Medicare Recipients The Clock Is Ticking & Plan F Is Going Away?

March 23,2020  

Plan F will no longer be sold starting in 2020

Yes, it is – but not for a while yet, so don’t panic. Medigap Plan F has been one of the most popular supplement plans on the market for decades. Millions of people will be affected, so Congress has given us plenty of time to prepare for this – until 2020, in fact.

We’ve got the scoop so you’ll know what to expect in 2020, when these changes come about.

Why Are They Changing Plan F?

The changes coming are a result of the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. You may have heard it referred to as the “doc fix” law.

The Doc Fix was necessary Congress passed this legislation last year to ensure that doctors would  be paid adequately for providing Medicare services. We all want our doctors to be paid fairly for seeing Medicare patients, but some earlier laws actually budgeted for doctors to have rate decreases over the years.

Doctors, of course, don’t like this, and many threatened to leave the Medicare program if the cuts continued. Every year, Congress has been voting at the last minute to stall the cuts, but kicking the can down the road doesn’t work forever.

The new law ensures doctors will be adequately paid for Medicare services

They needed a solution to fix the payments for physicians so that they would not bail out of the Medicare program.As you can imagine, that costs money, around $200 billion over the next 10 years. Congress had to come up with that money somewhere. They decided to reform our existing Medigap policies, among other measures.

All Medicare Beneficiaries Must Be Subject to a Deductible

Currently Medicare Parts A & B both have deductibles. Deductibles are the amount of money that you pay out of pocket before your benefits begin.

Medigap plans can still cover the Part A Hospital deductible, but as of 2020, the plans can no longer cover the Part B deductible for new enrollees.  Currently this deductible is $183 per year in 2017. Since Plan F covers that deductible, it is going to be phased out for new enrollees.

The goal of this measure, in the view of Congress, is to make Medicare beneficiaries put a little more “skin in the game.”

You see, people with Plan F have what we call “first dollar” coverage. Right from the first day, Medicare covers 80% and their Medigap Plan F covers the deductibles and the other 20%. So at the time of service, people currently on Plan F pay no copay for their Medicare-related doctor visits. No deductible either.  Lawmakers fear that this lack of cost-sharing results in people running to the doctor for minor issues that may not really require medical care.

These changes mean that all Medicare beneficiaries will have least $183 in deductible spending out of your own pocket each year. In light of this, they hope you might think twice before seeing a doctor and perhaps causing the Medicare Trust Fund some unnecessary spending.

Basically…. they want you to think about whether you really need to see a doctor for every little sniffle.

Will this really work to reduce Medicare’s overall annual expenditures? We’ll see. Opponents have argued that people may end up waiting to seek medical care for serious issues. This would ultimately cost the Medicare program more money down the road. The end result is something we’ll all be discovering together after 2020.

The 2020 Changes

Medigap Reform begins in 2020

So is Plan F going away? Yes, BUT only for new people starting in 2020. Here’s how it will go:

• If you are are on Plan F already when 2020 rolls around, you won’t be kicked off your coverage. In fact, you will continue to be able to purchase Plan F policies from other carriers after 2020 as well. (Again, the MACRA act only prohibits the sale of Medigap Plans C & F to newly eligibleMedicare beneficiaries.

• If you are eligible for Medicare before 2020 but have delayed it because you are still working and have employer insurance, don’t worry. When you leave that insurance and switch to Medicare, you will still have the right to enroll in Medigap Plans C or F.

• People eligible for Medicare AFTER 2020 will not have this same right, but they will have a similar right to enroll in Medigap Plans D or G going forward.

Other popular Medigap plans like Plan G and Plan N will continue to be available for everyone in their current format. A New High-Deductible Plan G will be created and made available for both newly eligible and previously eligible applicants.

What does this mean for you?

Here’s our advice:

1. Make the best coverage decision for yourself right now. If Plan F feels best to you, go for it. You’ll be grandfathered if you choose to keep that plan past 2020. If you would rather choose Plan G or Plan N that isn’t slated to be discontinued down the road, then that’s fine too. In fact, Plan G offers some great potential savings and gets great reviews.
2.  Watch our posts for future updates. Legislation about Medicare changes often and 2020 is still quite a long way away. We never know what other changes they may pile on between now and then. We’ll keep you posted though, so be sure to check in here at our website or l for future updates as we roll them out.
3. Visit us at www.deleonenterprisesinc.com to learn about these plans and other life insurance plans available in Houston and Surrounding areas. We’ll help you see just how much you would save. - Raymond De Leon

If it could happen to Superman, it can happen to you..."Prepare for the "Unthinkable."

GenerationXers this was advice only given to Boomers in the past but it's time for you also to "Prepare for the unthinkable."

If it can happen to Superman, it can happen to you. More than 12 million Americans need long-term care, and almost 5 million of those are working-age adults. Here's how to prepare for the worst.

I’ll bet you're not considering the prospect that you might need nursing home or skilled home health care. But the unthinkable can happen. Just ask Superman -- actor Christopher Reeve. Reeve was paralyzed in a 1995 horse-riding accident, joined millions of Americans who require nursing care at home or who now reside in nursing facilities. NOTE: Christopher Reeve died Oct. 10, 2004. 10 years after his accident.

You insure your home against fire and your car against an accident -- and never complain if that money is wasted. Why not insure against one of the most expensive realities of life -- long-term care? As our lives lengthen and new treatments are developed, you -- or your parents -- are more likely to require some type of senior care.

With a little planning, you can buy long-term care insurance -- either for yourself, or as an annual gift for your now-healthy parents. And you can encourage your company to provide this coverage as an employee benefit. Otherwise you may become one of the 7 million Americans who, according to the National Council on the Aging, now provide or manage care for a friend or relative aged 55 or older and not living with them.

Long-term care insurance is a product that catches the attention of seniors, but the ideal time to buy it is actually when you're in your early 50s and in good health. At that point, premium costs are lower, and you’re less likely to have a pre-existing condition that disqualifies you. But a society that values a youthful appearance seems unwilling to recognize these expensive facts of life.

The costs of long-term care are staggering today and should soar higher in the coming years when baby boomers retire. Even the GenXers won’t escape the impact. Your parents will either spend your inheritance on nursing home care, or you may find yourself taking care of your elderly parents out of your own retirement funds.

In fact, the U. S. General Accounting Office says that nearly 40% of people age 65 now will spend some time in a nursing home. The federal Health Care Financing Administration projects that spending on nursing home care will rise from about $94.1 billion now to $125 billion a year by the end of 2005 and $330 billion by 2030.

The average annual cost of a private nursing home is now about $55,000, or $150 per day -- with many facilities in large cities costing more than $65,000 a year. Those costs can add up quickly, and Medicare does NOT cover them -- except for a few days in a skilled nursing facility after a hospital stay.

And no Medicare supplement policy covers custodial nursing care. Yes, state Medicaid programs cover nursing care for the indigent -- but that means almost all assets and income must be spent down before the state will pick up the tab.

Medicaid spend-down planning has received attention as a way to deal with the nursing-care costs. Financial advisers counsel seniors to transfer assets to younger family members -- a process that must be completed at least three years before asking Medicaid to pay nursing home costs. But these state nursing home programs for the impoverished do not cover home-health-care costs. And aside from the moral implications of such a strategy, do you really want you or your parents to depend on a government-funded nursing facility?

Long-term care insurance can solve the problem in most cases. The latest generation of policies pays for "home care" at a senior daycare facility, as well as care in a skilled or custodial nursing facility. A portion of premiums may be tax-deductible, depending on your age and income. But not all policies are alike, the business is growing (There were just 4.1 million policy holders in 1998.) and coverages are constantly evolving, so study both the product and the pricing.

Nuts and bolts
If you’re thinking about buying long-term care insurance, here’s what you should know before you buy.

The cost of a long-term care policy depends primarily on three basic factors: your current age, your current state of health, and the location of your residence. Unless you move, you can’t control any of these. But you can control such questions as the amount and length of coverage, the elimination period (deductible), and whether you’ve chosen an inflation rider.

Buying early pays. A healthy 50-year-old could purchase more than adequate coverage for $1,365 a year. For a 73-year-old, the same policy might cost $6,300 a year. This four-year coverage would include a 90-day deductible or elimination period, $200 per day in coverage (for home health care or nursing home care), and a simple inflation rider -- all on a policy from a top-rated company.

Good health now pays off later. Once you’ve locked in an annual premium, it can’t be raised if your health changes. But insurance companies can ask state regulators to raise premiums for an entire age group, depending on claims experience. Unfortunately, many companies have raised premiums in recent years, once they realized they’d underpriced their policies. (See below, on choosing a reputable insurer.)

While some insurers require a medical examination, most just ask for a medical reference. However, any false claims could result in future denial of coverage.

Where you live affects costs. That’s because nursing costs typically are higher in major metropolitan areas than in smaller communities.

Length of coverage: The average stay in a nursing facility is 2.5 years, so some people opt to limit coverage length to cut costs. But if you're purchasing a policy in your mid-50s, you’ll find that lifetime coverage is not much more expensive.

Elimination period: This is like a deductible and works like one. You agree to pay for the first 60 days or 90 days of needed care; then the policy kicks in. Having a 90-day deductible can cut premium costs substantially.

Inflation rider: Even a 3% inflation rate can cut the value of your dollar in half in 25 years. Plus, assume health-care costs will rise more than the general inflation rate as boomers age. So it may pay to buy an inflation rider. All tax-qualified policies today (see below) must offer this coverage as an option.

Other issues
Benefit payments and triggers: A qualified physician must certify to the insurance company that you need the benefits -- and those benefits will be paid only to qualified caregivers. A daughter who simply does your shopping and prepares meals wouldn't qualify as a caregiver, but she might if she’s a trained professional.

Most policies require the inability to perform at least two activities of daily living to trigger the benefits. The activities include being able to dress yourself, bathe yourself, move from a bed to a chair, use toilet facilities or eat unassisted. Policies will also pay out if you can’t pass certain mental function tests. (Look for a policy that specifically includes coverage for mental or cognitive impairment.) Most policies no longer require a hospitalization before benefits start, but check the wording anyway.

Insurance companies may pay benefits using one of two methods:

Expense-incurred benefits: These are paid either to you or to your provider up to the limits in your policy.

A daily benefit or indemnity: This will be paid directly to you. But be sure your policy offers a pool of benefits on a daily or weekly basis allowing you to pay for covered services as needed, as well as nursing home care.

Tax-deductibility: You may be able to deduct part of your annual premium as part of a medical deduction. But remember, you can only deduct medical expenses that exceed 7.5% of adjusted gross income. The size of a deduction depends on age. People over age 61 can deduct $2,510 (assuming they meet the 7.5% threshold). Almost all policies sold before Jan. 1, 1997 were grandfathered and are considered qualified. Benefits paid by a qualified policy aren't generally considered taxable income -- even if your employer paid the premiums.

Options
Waiver of Premium: This provision lets you stop paying the annual premiums once you’ve moved into a nursing home and the insurance company has started to pay benefits. It may not apply if you are receiving home health care.

Premium Refund: Some policies will repay your estate any premiums you paid, minus benefits used. Usually, there’s an age limit, typically 65 or 70.

Non-forfeiture benefits: If you drop your coverage, perhaps because you can’t afford the premiums, you can receive some benefits for the money you've already paid in. But this feature can boost the policy cost substantially.

Find a strong company
Make sure you’ve purchased from a company with a strong financial base, and a 10-year history with this insurance, so it will price policies properly and be there when you need it. A number of companies jumped into long-term care insurance without adequate data on which to base prices.

Companies such as Fortis and Travelers have either sold their long-term care businesses to others or reduced sales. The same for John Hancock, UnumProvident, and GE Financial who were once big players in this business. Companies that raised prices substantially for existing policyholders include Banker LIfe and Casualty once owned by (Conseco) and Penn Treaty who just got out of the business completely. So di Allianz Life. 

That's why you only want to work with an Independent Insurance Broker. Captive agent that work with only one company will always have their companys' interest first. It's it 100% your reposibility to understand to the contract. (Buyer Be Ware). An independent Insurance Agent works for you the client and not the Big Insurance Companies.

Independent insurance expert Martin Weiss has created a ratings service for long-term care companies at his Web site, Weiss Ratings. Weiss suggests that experienced companies have more claims-paying data on which to accurately price policies. He also warns that if you ask an agent whether a recommended company has ever raised premiums, the agent will probably say no. That’s because companies change the identification number of a policy, in effect creating a new policy, when they ask for a rate increase! Ask whether an increase in premiums has taken place on this type of policy instead of on this specific policy.

An alternative coverage
Edited: February 7th, 2017. 

There are now (new) policies in the market today from top notch carriers that offer Return of Premium Riders (ROP). Some offer 100% and some 80% return of prepiums. In most cases you’ll have the option to chose which one you want. 

The ROPs are only available as "Riders" and cost extra but compared to the Long Term Care insurance products of the past I personally think it's worth it and that this is going to be a great product for our Aging Texans.

The need for long-term care can occur at any time of life. Of the 12 million Americans who need long-term care, nearly 5 million are working age adults. If something happened to you -- or your parents -- how would you cover the cost? Don’t say you’d just leave it to the government. Instead, take a minute to stop by a nearby nursing home. You would certainly bring some cheer to the patients there. And you’ll gain new respect for those who provide care. And, I hope, you’ll be inspired to do some planning now, before the need arises. After all, that’s what insurance is all about.

There is much to learn about long Term Care and the Four Financial Realities that could affect your life and retirement. Here at De Leon Enterprises & Seniors Health and Life PLLC we are here to help.

Visit our website at www.deleonenterprisesinc.com.

Thank you.

Raymond De Leon