Massive and Muddled - Medicare Legislation Passed by Congress

Written By: Attorney Jeffrey A. Marshall , CELA*

  In late November both Houses of Congress passed the Medicare Prescription Drug, Improvement, and Modernization Act.  President Bush is expected to sign this legislation into law on Monday, December 8^th. 

The Act creates a new Medicare "Part D" which will provide Medicare beneficiaries with the option of enrolling in a limited drug coverage program.  In additional to the long- promised prescription drug benefit, the law contains a cornucopia of non-drug related provisions, some of which are unrelated to Medicare.  It will bring significant added complexity to the Medicare health care program that serves 40 million older and disabled Americans. 

Under the new law, Medicare beneficiaries will be able to obtain some insurance coverage for previously uncovered prescription drug costs.  The drug benefit will be optional and quite limited.  Beginning in 2006, it will be offered to all 40 million Medicare beneficiaries through government-subsidized private plans. Due to premiums, deductibles, and gaps in coverage, most seniors will have only a fraction of their prescription expenses paid by the new benefit.   

Despite its name, there appears to be little "reform" or "modernization in the legislation.  Instead, the Act contains a "Santa's bag" of benefits and handouts designed to obtain the support of various congressmen, industries, geographic regions and interest groups for the legislation.

The numerous goodies are detailed in 681 pages of provisions weighing over 7 pounds.  The cost is estimated by the Congressional Budget Office at over 2 trillion dollars over the next two decades.  But no one really knows.  What is clear is that the costs will be paid by increasing deficit spending. Many commentators worry that such additional "unfunded mandates" further threaten the already precarious fiscal integrity of Medicare as well as the future financial security of most Americans.   Republican Senator McCain says Congress is "spending like a drunken sailor" and further criticizes the bill for its "incredible favors to the pharmaceutical companies." 

The Washington Post reports that over the next decade, the new law will steer at least an additional $125 billion to the health care industry and U.S. businesses.  This includes an estimated $86 billion in payments and tax breaks to employers who offer some prescription drug coverage to their retirees.   Hospitals, HMOs, physicians, ambulance services, and other providers will also be paid more for treating elderly and disabled Medicare recipients.  Rural areas are particularly favored. 

The legislation is so complicated that its effects will only become clear over many months and years. In future issues of this newsletter, I will be providing you with my understanding of some of the more important provisions and implications of the new law.      

The text of the Medicare Prescription Drug, Improvement, and Modernization Act is available on the Internet at http://waysandmeans.house.gov.

Understanding Your IRA

Written By:  Attorney Matthew J. Parker

  More often than not, the retirement plan of the average American constitutes the largest part of his or her savings. These plans include traditional IRAs, profit sharing plans, 401(k) plans, Keogh plans and 403(b) plans.  The rules and tax issues surrounding these plans are often complicated and confusing.      

In general, these retirement plans share the following characteristics:

1) Each is a formal arrangement for accumulating capital for the purpose of  financing the owner's retirement;

2) The arrangement is funded with contributions from the owner's earnings or    with contributions made  directly by the owner's employer;

3) Investment earnings accumulated "inside" the arrangement are not subject to income tax so long as they remain "inside";

4) In order to receive this special tax benefit, the arrangement must comply with an array of tax rules and other requirements;

5) One of the tax rules that all of these plans must comply with (with some slight variations) is the minimum distribution rules. 

Part I:

What is the required beginning date?

  Once the plan is set up, a plan owner will often ask what date is he or she required to make withdrawals from the retirement plan.   The required beginning date (RBD) is defined as the date on which the owner of the plan must start taking lifetime distributions from the retirement plan.  Most often the RBD is April 1 of the year following the year the owner reaches 70½.

If the owner fails to start withdrawing on the RBD, the IRS will penalize the owner in an amount equal to 50% of the amount that was supposed to be withdrawn.  Be advised that the RBD is not the same for every type of retirement plan. 

For any owner of a qualified retirement plan (a plan established by the owner's employer in accordance with a multitude of IRS requirements) who owns less than 5% of his company, or any employee in a 403(b) plan (a plan established by a tax-exempt employer), the RBD is generally April 1 of the year following the later of the calendar year in which the employee attains age 70½ or the calendar year in which the employee retires from employment with the employer maintaining the plan.  However, a qualified retirement plan is not required to recognize this later beginning date and may choose to have all employees commence distributions on April 1 of the calendar year following the year they reach 70½ .  There is no RBD for a Roth IRA. 

Although the first required distribution is April 1 following the year the owner turns 70½, the owner should be aware of the concept of distribution years.  If the owner turns 70½ in October of 2003, he is required to take the distribution for 2003 on or before April 1 of 2004.  However, in 2004, the owner is also required to take a distribution for 2004 on or before December 31, 2004 .   Therefore, if the owner waits to take the 2003 distribution in April of 2004, the owner will be required to take two (2) distributions in 2004. 

If you would like more information on this topic and other issues relating to retirement plans and estate planning, please stay tuned to the Elder Care Law Alert for more articles and for information about our upcoming free seminars entitled, "Understanding Your IRA and Essential Estate Planning". 

Government Clarifies Rules for Disclosures to Patient's Family Members

  Many health care providers are confused about releasing information to family members of their patients.  The Federal Government's Health and Human Services website recently posted some helpful explanations and illustrations on this topic.  Here is the text, taken from Message 488 posted 11/4/03 . 

"Does the HIPAA Privacy Rule permit a doctor to discuss a patient's health status, treatment, or payment arrangements with the patient's family and friends?

Answer: Yes.

The HIPAA Privacy Rule at 45 CFR 164.510(b) specifically permits covered entities to share information that is directly relevant to the involvement of a spouse, family members, friends, or other persons identified by a patient, in the patient's care or payment for health care. If the patient is present, or is otherwise available prior to the disclosure, and has the capacity to make health care decisions, the covered entity may discuss this information with the family and these other persons if the patient agrees or, when given the opportunity, does not object. The covered entity may also share relevant information with the family and these other persons if it can reasonably infer, based on professional judgment, that the patient does not object. Under these circumstances, for example:

- A doctor may give information about a patient's mobility limitations to a friend driving the patient home from the hospital.
- A hospital may discuss a patient's payment options with her adult daughter.
- A doctor may instruct a patient's roommate about proper medicine dosage when she comes to pick up her friend from the hospital.
- A physician may discuss a patient's treatment with the patient in the presence of a friend when the patient brings the friend to a medical appointment and asks if the friend can come into the treatment room.

Even when the patient is not present or it is impracticable because of emergency circumstances or the patient's incapacity for the covered entity to ask the patient about discussing her care or payment with a family member or other person, a covered entity may share this information with the person when, in exercising professional judgment, it determines that doing so would be in the best interest of the patient. See 45 CFR 164.510(b). Thus, for example:

- A surgeon may, if consistent with such professional judgment, inform a patient's spouse, who accompanied her husband to the emergency room, that the patient has suffered a heart attack and provide periodic updates on the patient's progress and prognosis.
- A doctor may, if consistent with such professional judgment, discuss an incapacitated patient's condition with a family member over the phone.

In addition, the Privacy Rule expressly permits a covered entity to use professional judgment and experience with common practice to make reasonable inferences about the patient's best interests in allowing another person to act on behalf of the patient to pick up a filled prescription, medical supplies, X-rays, or other similar forms of protected health information. For example, when a person comes to a pharmacy requesting to pick up a prescription on behalf of an individual he identifies by name, a pharmacist, based on professional judgment and experience with common practice, may allow the person to do so."

The above information and lots of additional answers to questions about the requirements of the HIPAA Privacy Rule are provided on the Health and Human Services website.  http://answers.hhs.gov/.

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