Medicaid Management: 2006 Figures

The Centers for Medicare & Medicaid Services (CMS) has informed the Department that due to an increase in the consumer price index, the federal maximum community spouse resource allowance (CSRA) increases to $99,540 effective January 1, 2006. The State's minimum CSRA will remain unchanged at $74,820. Therefore, in determining the community spouse resource allowance on and after January 1, 2006, the community spouse is permitted to retain resources in an amount equal to the greater of the following amounts:
1. $74,820 (the State minimum community spouse resource allowance); or
2. the amount of the spousal share up to $99,540 (the new federal maximum).

In addition, effective January 1, 2006, the community spouse minimum monthly maintenance needs allowance (MMMNA) increases to $2,489 ($2,488.50 rounded up). The increased MMMNA, family member allowance, federal maximum CSRA, and State minimum CSRA must be used when completing an assessment of a couple's resources and income.

NOTE: For home care, the monthly Medicaid income level for one-person ($692) and two-person ($900) household will also take effect on January 1, 2006.

Any increases in the MMMNA and family member allowance and/or changes in the NAMI of the institutionalized spouse are to be made effective January 1, 2006.

AARP Letter to the U.S. Senate

The following is a letter drafted by AARP in response to a report that the House approved the revision of asset transfer rules, making it much more difficult to obtain Medicaid. We urge you to copy this letter, sign and send it off in an attempt to ask the Senate to oppose this proposal.

December 19, 2005
The Honorable Bill Frist
Majority Leader
U.S. Senate
Washington, D.C. 20510
Dear Majority Leader Frist:
AARP strongly opposes the budget reconciliation conference agreement
scheduled to come before the Senate for a vote today. Rather than reflecting the
rational provisions of the Senate reconciliation bill, the final conference
agreement is irresponsible policy.
The final conference agreement does not ask for shared sacrifice to achieve
budgetary savings. Rather it protects the pharmaceutical industry, the managed
care industry, and other providers at the expense of low-income Medicaid
beneficiaries and Medicare beneficiaries who will foot the bill.
AARP members and your other constituents will question why members of the
Senate would vote for a bill that would:
• Make it harder for Americans needing long-term care to qualify for
Medicaid;
• Force some Americans to forfeit their homes in order to pay for long-term
care services;
• Require all Medicare Part B beneficiaries to pay higher premiums;
• Reopen the MMA, not to make improvements in the new drug benefit, but
to require those with more income to pay higher Part B premiums sooner;
and
• Force low-income Medicaid recipients to pay more for their care – and if
they cannot afford to do so – to potentially be denied care entirely.
The conference agreement systematically undermines the critical protections
built into both the Medicaid and Medicare programs. If the conference
agreement becomes law, then over the course of the next few weeks and months
we will make sure that our members across the country fully understand the
impact of this conference agreement on them and on their families.
Page 2
We urge the Senate to oppose the reconciliation conference package and urge
Congress to instead return to the fair and responsible policies of the original
Senate package.
Sincerely,
William D. Novelli
Cc: All members of U.S. Senate

Spousal Medicaid Rules: The 2006 Community Spouse Resource Allowance has been raised to $99,540. More figures will be reported as they are released. a

Trusts for Disabled Children: How to Choose which trust is right for your child's future

You already know you have to plan your estate carefully to provide the best quality of life for your child. But did you know there are several types of trusts to care for special needs children? The most common types are Support Trusts and Special Needs Trusts.

Support Trusts

A Support Trust mandates that the trustee make distributions for the child's support of such basics as food, shelter, clothing, medical care, and educational services. Beneficiaries of Support Trusts are ineligible to receive financial assistance through Supplemental Security Income (SSI) or Medicaid . Therefore, if your child will require SSI or Medicaid, you should avoid a Support Trust.

Special Needs Trusts

For many parents with a special needs child, the use of a Special Needs Trust is the most effective way to help the child. It manages resources while maintaining the child's eligibility for public assistance benefits. There are two types of Special Needs Trusts: Third-Party and Self-Settled.

Third-Party Special Needs Trust – Created using the parent's assets as part of an estate plan – distributed either by will or living trust.

Self-Settled Special Needs Trust – Generally created by a parent, grandparent or legal guardian using the child's assets to fund the trust – when the child receives a settlement from a personal injury lawsuit and will require lifelong care. If any assets remain in the trust after the beneficiary's death, a payback to the state is required.

Either type of Special Needs Trust helps provide a desirable quality of life for the disabled child while maintaining public assistance benefits.

Resource: www.specialneedsalliance.com

Lawrence Eric Davidow is a founding member and the Treasurer of this premier alliance of leading law firms throughout the country who are dedicated to the area of planning for those with Special Needs.

2006 Medicare Premiums, Deductibles, and Co-Pays Announced

The U.S. Centers for Medicare and Medicaid Services has announced the 2006 Medicare deductibles, premiums, and co-pay amounts. The following was published in the Federal Register:

Medicare Hospital Insurance (Part A):
Deductible - $952 per Benefit Period ($912 in 2005)
Co-insurance - $238 a day for the 61st through the 90th day ($228 in 2005), per Benefit Period; $476 a day for each “nonrenewable, lifetime reserve day” ($456 in 2005)
Skilled Nursing Facility Co-insurance - $119 a day for the 21st through the 100th day per Benefit Period ($114 in 2005)
Hospital Insurance Premium - $393 ($375 in 2005)
Reduced Hospital Insurance Premium - $216 ($206 in 2005)

Medicare Medical Insurance (Part B):
Deductible - $124 per year ($110 in 2005)
Monthly Premium - $88.50 ($78.20 in 2005)

For more details, log on to http://www.access.gpo.gov/su_docs/fedreg/a050923c.html
and scroll down to Centers for Medicare & Medicaid Services.

Social Security Announces 4.1 Percent Benefit Increase for 2006

Monthly Social Security and Supplemental Security Income benefits for more than 52 million Americans will increase 4.1 percent in 2006, the Social Security Administration announced today.

Social Security and Supplemental Security Income benefits increase automatically each year based on the rise in the Bureau of Labor Statistics' Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), from the third quarter of the prior year to the corresponding period of the current year. This year's increase in the CPI-W was 4.1 percent.

The 4.1 percent Cost-of-Living Adjustment (COLA) will begin with benefits that more than 48 million Social Security beneficiaries receive in January 2006. Increased payments to 7 million supplemental Security Income beneficiaries will begin on December 30.

Some other changes that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $94,200 from $90,000. Of the estimated 161 million workers who will pay Social Security taxes in 2006, about 11.3 million will pay higher taxes as a result of the increase in the taxable maximum in 2006.

It is important to note that no one's Social Security benefit will decrease as a result of the 2006 Medicare Part B premium increase, announced last month. By law, the Part B premium increase cannot be larger than a beneficiary's COLA increase. More information about Medicare can be found at www.cms.hhs.gov.

Tips on Providing for Children with Disabilities

One of the major concerns for parents with children with disabilities is how to provide for their financial future. Here are some tips:
Buy enough life insurance. A parent is irreplaceable, but someone will have to fill in. In all likelihood, that person or family will have to pay for at least some services the parent or parents had provided when able. If the estate is not large enough for this purpose, it can be made large enough through life insurance proceeds. Premiums for second-to-die insurance (which pays off only when the second of two parents passes away) can be surprisingly low.

Set up a trust. Any funds left for a disabled child, whether from an estate or the proceeds of a life insurance policy, should be held in trust for his or her benefit. Leaving money for anyone with a disability jeopardizes public benefits. Many people with disabilities cannot manage funds especially large amounts. Some families disinherit disabled children, relying on their siblings to care for them. This approach is fraught with potential problems. Siblings can be sued, get divorced, disagree on their responsibilities, or run off with the funds. It can also cause tax problems for siblings.

Will/appointment of guardian. While a will and the appointment of a guardian is important for anyone with minor children, it is doubly so if the child is disabled. Finding the right guardian can be difficult. In some cases, the care needs of the child may be so demanding that he or she will need a different guardian from his or her siblings. The will is the vehicle for the appointment of the guardian.

Care plan. All parents caring for disabled children should write down what any successor caregiver would need to know about the child and what the parents wishes are for his or her care. For example, should the child be in a group home, live with a parent, be on his or her own? Usually, the parent knows best, but needs to pass on the information.

Coordination with other family members. Even a carefully developed plan can be sabotaged by a well-meaning relative who leaves money directly to the child with a disability. If a trust is created for the benefit of the child, grandparents and other family members should be told about it so that they can direct any bequest they may life to leave to that child through the trust.

Gift Tax Exemption Should Increase to $12,000 in 2006

There is good news next year for those who are wealthy, or just plain generous. The gift tax exemption, now set at $11,000 (per donor, per recipient, per year) will increase to $12,000 on January 1, 2006.
The gift tax exemption amount was stuck at $10,000 for years until it was indexed to inflation in 1998. That number rose by $1,000 in 2002, and next year another similiar increase will be mandated. That means those individuals who have been giving $11,000 per year to each child, for example, should now consider whether to increase that amount. Married couples will be able to give away $24,000 without paying tax.
Note that the gift tax exclusion amount is calculated for each recipient. Thus, if a particularly generous parent wanted to give $55,000 to her five children this year, she would be able to make a total of $60,000 in gifts in 2006. In fact, she could give another $12,000 to each of the children's spouses, and another $12,000 to each grandchild.
Several other aspects of the gift tax exclusion are often misunderstood. First of all, the exclusion is not the government's way of saying you are not permitted to make larger gifts. In fact, if over your lifetime the amount you give in excess of the exemption amount does not add up to another $1,000,000 you will not pay any gift tax at all. You will have reduced your estate tax exemption amount, and you will have had to file a gift tax return, but you will not have incurred any additional tax.
Another common misunderstanding: your gifts (of any amount) will not have any direct effect on either your or the recipients' income taxes. Gifts are not deductible to you, and they are not taxable income to the recipient (not that this generalization may not be exactly accurate if you pay more than half of the expenses of your recipient; you may be able to at least claim the recipient as a dependent).
Another little-known quirk in the gift tax law: direct payment of medical or educational expenses will not get calculated as part of the $12,000 limit. In other words, you can pay a grandhild's private school tuition, or college expenses, and still make another $12,000 gift (after the first of the year, of course). You can pay your father's nursing home expenses without having to worry about gift tax consequences. But this rule does require that you make the payments directly; you should not give your grandson $40,000 and make him promise to use it for tuition - you need to write the check directly to the college he will be attending.
Another common confusion: the gift tax and the estate tax are no longer closely coupled. While lifetime gifts of over $1,000,000 will be taxed, an estate of $2,000,000 can be passed to heirs without taxation beginning in 2006.

Source: Elder Law Issues, Volume 13, Issue 14.