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.

Congress Does Unthinkable by NOT Addressing Estate Tax

Who wants to ring in the New Year with uncertainty? Well, that’s what Congress did by not getting around to extending the estate tax before December 31, 2009. Many experts believed this would NEVER happen. I discussed this in several past blog entries in September and December of last year.

Flashback to 2001: At that time, a largely Republican coalition in Congress tried to repeal the estate tax completely, but they were unable to get past a filibuster. So, instead, the changes were put into the tax code when then-President George W. Bush signed a bill that was designed to phase out the estate tax so that by January 1, 2010, the estate tax would no longer exist. However, since this was done through the tax code, Congress would have to revisit the changes within ten years, or the estate tax would come back into effect on January 1, 2011, at a higher rate. Generally all experts in the field believed that Congress would act and not allow the estate tax to disappear completely in 2010. But, Congress was so busy debating health care reform this fall that we have entered 2010, and the estate tax is temporarily gone.

So what will happen now? As of right now, if someone dies in 2010, his or her heirs will not owe any taxes on the estate. Sounds pretty good right? Well don’t go “pulling the plug” on Great Uncle Henry just yet. One also has to consider changes to the capital gains tax. Attorney Deirdre Wheatly-Liss wrote a fantastic blog on this topic.  If that same person dies after December 31, 2010, however, with an estate of 1 million dollars or larger, those same heirs will pay a 55% tax. This means that in 2011, a one million dollar estate will be reduced to $450,000, after taxes are paid. Considerinig your life insurance policies are countable in your overall estate, many more middle-class americans will be subject to estate taxes in 2011 if Congress continues to fail to act.

This uncertainty continues when Congress resumes session this year because our representatives may decide to draft a retroactive law reinstating an estate tax that would extend back to January 1, of this year! (Don’t go spending that windfall inheritance quite yet). No one knows howlong it will take Congress to act or what Congress will do. If Congress does act, then the question will be whether a retroactive law would be upheld in court. Unfortunately, it could be a long time, filled with much speculation, before Congress acts and whether that action is deemed constitutional.

While this uncertainty may exist for quite a while, some steps can be taken to protect your family. Please check in with your elder law attorney to learn about potential planning opportunities and to stay up to date on what Congress is doing with regard to the estate tax.

Congress is Down to the Last Hour When it Comes to the Estate Tax Sunset Rules

Tick, tick, tick… The clock is ticking for Congress to act to extend/amend the current estate tax laws. They have about three weeks to prevent the federal estate tax to disappear all together in 2010. Experts agree that it is unlikely for Congress not to act.

The question is, however, will they act in time?

The House approved a bill last week to create an entirely new, permanent, estate tax. According to this bill, estates would have an exclusion for taxes of $3.5 million ($7 million for couples). Under this measure the top tax rate for larger estates would be 45 percent. Another key provision of note is that for tax purposes, assets within an estate’s value is set when the estate holder dies, not when he or she originally acquired the assets. This spares heirs from hefty capital gains taxes on inheritances.

A million isn’t what it used to be

Without new legislation, the sunset provisions of current estate tax rules would erase the tax entirely in 2010. Why would anyone WANT Congress to pass a new Estate Tax then? Hold on to your hats because under the current legislation in 2011 the estate tax will be restored with a 55 percent tax rate and an exclusion of only $1 million. This means that anyone with an estate over $1 million will be subject to a 55 percent estate tax when they die.

Million-dollar estates aren’t as impressive as they once were. As the years pass, many everyday families are millionaires and don’t even know it. When calculating your estate you must include not only the value of what you think of being your assets, but also the value of your home, any vacation properties, and life insurance. Life insurance payouts plus the value of your home can easily put one above this $1 million threshold.

A middle class nightmare?

And while Congress could always take steps in 2010 to change that 2011 scenario, it must act this year to avoid triggering the 2010 estate rules. Losing the estate tax all together in 2010 might seem like a good deal for estate beneficiaries. But an even larger pool of taxpayers might get an unpleasant surprise. That’s because the value of assets in 2010 estates would be set, for tax purposes, at their level when they were originally acquired. In addition to being a bookkeeping nightmare, this provision would trigger capital gains taxes for any estate larger than $1.3 million. It would affect a much higher percentage of middle-class estates than the rules that currently exist.

Have you checked with your Elder Law Attorney?

Very few people have estates large enough to be affected by the newly proposed rules. Those fortunate enough to be among them should stay in touch with their estate planning attorney for further estate-tax developments and planning opportunities.
Check out my previous comments on this topic.