By: Zisl Edelson, J.D., M.B.A.
With 65 being the new 35, most estate planning attorneys will have clients with important questions about Medicare. Since Medicare Fall open enrollment is underway, now is a good time to learn some key information about the complex Medicare rules. As costs of healthcare and health insurance skyrocket, Medicare is of great interest to most to clients, including adult children trying to help their parents. Having some general knowledge about Medicare is a great way to help your clients on a practical level, with benefits they will often immediately appreciate. Medicare is a very complex system with many confusing rules, and a full understanding is beyond the scope of this brief article. But, I would like to share with you three main areas, with large potential pitfalls, that should be a priority for you and your clients to be aware of:
(2) Traditional and Medicare Advantage
Enrollment Pitfalls – Timing is Everything
Many estate planning clients are sophisticated business persons and professionals, with excellent health insurance plans, and no intent to retire or take social security at age 65. These high achievers are most at risk of getting saddled with significant additional costs and penalties, not to mention bureaucratic hassles, if they don’t understand the ins and outs of Medicare enrollment.
The “initial enrollment period” for Medicare begins three months prior to an individual’s 65th birthday. Individuals receiving Social Security retirement benefits get prior notice of Medicare eligibility, and are automatically enrolled in Medicare Part A, which covers hospitalization and short-term skilled care/rehabilitation, and Medicare Part B, which covers doctor’s visits. However, individuals over age 65 who are not receiving Social Security retirement benefits do not get prior notice for Medicare enrollment, and need to be proactive to avoid significant penalties, increased premium costs and gaps in coverage. This lack of notice can catch clients off-guard and cost them a lot of money. For example, individuals who do not apply for Medicare Part B, during the three-month period prior to the month of their 65th birthday, are subject to a 10% surcharge on Medicare Part B costs – forever.
Clients who fail to enroll in Medicare on time, and who do not have private health insurance (i.e. through their employer) will end up paying out-of-pocket for health care expenses, until July 1 of the following year – resulting in a gap in coverage. A “special enrollment period” (this usually applies to persons who have employer health plans and are working) provides a four-month extension for enrollment. For clients who fail to enroll during both the initial and special enrollment periods, there is a general enrollment period, which is January 31 through March 31 of each year. Either way, coverage for those signing up late does not begin until July 1, and there are higher premiums for late enrollment.
The Fall open enrollment period runs from October 15 through December 7, and may only be used to change existing Medicare plans (i.e. from Medicare Advantage to Medigap), or to change or add a Medicare Part D plan for drug coverage. Experts recommend that patients shop annually for Part D plans, as the costs of medications and plans can vary widely. Here is a link to a tool which helps consumers research and compare various Medicare Part D programs: https://www.medicare.gov/find-aplan/questions/home.aspx. After the fall enrollment period, Medicare coverage is effective January 1.
Even the best planning can fail if a client unexpectedly loses their job, and employer health benefits that go with it. For routine illness and hospital visits, Medicare will cover almost everything. But for serious illness requiring longer hospital stays and rehabilitation the costs can become astronomic. For example, inpatient rehab averages about $250 per day, and drug costs can potentially run into the $1000s per month. Having no Medicare or health insurance coverage can be quite expensive. The bottom line is your clients aged 64 who are still working, and are not taking social security benefits need help with planning for Medicare. This link will help guide you (and your clients) through the process of when and how to initially sign up for Medicare https://www.medicare.gov/sign-up-change-plans/get-parts-a-and-b/when-sign-up-partsa-and-b/when-sign-up-parts-a-and-b.html. Another good resource for Medicare guidance is your state’s local SHIP (State Health Insurance Assistance Program) office, which can be located through this link: https://www.shiptacenter.org/.
Traditional and Medicare Advantage Pitfalls – Be Wary of “Low Cost” Plans
The Medicare system is modeled similarly to the private health insurance market, with two basic choices: “Traditional (or Original) Medicare” and “Medicare Advantage.” Traditional Medicare is similar to private employer provided insurance, with limited coverage, co-pays, and consumer choices such as preferred providers (PPOs). Medicare Advantage is like an HMO-type system, providing 100% coverage (theoretically), but has far more limited choices in doctors and hospitals. Since traditional Medicare covers only a portion of certain medical costs (there are deductibles and co-pays), Medigap plans provide supplemental insurance which covers the rest. Medigap plans cost extra, but are especially important to help cover co-pays for the high costs of rehabilitation and skilled care.
Advantage plans are typically much less expensive than traditional Medicare, and are supposed to provide the same coverage as Medigap, including drug costs. Advantage plans may also cover dental, health clubs, and other health-related perks. Many retirees hoping to cut living expenses, and are tempted to go with lower cost Advantage plans. But, it is important to study the options carefully, as Advantage plans vary greatly, especially when it comes to rehabilitation and long-term skilled care. National studies and reports claim that Advantage plans can be very limiting for patients, because they have far fewer in-network options for hospitals and doctors, and lack high-level specialists and elite hospitals known for treating serious illnesses such as cancer and heart disease. (See, https://www.wsj.com/articles/beware-medicareadvantage-plans-1480302660). In addition, Advantage plans may change providers during the enrollment period – this means your client’s doctor may no longer be available within the same year they enrolled. (See, http://time.com/money/4396394/medicare-advantage-enroll-health-care/ ). Proof of the many problems with Medicare Advantage plans is the high consumer drop-out rate. (See, https://www.cbsnews.com/news/medicare-advantage-plans-2018-finding-healthinsurance/).
My own experience with clients has been that Advantage plans may be less expensive upfront, but in the long run end up increasing health care costs, when clients become seriously ill. This occurs because Advantage plans appear to discharge patients from rehabilitation programs more quickly, with almost no practical recourse. The frail are not the only ones at risk. Seemingly healthy clients can unexpectedly suffer a stroke or heart attack out of no-where, which may require long-term skilled care and rehabilitation.
I strongly encourage my clients to enroll in traditional Medicare and purchase good Medigap plans, because Medicare only covers only a portion of rehab costs after the first 20 days. Starting on day 21 of rehab, patients are charged a co-pay of approximately $165 per day. At that point, in my experience, rehab facilities seem to find reasons to discharge patients who do not have supplemental Medigap coverage. The rehab facilities want to be paid 100%, and don’t want to argue with Medicare for reimbursement. Patients with Advantage plans appear to be discharged even sooner from rehab, because the coverage limits are not as generous. I have heard of stroke victims on Advantage plans being sent home alone from rehab, and placed into taxi cabs, when they could barely even stand without assistance. Clients with traditional Medicare and Medigap coverage appear to receive longer stays in rehab, and are not pushed out before they are comfortable being sent home.
Rehabilitation Pitfalls – Fight for Full Benefits
Rehabilitation facilities (also sometimes called nursing homes), which are separate from acute care hospitals have become an important part of the healthcare system. Typically, after a hospital stay for an acute illness or surgery, patients are moved to a rehabilitation facility for anywhere from a few days to several months. It is important for clients to understand that Medicare will only cover the costs of rehab if they were “admitted” to a hospital for three consecutive nights. If the hospital did not admit the patient, but rather placed her on “observation status” rehab will not be covered by Medicare, and the patient will have to pay out of pocket at costs averaging $250 per day, and more.
These requirements cause much confusion and frustration for clients who are shocked by large medical bills, after learning they were not officially “admitted” to the hospital, but were only on “observation status.” Once a patient is released from the hospital, it is usually not possible to change the past medical record from observation to admission status. Fortunately, a new law has provided some relief for patients by requiring notification of their admission status within 36 hours of coming to the hospital (see, http://www.medicareadvocacy.org/hospitals-must-give-patients-notice-of-theirobservation-status-beginning-march-8-2017/).
After arriving at the hospital, patients should be proactive and not wait for the hospital to provide notice of admission status. Patients or their families should inquire about their admission status, as early as possible, to avoid excessive hospital bills. If the doctor does not deem it “medically necessary” to “admit” the patient, the family may decide to take the patient home, and obtain medical services on an out-patient basis to reduce costs.
Making the decision to take the patient home and coordinate out-patient services can be made easier on the family by engaging the help of a private patient advocate (usually a R.N. or licensed social worker). Or, if the family feels the patient will be better off staying in the hospital, a patient advocate can help the family make the case that a hospital stay is medically necessary by reviewing the charts, assessing the patient’s condition, and interfacing with the hospital staff to make a case for the patient to be taken off observation status and officially admitted. The costs of several hours of time for a private patient advocate (charges typically range from $125 to $225 per hour), can save the family a great deal of money and stress. Word of mouth is always the best way to find a good patient advocate (some are also called “care managers”), but a good online resource is the Aging Life Care Association at this link: https://www.aginglifecare.org/.
After having been admitted to an acute care hospital for three consecutive overnights, the patient’s battle for health care is not over. Most rehab facilities are for-profit companies looking to maximize profits. The complex Medicare system often causes difficulties for facilities to obtain reimbursement. This creates a climate where rehab facilities are put in the position of balancing patient’s best interests and the company’s need to maintain a reasonable financial bottom line. The result may not be favorable to the patient.
Elder law attorneys are commonly approached by families seeking advice around day 20 of a rehab stay, when Medicare stops covering 100% of the stay. At that point rehab facilities will often tell the family that the patient is “failing to improve” in therapy and will be discharged. What you need to know is that “failure to improve” is not the correct legal standard for patient rehab eligibility. Thanks to the hard work of attorneys at the Center for Medicare Advocacy, Medicare has been forced to adhere to the federal laws which require that Medicare pay up to 100 days of rehab, when necessary to maintain the patient’s health and function (see, Jimmo v. Sebelius, VT Dist. Ct. 2011, at: Sebhttps://scholar.google.com/scholar_case?case=1758548206941065533&hl=en&as_sdt=6&as_vis=1&oi=scholar)
Many rehab facilities and health care professionals do not seem to understand the 100-day entitlement for rehab, and clients are still getting pushed out of rehab too early. Attorneys should help clients push back when rehab facilities threaten to discharge for “failure to improve.” The doctor will be your client’s most important advocate for rehab, and should write an order specifying that continued rehab is necessary to maintain the client’s health and function. For more specifics on the patient’s right to receive up to 100 days of rehab, and a guide to help clients advocate for themselves, visit this link to the Center for Medicare Advocacy: http://www.medicareadvocacy.org/self-help-packetfor-expedited-skilled-nursing-facility-appeals-including-improvement-standarddenials/#Improvement. Also visit this link to the Center for Medicare and Medicaid Services (CMS) which references the Jimmo v. Sebelius settlement and later updates to the ground-breaking 2011 case on Medicare’s obligation to provide rehab services: https://www.cms.gov/Center/Special-Topic/Jimmo-Center.html.
As older individuals are becoming a larger segment of our society, all attorneys need to be elder law attorneys to a certain extent. Or, at least attorneys should be able to spot elder law issues, so they can refer older clients for appropriate legal guidance. Learning about Medicare and other government programs important to this growing demographic is not only interesting but rewarding, since this knowledge provides clients with immediate relief during stressful times, and economic benefits they can enjoy while still living. For more information about elder law, visit the ABA Senior Lawyers Division at: https://www.americanbar.org/groups/senior_lawyers/elder_law.html, and the National Academy of Elder Law Attorneys at: https://www.naela.org/.