Gifts as a way to Protect against Long Term Care Costs – Comparing Strategies

Today’s blog post continues the series about giving money away as a method to plan ahead for protection against long term care costs.  My post of September 19, 2014, the first installment of the discussion on gifting, described how the Medicaid “Aged, Blind and Disabled” program and the Department of Veterans Affairs “Pension” (aka VA “Aid and Attendance”) program look at assets given away.  My post of September 25, 2014 discussed transferring assets to a trust for protection against long term care costs.  My post of October 2, 2014 discussed transferring assets to a Limited Liability Company for protection against long term care costs.  My post of October 9, 2014 discussed transferring assets to your children (or other family members) for protection against long term care costs.  My post of October 16 discussed transferring assets to a charity as a way to protect against long term care costs.  My post of October 23 discussed transferring assets to your spouse as a way to protect against long term care costs.

The current series on gifting is part of a more comprehensive series on possible ways to plan ahead to protect against long term care costs.  Previously, my blog discussed long term care insurance as an approach to planning ahead for long term care costs.  In the long term care portion of this discussion, my post of May 22, 2014 discussed whether to buy long term care insurance at all.  My post of May 29, 2014 suggested looking for a stable, proven insurer.  My post of June 5, 2014 described how to identify a proven, stable Long Term Care insurance company.  My post of June 12, 2014 discussed the importance of protection against inflation. My post of June 19, 2014 suggested planning to use insurance to pay for four or five years of long term care.  My post of June 22, 2014 suggested a daily rate to choose when purchasing long term care insurance.  My post of July 10, 2014 advised to look carefully at the list of Activities of Daily Living that can trigger coverage from the long term care insurance policy.  My post of July 17, 2014 described the differences between a “period of time” kind of coverage and a “pile of money” kind of coverage.  My post of July 25, 2014 advised to make sure that the long term care insurance includes coverage for cognitive impairment.  My post of July 30, 2014 described the differences between tax-qualified and non-qualified policies.  My post of August 5, 2014 discussed the value of long term care insurance policies that qualify for the Partnership program.    My post of August 14, 2014 discussed hybrid policies that combine long term care insurance with life insurance.  My post of August 21, 2014 described how a long term care insurance policy with a return of premium rider can be used to construct a “hybrid” life insurance/long term care insurance policy.  My post of August 28, 2014 described how to use a partnership policy to protect just enough of your life savings while holding down the cost of the insurance.  My post of September 5, 2014 described how to coordinate long term care insurance with potential veterans benefits.  My post of September 12, 2014 discussed how an elder law attorney can help maximize the value of long term care insurance.

The introductory post in the series on planning ahead for long term care costs appeared on May 15, 2014.

Today’s post, as part of the sub-series on to how to give assets away, summarizes and compares the different gifting strategies.

Gifts to a spouse do not have any effect on Medicaid or VA Pension eligibility.

Gifts to a trust are the most highly protected from risks because the beneficiaries (the people whom you wish to eventually receive your money) cannot get to the contents of the trust except through the discretion of the trustee.  The beneficiaries’ creditors cannot get into the trust to collect on beneficiaries’ debts.  But, the trust pays the highest tax rate, holding down its growth.  In addition, the trust will have some initial set up costs and some ongoing administration costs.

Gifts to a Limited Liability Company are well protected because the members of the LLC (the people whom you wish to eventually receive your money) cannot get to the assets of the LLC except through the managing member.  In addition, the income of the LLC is not automatically taxed at the highest tax rate.  Each member pays his or her share of the tax at his or her applicable tax rate.  Members’ creditors, however, may be able to take the members’ ownership interest in the LLC.  (Creditors can’t get at the assets inside the LLC except through the decisions of the managing member, but they can become members of the LLC in place of the original members’ because of the original members’ debts.)  In addition, the LLC will have some set up costs and some ongoing administration costs.

Giving to children (or close friends) is the easiest and least expensive gifting method.  There are no set up costs and no administration costs (like with an LLC or trust.) not protected at all from the child’s risks.  It is also the most flexible gifting method if you don’t hold back enough assets to support yourself because it is easy for a child to just give some money back when you need it.  Giving to children is, however, the riskiest gifting method.  Once the child receives the assets, the child’s creditors can pursue the assets easily.

Giving to charity is completely inflexible and should be done (if at all) with only a small part of your assets and then only in line with the charitable practices that you would follow under “normal circumstances” (i.e., Don’t let the with to pre-plan for long term care costs cause you to give much more to charity than you would otherwise give.)  The gifts to charity will be used by the charity almost immediately, so there is no way to reverse the gift if you miscalculate your future living expenses.

No matter which gifting strategy seems best for you, do not give away all of your assets.  You need to hold back enough to support yourself.  Because this discussion is about gifting before you need care, there won’t be any Medicaid or VA Pension benefit coming in the near future that you can use to pay your bills.  You must hold onto some of your assets.

Above all else, please remember that the gifting strategies discussed in this series are for long term care PRE-PLANNING (i.e., when you are worried about, but don’t yet need, long term care.)  The analysis in this series is not appropriate for someone who needs care now or will probably need care within 5 years.

For more information, visit Jim’s website.

Jim Koewler’s mission is
“Protecting Seniors and People with Special Needs.”

For help with long term care or with planning for someone with special needs,
call Jim, or contact him through his website.

© 2014 The Koewler Law Firm.  All rights reserved.

Medicare Supplement or Advantage Plan? More details

I want to follow up my November 6, 2014 post with additional details to provide more specificity to my comments.

As I pointed out last week, it isn’t necessary to have Medicare additional insurance.  People can choose “Traditional Medicare” in which they must cover the 20% Medicare co-pay by themselves.    It costs nothing in a year during which you have no medical issues.  It can, though, without warning, cost lots of money if you have an accident or need an operation, for example.  You could pay 20% of $0 or 20% of $200,000, or 20% of any amount depending on what happens to you during that year.  Before choosing traditional Medicare, you must decide whether you wish to assume the risk of a big surprise in health costs during the coming year.

I pointed out that Advantage Plans generally are less expensive while supplements are generally more expensive.  My statement refers to the monthly premium.   depending on your plan and on your medical needs during the year.  There are also .

Advantage Plans are generally built like Health Maintenance Organization (HMOs.)  There are .  These will usually cost a little more.

Also,(granted, they won’t have a 20% co-pay like traditional Medicare.)  Usually, the lower the premium, the higher the co-pay (just like auto insurance.)  Supplements have no co-pay.

I wrote last week that, after a major illness or injury that requires rehabilitation therapy (“rehab,”) supplements usually are more generous than Advantage Plans.  That is generally true, but .  Advantage Plans will still have the ability to halt their rehab payments, but they are no longer supposed to base that decision on day-to-day progress reports.  (Anyone can have a bad day, right?)  The Advantage Plans must look at week-to-week comparisons or even bi-weekly comparisons.  Supplements generally give the full 100 days that are allowed in the Medicare rules.

So, my modified suggestions for choosing between Advantage Plans and supplements are:

I want to reiterate:  No matter your preference, seek out a Medicare insurance agent that represents more than one insurer.  Don’t just assume that the person at the table in your local grocery, pharmacy, or department store can give you all the options.  If the person at that table sells insurance for just one company, find someone else.

But, don’t go it alone.  Get help from an insurance broker.  These insurance plans are complicated, and there are many different choices among Advantage Plans and among supplements.  Let someone help you figure out your best options.  Their help doesn’t cost you anything.  They’re paid by the insurer you choose.

Choose your plan wisely.

Thank you to Mike Whitaker and Dan Bassani of for their help with this week’s installment.

“My Care Ohio” Enrollment for 2015

My Care Ohio enrollment is back.  Ohioans on both Medicare and Medicaid were first enrolled into My Care Ohio in May, June, and July 2014.  Now, it’s time to enroll for 2015.

My Care Ohio is a system of “managed care” for people on both Medicare and Medicaid (called “dual eligible” but more accurately described as “dual covered”) in the populous areas of Ohio.  It is an attempt to control the state’s costs for long term care paid from the state budget.

When the implementation of My Care Ohio started earlier this year, I  tried to provide an overview on how the My Care Ohio program will work  (Managed care for Ohio Medicare/Medicaid “Dual Eligibles”) on February 22, 2014.  On February 28, 2014, I explained how My Care Ohio is an attempt to cut costs through insurance company command and control methods rather than empowering people to choose lower cost care by making it easier to qualify for in-home care Medicaid through PASSPORT or for the Assisted Living Waiver instead of maintaining the current financial incentive to choose a nursing home, with its higher cost per person (My Care Ohio: A Triumph of the Stick over the Carrot.)  On March 7, 2014, I described the decisions that dual eligibles must make when My Care Ohio comes to their county:  (1) whether to accept managed care for Medicare for this first year; (2) which Managed Care Organization to join; and (3) whether to accept managed care for Medicare for years two and three.  (Your Options in “My Care Ohio,” managed care for Medicare/Medicaid “Dual Eligibles”)  On March 13, 2014, I outlined what to choices to make when enrolling in My Care Ohio.  (What to choose in “My Care Ohio,” managed care for Medicare/Medicaid “Dual Eligibles”.)

When all of 2014’s enrollees were placed into the My Care Ohio program, I described how enrollees could minimize the likelihood that needed care services would be cut by opting out of Medicare participation in My Care Ohio (Keep your doctor separate from your Managed Care Organization in the “My Care Ohio” program) in my July 4, 2014 post.

Now that it’s time to make enrollment decisions for My Care Ohio for 2015, I want to revisit the strategies that dual covered Ohioans should use.

As I’ve written before, my biggest fear for people in the My Care Ohio program is that their managed care organization (i.e., the insurance company to which they are assigned) will reduce services (in order to cut costs) that the managed care organization/insurance company deems unnecessary.  (We’ll call the managed care organization/insurance company the “MCO.”)  For example, if the person is in a nursing home and is doing well, the MCO might decide that the person can go home and receive home care (with a resulting big reduction in costs.)  In fact, friends of mine who work in nursing homes have described a number of such discharges triggered by MCOs.  Unfortunately, without the 24 hour care that a nursing home provides, these discharged seniors are at great risk to their health and well-being.  Some of them will likely die.

The best protection against unwise cuts in services is the personal doctor.  My fear is that a doctor could feel pressured by the MCO that pays the doctor’s fee to comply with an MCO decision.  Because the doctor gets his or her payment from the MCO, the doctor may be hesitant to question or oppose the MCO’s decision to reduce services.

To avoid MCO influence over the doctor, I urge all people in the My Care Ohio program to:

  • Opt out of the Medicare portion of My Care Ohio;
  • Find out which MCO works best with the care providers (other than the doctor) that you would like to use and enroll with that MCO; and
  • Choose a Medicare supplement (not an Advantage Plan) from an insurer that is not one of the MCOs in the My Care Ohio program.

For example, a person who can choose between United Health Care  and CareSource as their MCO (as in Summit County where I live) would look at these insurers’ provider lists for the care providers that they prefer.  Then, the person would tell Ohio Medicaid that they choose to OPT OUT of Medicare’s participation in My Care Ohio.   Then the person would sign up for a Medicare supplement with a company other than United or CareSource.  (Get the supplement enrollment done before December 7.)  After taking these steps, the person’s doctor is paid by someone other than the MCO and would be immune to perceived pressure from the MCO to acquiesce to questionable care decisions.

Remember, in this second year of My Care Ohio, the program assumes that Medicare will be opted into My Care Ohio.  You must take steps to notify the program that you choose to opt out for Medicare.

For more information, visit Jim’s website.

Jim Koewler’s mission is
“Protecting Seniors and People with Special Needs.”

For help with long term care or with planning for someone with special needs,
call Jim, or contact him through his website.

© 2014 The Koewler Law Firm.  All rights reserved.

Medicare Supplement or Advantage Plan? Choose carefully.

It’s time to enroll for Medicare additional insurance for 2015.  The open enrollment period runs until December 7.  If you are on Medicare, make sure to get your enrollment done by then.

It isn’t necessary to have Medicare additional insurance.  People on Medicare can choose to cover the 20% Medicare co-pay by themselves.

If, though, you prefer to buy insurance for the co-pay, choose your insurance carefully.  The types of plans available fall into two broad categories: (1)  Advantage Plans and (2) supplements.

Advantage Plans generally are less expensive.  Supplements are generally more expensive.

Advantage Plans are built like Health Maintenance Organization (HMOs.)  They have a more restrictive provider list but usually provide more preventive medicine support.  Supplements are traditional fee for service plans, so preventive services mostly take place only when initiated by the insured person.

After a major illness or injury that requires rehabilitation therapy (“rehab,”) supplements usually are more generous than Advantage Plans.  Medicare itself allows 100 days of rehab, 20 paid fully by Medicare and the rest subject to the 20% co-pay.

Advantage Plans pay close attention to the insured person’s progress during therapy and, if they don’t see adequate progress, will cut off payments for rehab days very quickly. Some insured people have their rehab coverage end just a few days past the 20 days that are fully covered by Medicare.

Supplements, with a few exceptions, do not cut off rehab days.  Most insureds with supplements get most or all of the 100 available rehab days.

So, my suggestions for choosing between Advantage Plans and supplements are:

No matter your preference, seek out a Medicare insurance agent that represents more than one insurer.  Don’t just assume that the person at the table in your local grocery, pharmacy, or department store can give you all the options.  If the person at that table sells insurance for just one company, find someone else.

But, don’t go it alone.  Get help from an insurance broker.  These insurance plans are complicated, and there are many different choices among Advantage Plans and among supplements.  Let someone help you figure out your best options.  Their help doesn’t cost you anything.  They’re paid by the insurer you choose.

Choose your plan wisely.