Medicare Increases Coverage of Mental Health Services

Medicare has increased the amount of mental health coverage beneficiaries are entitled to. After years of unequal treatment, Medicare now covers mental health care the same way it covers physical illnesses.

Previously, Medicare covered only 50 percent of the cost of mental health treatment. In 2008, Congress passed a law that required Medicare to gradually begin covering a greater portion of the cost until it was equal to the amount Medicare pays for outpatient medical care.

In 2014, Medicare began covering 80 percent of the approved amount for outpatient care, including visits to psychiatrists and licensed drug and alcohol counselors. Beneficiaries will still have to pay any applicable deductibles and coinsurance amounts. These new coverage rules apply to Original Medicare only. Individuals covered by a Medicare Advantage plan may have different costs and rules. 

Medicare still puts a cap on inpatient mental health coverage, paying for no more than 190 days of inpatient psychiatric hospital services during a beneficiary’s lifetime.

For more information on Medicare's coverage of mental health, click here.

Roth IRAs Dim as Inheritance Vehicles- Beware the Rush to Covert

Roth IRA's may sound like a great idea for passing wealth to family members—the funds essentially can grow tax-free over your lifetime and theirs. But, before you rush to convert all or part of a traditional retirement account to a Roth for your loved ones, take a long hard look.

Roth conversions- account holders converting a traditional IRA to a Roth, ostensibly in order to capture the benefit s of tax-free, rather than tax deferred growth, often rely upon a common supporting "story" that requires estate taxes (quite avoidable with good planning), high income taxes on the IRA at death (also for which good planning can make a difference), and healthy returns on the Roth investment to pay the investor back for taxes paid making the conversion(which are sometimes unrealistic, especially over time). It is not uncommon for consumers to believe that their traditional IRA's will suffer extraordinary taxes upon death, 50-75% in many cases! While unquestionably those with large IRA's and estates exceeding five million dollars may witness such excessive tax consequence (federal estate tax, state estate tax, federal income tax, state income tax), the reality for most taxpayers is, fortunately, less severe.

Roth IRAs are not always a good way to pass wealth. Whether such a conversion makes sense depends heavily on tax rates—of both the account owner and heirs—and whether lawmakers approve proposed rule changes that could eliminate some of the estate-planning perks of Roths.

Many people use Roths for bequests because account holders don't have to start taking distributions at age 70½ as they do with traditional IRAs. The money can sit untouched and grow tax-free throughout the owner's lifetime—a big plus for those who don't need the assets to live on. And while those who inherit any type of IRA must start taking distributions immediately, they are permitted to stretch out those payments over their lifetime, allowing the bulk of a Roth account to continue growing tax-free.

Two proposals in President Obama's 2015 budget, if approved, would change all that.

The first would require Roth owners to start taking distributions at age 70½. If that happens the Roth IRA would typically be rendered bereft of value by the time an account holder could leave the asset to an heir.

Long Term Care Differs Under Medicare and Medicaid

Although their names are confusingly alike, Medicaid and Medicare are quite different programs. Both programs provide health coverage, but Medicare is an “entitlement” program, meaning that everyone who reaches age 65 and is entitled to receive Social Security benefits also receives Medicare (Medicare also covers people of any age who are permanently disabled or who have end-stage renal disease.)

Medicaid, on the other hand, is a public assistance program that that helps pay medical costs for individuals with limited income and assets. To be eligible for Medicaid coverage, you must meet the program’s strict income and asset guidelines. Also, unlike Medicare, which is totally federal, Medicaid is a joint state-federal program. Each state operates its own Medicaid system, but this system must conform to federal guidelines in order for the state to receive federal money, which pays for about half the state’s Medicaid costs. (The state picks up the rest of the tab.)

The most significant difference between Medicare and Medicaid in the realm of long-term care planning, however, is that Medicaid covers nursing home care, while Medicare, for the most part, does not.  Medicare Part A covers only up to 100 days of care in a “skilled nursing” facility per spell of illness. The care in the skilled nursing facility must follow a stay of at least three days in a hospital. And for days 21 through 100, you must pay a copayment of $152 a day (in 2014). (This is generally covered by Medigap insurance.)

In addition, the definition of “skilled nursing” and the other conditions for obtaining this coverage are quite stringent, meaning that few nursing home residents receive the full 100 days of coverage. As a result, Medicare pays for less than a quarter of long-term care costs in the U.S.

In the absence of any other public program covering long-term care, Medicaid has become the default nursing home insurance of the middle class. Lacking access to alternatives such as paying privately or being covered by a long-term care insurance policy, most people pay out of their own pockets for long-term care until they become eligible for Medicaid.

The fact that Medicaid is a joint state-federal program complicates matters, because the Medicaid eligibility rules are somewhat different from state to state, and they keep changing. (The states also sometimes have their own names for the program, such as “Medi-Cal” in California and “MassHealth” in Massachusetts.) Both the federal government and most state governments seem to be continually tinkering with the eligibility requirements and restrictions. This is why consulting with your attorney is so important.

As for home care, Medicaid has traditionally offered very little -- except in New York, which provides home care to all Medicaid recipients who need it. Recognizing that home care costs far less than nursing home care, more and more states are providing Medicaid-covered services to those who remain in their homes.

It’s possible to qualify for both Medicare and Medicaid.  Such recipients are called “dual eligibles.”  Medicare beneficiaries who have limited income and resources can get help paying their out-of-pocket medical expenses from their state Medicaid program. For details, click here.

Most Terminal Dementia Patients in Nursing Homes Given Pointless and Potentially Dangerous Drugs

Tim Mullaney, staff writer for McKnight's, posted the following article:

Nursing homes administer largely pointless and potentially harmful drugs to a majority of residents with advanced dementia, according to findings in JAMA Internal Medicine. 

Out of more than 5,400 residents under consideration, about 54% received a “medication with questionable benefit,” the investigators determined. Alzheimer's disease drugs such as donepezil (Aricept) and memantine (Namenda) were the most commonly administered. There is little evidence that they improve cognitive functioning for people with advanced stages of dementia, and potentially put residents at risk for falls or urinary tract infections. 

About 20% of the residents were on a lipid-lowering agent. These also are associated with a host of troublesome potential side effects, including confusion and muscle fatigue, and may do little to extend the life of these residents. 

The costs associated with these medications is substantial, the study authors found. The mean 90-day expenditure for these drugs was $816. This represents more than a third of the medication expenditures for residents with advanced dementia. 

“While it can be difficult for family decision-makers to discontinue medications that treat the chronic diseases of their loved ones as they transition toward comfort care, minimizing questionably beneficial interventions is an important therapeutic option consistent with recommendations by the Institute of Medicine about care quality at the end of life,” the authors wrote. 

Hospice patients with a do-not-resuscitate order were less likely to be on a questionable medication, they determined. They did not find any “facility-level association” in terms of having a dementia special care unit, more beds, or a higher percentage of residents with a DNR. The findings should prompt physicians to reconsider their prescribing practices for late-stage dementia patients, the Regenstrief Institute's Greg A. Sachs, M.D., wrote in an accompanying JAMA editorial. 

The findings are based on an analysis of a nationwide long-term care pharmacy database linked to the Minimum Data Set. The numbers came from 2009 and 2010. The authors are affiliated with a variety of institutions, including the University of Massachusetts Medical School in Worcester and the Wistar Institute at the University of Pennsylvania. Findings were posted online Monday ahead of print.

The study supports what is an increasing body of evidence supporting the the use of advanced directives, particularly when coupled with utilization of hospice care.  Apart, or together, there is good evidence that each impacts favorably end-of-life health care, and in this study, particularly for   patients suffering from dementia. 

Feds Move to Protect Some Surviving Spouses of Reverse Mortgage Holders

A new federal rule has taken effect aimed at protecting certain spouses of reverse mortgage holders from being forced out of their homes when the mortgage holder dies.

Borrowers must be 62 years or older to qualify for a reverse mortgage.  Until now, if one spouse was under age 62, the younger spouse had to be left off the loan in order for the couple to qualify.  Some lenders have actually encouraged couples to put only the older spouse on the mortgage because the couple could borrow more money that way.

But couples often did this without realizing the potentially catastrophic implications.  If only one spouse's name was on the mortgage and that spouse died, the surviving spouse would be required to either repay the loan in full or face eviction.  Although this prospect is, perhaps, explained by the disclosures made in specific instances, the truth is that most seniors are unaware, informed generally by advertisements touting the benefits of reverse mortgages,  which assure seniors that they can remain in their homes.

In 2012, AARP sued the Department of Housing and Urban Development (HUD) on behalf of the surviving spouses of individuals who took out Home Equity Conversion Mortgage (HECM), the most widely available reverse mortgage and are administered by HUD.  The spouses in the suit could not sell and repay their loans because, due to the housing downturn, the homes were worth less than the balance due on the reverse mortgage.

In a decision issued September 30, 2013, the U.S. District Court for the District of Columbia agreed with AARP and told HUD to find a way to shield surviving spouses from foreclosure and eviction.

HUD developed a new rule that took effect August 4, 2014, and that better protects at least some surviving spouses.  Under the rule, if a couple with one spouse under age 62 wants to take out a reverse mortgage, they may list the underage spouse as a “non-borrowing spouse.”  If the older spouse dies, the non-borrowing spouse may remain in the home, provided that the surviving spouse establishes within 90 days that she has a legal right to stay in the home (this could, for example, be an ownership document, a lease, or a court order).  The surviving spouse also must continue to meet the other requirements of a reverse mortgage holder, such as paying property taxes and insurance premiums.

However, the non-borrowing surviving spouse cannot access the remaining loan balance, and the new rule protects only spouses who were married to the borrowing spouse at the time the loan was taken out.  Spouses who married the borrowing spouse after the mortgage was taken out are not protected. 

One major downside is that under the new rule, spouses will no longer be able to leave a younger spouse off the mortgage in order to get a larger loan amount.  This means that loan amounts will be less for such couples because loans are based on the younger spouse’s age.  This is a particularly unfortunate event where the younger spouse is unable to support the couple, and is not the heir of the home at any rate, such as where there is a prenuptial agreement.

Finally, the new HUD rule affects only loans written after August 4, so it does not protect non-borrowing spouses on existing reverse mortgage loans, as Hayward, California, elder law attorney Gene Osofsky points out in his excellent blog post on the new rule. However, Osofsky notes that surviving non-borrowing spouses on older loans might still attempt to seek protection under the umbrella of the court’s ruling in the AARP case. 

Prof. Jack M. Guttentag, the self-styled “Mortgage Professor,” has been critical of the change and sees one particularly ominous consequence. Writing in a July 19 article, he said that in anticipation of death a borrower could draw the full amount of any unused credit on the loan, making it accessible to the non-borrowing spouse.  “This is a horror show waiting to happen that will seriously endanger the integrity of the program,” Guttentag warns.  He does not elaborate on what the horror show could be, but presumably it involves more foreclosures.