Medicare Drug Plan Changes for 2008

Audits Reveal Widespread Problems with Plans

Written By: Jeffrey A. Marshall, CELA*

  The Government has announced Medicare drug plan changes in premiums and plans for 2008.

Medicare's fall open enrollment is from November 15, 2007 to December 31, 2007 . This is the time for people with Medicare to enroll in a drug plan, review their health care and drug coverage, and make changes.

A confusing array of 63 Medicare Prescription Drug Plans (PDPs) will provide options to Pennsylvania residents with Medicare in 2008.  There is extra help available for people with limited income and resources. The extra help is worth up to $3,600 for some people to help pay for their drug coverage.  In Pennsylvania , low income seniors (over age 65) and couples may be eligible for the state prescription programs - PACE and PACENET.  PACE and PACENET cardholders are enrolled in Medicare Part D through the state plans.  

"Dual eligibles" (individuals who are eligible for both Medicaid and Medicare) will be particularly affected by the changes. Seniors who are eligible for both Medicare and Medicaid get their benefits heavily subsidized. The Government puts this dual eligible drug program business out to bid each year.  As a result, 1.6 million, or 26%, of dual eligible seniors will be assigned to new insurers in 2008. 

Changing plans creates significant difficulties for both consumers and their physicians since each plan can have a separate formulary (list of approved drugs). 

United Health Group and Humana, the largest of the Medicare drug plan insurers, will lose nearly 1 million members between them.  Humana, which secured many members through rock-bottom prices a couple years ago, will increase its most basic plan, which currently costs between $10.20 and $18.20, by more than $10.

Audits Reveal Problems with Private Drug Plans

In a separate matter related to Medicare drug plans, government audits are turning up serious problems in marketing plans and the handling of claims, appeals, and grievances. 

According to the New York Times, "tens of thousands of Medicare recipients have been victims of deceptive sales tactics and had claims improperly denied by private insurers that run the system's huge new drug benefit program and offer other private insurance options encouraged by the Bush administration, a review of scores of federal audits has found."

The problems include the improper termination of coverage, huge backlogs of claims and complaints, and a failure to answer telephone calls from consumers, doctors and drugstores. "The audits document widespread violations of patients' rights and consumer protection standards. Some violations could directly affect the health of patients - for example, by delaying access to urgently needed medications."

"The same insurance companies that offer stand-alone drug plans also sell Medicare Advantage plans, which provide a full range of benefits including coverage of doctor's visits and hospital care. Enrollment in Medicare Advantage plans has grown rapidly, to more than 8 million, from 4.7 million in 2003. Federal auditors found the same types of violations in both parts of the program."

Medicare officials said that the audits showed that insurers will be held accountable.  Medicare has taken "vigorous action" to halt marketing violations, said Abby L. Block, a Medicare official.

According to an article in the October 2007 AARP Bulletin, "[t]he scale of abuse came to light earlier this year when the insurance commissioners of 37 states reported that thousands of beneficiaries had fallen victim to illegal or unethical hard-sell tactics used to sign them up for Medicare Advantage plans, which cover everything the original Medicare plan covers and often cost less but have more restrictions on access to doctors and hospitals.

"'In the most troubling of these cases, unscrupulous agents have enrolled beneficiaries with dementia into an inappropriate plan, Wisconsin insurance commissioner Sean Dilweg told Congress in May.

"Some people said insurance agents told them original Medicare was "closing down," so they should join an MA plan to keep coverage. Others thought they were buying medigap supplementary insurance or a drug plan but found later they'd been enrolled in an MA plan covering all their medical care. That meant they were automatically moved out of original Medicare and, in some cases, lost their retiree health benefits.

"About 7 million of Medicare's 43 million beneficiaries are in MA plans. Dilweg and other experts emphasize that most people are not tricked into buying such plans, and that enrollees pleased with their care need not be alarmed. But when abuse does occur, the consequences can be devastating."

AARP notes that in response to a crescendo of complaints the federal government issued new marketing rules and decreed that "beneficiaries who believe they've been misled into joining an MA plan have the right to apply for a special enrollment period in which they can return to original Medicare (and their supplementary medigap policy if they had one) or switch to another MA plan."

For Further Information

For the New York Times article on the government audits, see "Medicare Audits Show Problems in Private Plans" By Robert Pear, New York Times, October 7, 2007

http://www.nytimes.com/2007/10/07/us/07medicare.html?_r=1&hp&oref=slogin

For the AARP Bulletin October 2007 article, "Don't Fall for the Hard Sell" By Patricia Berry, http://www.aarp.org/bulletin/medicare/dont_fall_for_the_hard_sell.html

For further information on Medicare drug plan enrollment and help in choosing a plan, see   http://www.cms.hhs.gov/center/openenrollment.asp

Further information on PACE and PACENET is available at http://www.aging.state.pa.us/ (click on "Prescription Assistance.")  For an article on PACE plus Medicare, see "PACE Plus Medicare Begins," Elder Care Law Alert, Sept 7, 2006 , http://www.paelderlaw.com/PensionLaws.html#2

Attorneys Marshall can be contacted at webmail@paelderlaw.com or at 1-800-401-4552

Nursing Home Planning Options Discussed in 2^nd Wall Street Journal Articl

Written By: Attorney Jeff Marshall, CELA*

  In July, The Wall Street Journal published an article about strategies estate planning experts are using to protect assets from nursing home costs.  (See links below).  The use of special trusts and annuities were discussed. 

The original Journal column "generated a stream of questions and comments" from readers.  This prompted the Journal to publish a follow-up article, "Answers on Medicaid Vary State by State," Wall Street Journal, August 19, 2007 .  (See links below).

In the follow-up piece, Journal columnist, Tom Lauricella, states: "Many readers asked a basic question: Where can they go to get more information. But, as with just about everything associated with Medicaid, there is no simple answer. As we noted in the previous column, Medicaid is a state-managed program and rules can vary significantly from state to state."

The Wall Street Journal is a world renowned publication, and these articles on financial planning for nursing home costs are right on target.  But, as the author emphasizes, readers must seek out state specific answers. 

I was honored to be one of the estate planning experts quoted by author Lauricella in both the Journal articles. For those who have read (or will read) these Journal articles, here are Pennsylvania specific answers to the questions raised by Mr. Lauricella's readers.

- Some readers "asked whether there is a threshold below which a gift wouldn't affect eligibility."     

PA Answer: In Pennsylvania , the Department of Public Welfare will disregard transfers if the aggregate total is $500 or less in a calendar month.

- "A number of readers also asked for additional information on annuities and Medicaid."

PA Answer: In preparing his article, Mr. Lauricella's discussed the answer to this question with me.  His answer is correct for Pennsylvania .

"Under the new guidelines set by Congress, it's still possible to put money in an annuity and have it not be counted as an asset when determining Medicaid eligibility.

The idea is that if a couple has more than the allowable level of assets when one spouse needs to go into a nursing home, rather than spend the money down to the maximum allowable assets (about $101,000 in many states) the difference can be put into an immediate annuity from which the healthy spouse can draw income."

Federal and state requirements which apply to this use of annuities are extremely complicated. Expert assistance is required.  Additional information on the use of annuities in Pennsylvania Medicaid planning is available online at www.paannuity.com.

- "One reader asked what the best timing would be for taking that step."

PA Answer: The Journal's answer is correct in PA. "It's not something you'll do ahead of time, says attorney Jeffrey Marshall. 'You do it at the time when you need to apply for Medicaid,' he says, that way you know the exact amounts you need to put away in the annuity."

- "The strategy of putting a home or other assets into a irrevocable-income-only trust also generated some questions about how they worked.  'How can the house be sold by the parent?' one reader asks."

PA Answer: The Journal's answer to this question is correct for Pennsylvania . "The basic concept is that whatever is transferred into the trust -- investments or a house -- counts as principal. The parents can take income from investments in the trust or even rental income off the home. If the house is sold, they can take income off investments made with the proceeds of the house -- but they can't touch the principal.

'The house counts as principal,' says Chicago attorney Janna Dutton. 'As long as there is no access to the principal, it would not be counted as an available asset,' he says."

- "Why is it that you would encourage people to turn to Medicaid to pay for their nursing-home costs so that they can leave their assets to their kids? Is that fair?" One reader wrote.

The Journal's answer: "It is true that this is a divisive issue, but these practices exist and are legal." 

Attorney Marshall's addition: The circumstance of middle class seniors was well described by a New York Judge in a famous case as follows:

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