations actually improve transparency? All of the recommendations must go through Congress before anything will happen, so only time will tell.

Other recommendations concerning 401(k) plans include: encouraging plan sponsors to give unbiased investment advice to workers, making annuities and other forms of guaranteed lifetime income more available, and requiring clear disclosure on target-date funds. These recommendations are not ironed out clearly yet, and Congress is likely to spend a great amount of time working through them.

The full fact sheet on the recommendations presented by the task force includes recommendations on expanding the Child and Dependent Care Tax Credit and making college more affordable.

Congress Begins to Work on the Federal Estate Tax

Experts view the current Federal Estate Tax system as a ticking time bomb. Some don’t consider planning for estate taxes because the 2009 threshold is set at $3.5 million. In other words, if you die in 2009 owning less than $3.5 million in total assets, you are not subject to a Federal Estate Tax.
If you die in 2010, as the law currently is written, no one owes estate tax, even if they had one hundred billion dollars (Dr. Evil reference, couldn’t resist). But here’s the rub: if you pass in 2011, the threshold reverts back to $1 million dollars.

Think you don’t have a million dollar estate? Without proper planning your estate can include your primary residence, vacation homes, and even life insurance policies. Still not concerned? The tax imposed can be 40%  to 50% of your total assets. Quite a kick-back to Uncle Sam. Dont’ fret, Congress is working on it!

The rest of this week’s blog is guest-written by Matthew Curtiss, Esq., a former classmate of mine with a practice in Mystic, CT.

With all of the talk of health care, public options, spicy mustard, socialism, and Michelle’s arms; its nice to see some members of Congress address the approaching year-long federal estate tax repeal.  NACSOnline has a nice overview of what proposals have been  put forth to date:

• H.R. 436 – Rep. Earl Pomeroy (ND-at large):
Makes the current exemption of $3.5 million and the rate of 45% permanent. (Estates between $10 million and $23.5 million would be taxed at 50%.).
• H.R. 96 – Rep. Michael Conaway (TX-11): Increases to $1.85 million the maximum reduction amount for alternative valuations of farmland and other business property for estate tax purposes; and restores after 2009 the estate tax deduction for family-owned business interests and increase such deduction to $2 million. Allows annual inflation adjustments to such increased amounts after 2010.
• H.R. 173 – Rep. John Salazar (CO-3): Excludes from an individual’s estate farmland so long as the land continues to be used for farming. To exclude such farmland from the total estate, the individual must have earned 50% of their gross income from farming in at least 3 of the 5 years from the individual’s last tax year and during 5 of the 8 years prior to the individual’s death the land must have been used for farming. If the land is subsequently sold or no longer used for farming a tax will be applied on the heirs.
• H.R. 205 – Rep. Mac Thornberry (TX-13): Repeals the federal estate, gift and generation-skipping transfer taxes.
• H.R. 498 – Rep. Harry Mitchell (AZ-5): Restores the unified credit against gift tax liability; provides for annual increases in the estate tax exclusion amount between 2010 and 2015 and establishes a permanent exclusion amount of $5 million for 2015 and thereafter; provides for an inflation adjustment to the estate tax exclusion amount after 2015; reduces estate tax rate brackets; and allows a surviving spouse to use the unused unified estate tax credit of a deceased spouse.
• H.R. 2023 – Rep. Jim McDermott (WA-7): Sets a $2 million per-person exemption, indexed for inflation, and imposes a 55 percent top rate.
• H.R. 3524 – Rep. Mike Thompson (CA-1): Prevents the value of inherited farmland from being subject to the estate tax if the decedent’s family continues to own it and farm it.

I do like the attempts to keep working farmland totally or partially exempt from tax; as it benefits non-corporate farmers.

For what its worth, with the hearth-care bill taking up so much time, I wouldn’t be surprised to see a one year rollover of the current rates and exemptions.

Thanks to the Wills, Trusts and Estates Prof Blog for the heads up.

For more of Matt’s wisdom, be sure to visit his blog.