In This Issue

President's Deficit Plan Still Means Sacrifice for Elderly and Disabled
How to Avoid Problems as a Trustee
Planned National Long-Term Care Insurance Program in Critical Condition
Medicare's Open Enrollment Season Already Underway

San Diego's PREMIER Law Firm for the legal needs of our
Elder and Disabled communities, their families, and caregivers

At San Diego Elder Law Center, our practice specializes in Elder and Disability Law. In particular, we assist our clients with:

• Identifying appropriate care and resources, and accessing any available programs or funds to pay for such care
• Qualifying for Medi-Cal nursing home coverage, while avoiding or minimizing “share of cost” and State recovery actions
• Advanced and Crisis Planning to preserve our clients' estates for the benefit of themselves, their spouses, children and heirs
• Coping with the legal problems posed by dementia, incapacity, disability, or death
• Special Needs Trusts and other planning for the developmentally disabled
• Preserving eligibility for public benefits in face of inheritance or other new income or assets

As part of his opening move in negotiations to reduce the federal deficit, President Obama has proposed $320 billion in cuts to Medicare and Medicaid.  Although the Medicare and Medicaid programs would be spared the kind of radical surgery prescribed by Republicans, the President's proposal would result in higher costs for some Medicare beneficiaries, and advocates warn that proposed cuts to health care providers and states will end up indirectly eroding care for the beneficiaries of both programs.

The deficit reduction pact agreed to by Congress calls for a 12-member Congressional "super committee" -- six members from each party – to come up with between $1.2 and $1.5 trillion in budget savings or face mandatory budget cuts, mostly to health care providers.

The Obama plan, which would reduce Medicare spending by $248 billion and Medicaid by $72 billion over 10 years, derives a large amount of its Medicare savings by requiring drug companies to give that program the same rebates the companies currently accord Medicaid, yielding a projected $135 billion over 10 years starting in 2013.  Unless you're a drug company executive, this change is fairly non-controversial.

But the same cannot be said of a big chunk of Medicaid savings in Mr. Obama's plan, which would come from changing how the federal government shares Medicaid costs with the states.  Currently, the federal government pays states a different rate for different populations, such as children or seniors, because some populations are costlier to cover than others.  President Obama is proposing that the federal government switch to so-called "blended rate," in which states would receive the same rate for all their Medicaid patients, resulting in anticipated savings to the federal government of $14.9 billion over 10 years.

The President first proposed the change during negotiations over raising the debt ceiling this past summer.  At the time, the Center on Budget and Policy Priorities predicted that the adjustment will shift significant Medicaid costs to the states because the new blended rate would be set at a level that provides a state with less federal funding than it currently receives. In addition, a fair and accurate blended rate for each state would be very difficult or impossible to calculate, the Center claimed.

States desperate to make up for the reduction in federal Medicaid funding would likely turn first to reducing services to the elderly and disabled because that's where the money is.

“The Medicaid cuts in the president’s proposal shift the burden to states and ultimately onto the shoulders of seniors, people with disabilities and low-income families who depend on the program as their lifeline,” says Ronald F. Pollack, executive director of the consumer group Families USA, of the new deficit plan.

Matt D. Salo, executive director of the National Association of Medicaid Directors, which represents state Medicaid officials, says, “You would have a hard time cutting significant amounts from Medicaid payments to states without hurting beneficiaries.”

At the same time that states could have fewer Medicaid dollars to spend on care for the elderly and disabled, the Obama plan would cut $42 billion over 10 years in payments to nursing homes, long-term care hospitals, rehabilitation facilities and home health facilities.   The nursing home industry says this will diminish its members' ability to properly care for elderly and disabled patients.

The President's proposal would also place new, direct costs on certain Medicare beneficiaries, future retirees in particular.  The plan would:

• Require beneficiaries of home health services to pay a $100 co-payment per treatment episode starting in 2017.  Revenue raised: $400 million over 10 years.

• Increase the deductible for Medicare Part B (physician services) by $25 in 2017, 2019 and 2021 for new beneficiaries.  Revenue raised: $1 billion over the next decade.

• Impose a 15 percent surcharge on Medigap policies, which pay for out-of-pocket costs in Medicare, starting in 2017.  Revenue raised: $2.5 billion over 10 years.

• Hike premiums for higher-income Medicare beneficiaries on Medicare Part B and Medicare prescription drug plans.  Revenue raised: $20 billion over 10 years.

• Fix a glitch in the health reform law allowing some middle-class early retirees to get Medicaid.  Savings: $14.6 billion over 10 years.  (Details here.)

At a rally sponsored by more than 90 national advocacy groups — including AARP and the American Association of People with Disabilities — hundreds of disability-rights advocates congregated at the Capitol on September 21 to protest the proposed Medicaid cuts.

In announcing his deficit reduction plan, which aims to cut the debt by a total of $3 trillion, President Obama promised that he would veto any legislation asking Medicare beneficiaries to sacrifice without also raising taxes on the rich.

“I will veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans or biggest corporations to pay their fair share,” Obama said. “We are not going to have a one-sided deal that hurts the folks that are most vulnerable.”

For details on the President's proposal from Kaiser Health News, click here.

For a New York Times article on the plan, click here.

Being a trustee is a big responsibility and if you don't perform your duties properly, you could be personally liable. That's why it's important to hire the right people to guide you in this important role.

A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a "trustee," holds legal title to property for another person, called a "beneficiary." If you have been appointed the trustee of a trust, this is a strong vote of confidence in your judgment.

A trustee's duties include locating and protecting trust assets, investing assets prudently, distributing assets to beneficiaries, keeping track of income and expenditures, and filing taxes. (For more information on a trustee's duties, click here.) As a trustee, you have a fiduciary duty to the beneficiaries of the trust, meaning that you have an obligation to act in the best interest of the beneficiaries at all times. It also means you will be held to a higher standard than if you were just dealing with your own finances.

A trustee is usually entitled to hire an attorney (and other professionals like an accountant) to assist in trust administration. The attorney's fees will be paid from the trust funds. While hiring an attorney will cost money, not having an attorney at all could cost a trustee much more if errors are made.

A trust can be administered without court involvement, but that doesn't mean that the administration is simple. There are many areas where problems can arise -- for example, if assets aren't invested properly, taxes are late, or if proper records aren't kept. If something goes wrong during the administration of the trust, the trustee can be removed and held personally liable for any costs incurred or losses suffered. Even if a spouse is the trustee, he or she should still consult with an attorney. Many couples have so-called "AB" trusts to take advantage of the maximum estate tax exemption; these trusts require special knowledge to determine whether the trusts are properly funded and the taxes filed.

The Obama administration may be on the brink of scuttling a new national long-term care insurance program that was part of the health reform law.

The Community Living Assistance Services and Supports (CLASS) Act, Sen. Edward M. Kennedy's final legislative legacy, would create a modest, voluntary insurance program aimed at helping to keep the elderly and disabled out of nursing homes and off the Medicaid rolls.

The CLASS program is to be designed by October 2012, but it has drawn intense fire from Republicans and some Democrats who charge it is financially unsustainable.  The program's critics contend that because it is voluntary, only those with expensive health problems will sign up for it. Americans who wish to be in the program would pay a monthly premium for five years, after which they would be vested and eligible to receive benefits averaging between $50 and $75 a day to pay for a range of long-term care services that would help them stay in their homes, or the money could be used to defray the cost of nursing home care.

But if too few younger, healthier workers participate, the resulting "adverse selection" will mean that the benefits will be too meager or the premiums too high for the program to work.

Health and Human Services (HHS) Secretary Kathleen Sebelius has conceded that the CLASS program as outlined by Congress was flawed, but she has said that it could be fixed through regulations, and that if it couldn't, HHS would not continue to roll it out.

The latter seems to be what's now happening.  According to Urban Institute fellow Howard Gleckman writing in Forbes,  the CLASS program's chief actuary and his staff "finished their actuarial analysis some weeks ago and sources say it concluded it would be difficult -- though not impossible -- to create successful CLASS policies given the limits of the law."

Last week it was revealed that the Department of Health & Human Services had laid off the actuary, Bob Yee, and reassigned most of his staff. Earlier, the Senate Appropriations Committee, at HHS's request, deleted all of the $120 million that had been planned next fiscal year to implement the benefit.

HHS has acknowledged CLASS is being delayed, and says it is “an open question whether the program will be implemented.”

Comments Gleckman, "In Washington-speak, this is akin to a surgeon telling his patient’s family that 'things didn’t go as well as we’d hoped.' "

"After reviewing the actuarial work done by Yee and his staff, [HHS Secretary Sebelius] seems to have concluded it would flop," Gleckman writes. "And now she may be scuttling the program."

On September 15, The Hill reported that the CLASS Act's Democratic supporters in Congress are scrambling to stop the Obama administration from pulling the plug on it.

UPDATE: HHS will "issue a report along with recommendations about how to proceed" with the program by mid-October, according to Assistant Secretary of Aging Kathy Greenlee, as reported by The Hill.  The report will include the results of the actuarial analysis of the CLASS Act.

This year's holiday shopping season has begun early for Medicare beneficiaries: the program's Open Enrollment Period, during which you can enroll in or switch plans, began October 15 and ends on December 7.

During this period, you may enroll in a Medicare Part D (prescription drug) plan or, if you currently have a plan, you may change plans. In addition, during the seven-week period you can return to traditional Medicare (Parts A and B) from a Medicare Advantage (Part C, managed care) plan, enroll in a Medicare Advantage plan, or change Advantage plans. Beneficiaries can go to www.medicare.gov or call 1-800-MEDICARE (1-800-633-4227) to make changes in their Medicare prescription drug and health plan coverage.

Even beneficiaries who were satisfied with their plan in 2011 need to review their options for 2012, particularly because things are still in flux due to changes brought on by the health care law. Prescription drug plans can change their premiums, deductibles, the list of drugs they cover, and their plan rules for covered drugs, exceptions and appeals. Medicare Advantage plans can change their benefit package and as well as their provider network.

According to the federal Centers for Medicare and Medicaid Services (CMS), Medicare Advantage premiums are expected to decrease by an average of 4 percent next year from this year, while Part D plan premiums will likely increase about 2 percent to $30 a month, on average.

Reaching for the Stars

One change beneficiaries using the Medicare Plan Finder will notice this year is CMS's enhanced five-star rating system.  Plans that have achieved a five-star rating from CMS are identified with a "gold star" icon.  Those that have received a low overall quality rating for the past three years are identified with a "caution signal" icon.  Another new innovation is that there is no time limit to switch into a five-star Advantage or prescription drug plan. Medicare beneficiaries have one opportunity to switch to one of these top-rated plans anytime during 2012.

If you want out of your Advantage plan after December 7, you can "disenroll" between January 1 and February 14.  At that point you can return to traditional Medicare and add a Part D plan, or move into a five-star Advantage plan.  But if you return to traditional Medicare you may not be able to buy Medigap coverage at that point, although the rules vary by state.

If you take no action, you will remain in your current plan unless your Medicare Advantage or drug plan is terminating its Medicare contract. Also, if you receive the Low-Income Subsidy (LIS) to help pay for some or most of your Part D drug costs, you may be randomly reassigned to a different plan. (For more on the LIS program, also known as "Extra Help," click here.)  

Some factors to consider when evaluating your drug plan include:

• What is the monthly premium?
• Does the plan continue to cover necessary drugs?
• Does the plan provide coverage for drugs in the "doughnut hole" or coverage gap?
• What pharmacies are covered under the plan?

Some factors to consider when comparing Medicare Advantage plans include:

• What is the monthly premium?
• What is the cost-sharing for doctor visits?
• Which doctors and hospitals are covered?
• Is prescription drug coverage included?
• Are any other extra benefits included and will they be useful to you?

Remember that fraud perpetrators will inevitably use the Open Enrollment Period to try to gain access to individuals' personal financial information.  Medicare beneficiaries should never give their personal information out to anyone making unsolicited phone calls selling Medicare-related products or services or showing up on their doorstep uninvited.  If you think you've been a victim of fraud or identity theft, contact Medicare.  For more information on Medicare fraud, click here or here. 

Here are several sources of additional information:

• The 2012 Medicare & You handbook, which all Medicare beneficiaries should have received. The handbook can also be downloaded online at: www.medicare.gov/publications/pubs/pdf/10050.pdf 

• The Medicare Rights Center: www.medicareinteractive.org

• Your State Health Insurance Assistance Program, which offers independent counseling: www.medicare.gov/contacts

• Medicare Plan Finder: www.medicare.gov/find-a-plan