Any person (or parent of a young person) with special needs who receives Medicare or Medicaid benefits (as well as seniors or other individuals who currently or will soon receive these benefits) should be aware of how decisions made during this year could affect the medical services they receive and their out-of-pocket medical costs.
In December of 2010, the House of Representatives and the Senate voted to pass H.R. 4994, the Medicare and Medicaid Extenders Act of 2010. President Obama signed it into law on December 15. Had it not become law, the amount physicians receive for Medicare claims would have been reduced by 25percent, and ultimately, it would have affected Medicare beneficiaries. Other aspects of medical care and cost are also affected by this law.
How this extension affects physicians and other health care providers
When a bill for medical services is sent to Medicare for payment, it's for an amount the provider feels is a fair price for the services. However, Medicare uses a formula to determine the reimbursement level for the services and makes an adjustment to the fee charged. Many people commonly refer to the adjusted fee as the allowable or approved amount.
Medicare pays 80% of this allowable amount. The balance is paid by the patient and/or a supplemental health insurance plan the patient has purchased.
Many physicians believe Medicare's process has not kept pace with the cost of providing services to patients. Yet without this one-year extension, their payments would have been reduced, a move in the opposite direction of what they would like to see. And if nothing is done to change the system in the coming year, the reduction will take effect on January 1, 2012,
How it could affect Medicare beneficiaries
Physicians have three options.* They may continue to be a Medicare participant (offer services to Medicare beneficiaries) regardless of any changes that are or are not made to the Medicare system, OR serve Medicare beneficiaries on a case-by-case basis (select which Medicare beneficiaries they'll accept as patients), OR become a private contractor (have no patients who are Medicare beneficiaries).
Obviously, if fewer physicians accept Medicare beneficiaries as patients, it will be more difficult for them to find doctors to take care of their needs--doctors who have the skills they're looking for and who are located within a reasonable distance from their home. Out-of-pocket expenses (doctor bills, gas/travel, etc.) might increase, and premiums paid for a supplemental insurance policy may rise to offset the insurance providers' higher cost of doing business.
During 2011, the American Medical Association, health care providers, and other medical associations, along with politically active individuals who receive Medicare benefits or want to improve the system for all Americans, will be working to encourage Congress to find a long-term solution to the current situation.
Managing the effects
Consider how your financial situation may be affected by changes in Medicare coverage. "Managing your finances is more important now than ever before." says Chris Collier, CLU, a Special Care Planner with The Paragon Financial Group (www.chriscollierclu.com) in Cincinnati, Ohio, a general agency of Massachusetts Mutual Life Insurance Company (MassMutual). "In recent years, more and more responsibility has been shifted to individuals and families. They must take active roles in managing their financial wellness. It's important to understand all of your options and to know--or at least try to anticipate--what changes may come about, then make decisions based on that knowledge."
The Medicare issue is just one example of how changes in our society can affect us. How will this be resolved? What other changes will the future hold? What can we do to try to manage the impact these changes will have on us?
"There are some things I can suggest," says Collier, "which may be beneficial to everyone, in addition to those who have special needs or who'll be affected by any changes in the Medicare or Medicaid programs. First, take a good look at your financial picture. Know what your costs are today and how they may increase in the future. Anticipate and plan accordingly. Make the best use of every dollar you have."
That means working with financial and legal professionals who understand the tools and products that are available to you and can help you determine how to put them together in a strategy to suit your particular needs. Persons with special needs should rely on those who have experience in serving the special needs community.
"It's one thing to have some clarity bout what you might be facing, but a whole different ballgame to come up with what you need. An experienced professional can help you see how you're using your money and suggest ways to use it better.
For example, you might find you have a need for permanent life insurance. It offers a tax-free death benefit to the beneficiary, policies may offer a disability rider, which continues to pay premiums should the policy owner become disabled (additional cost may be associated). Life insurance may also be protected against the reach of creditors (under certain state statutes, the cash value may be protected if you are sued).
Collier also suggests taking advantage of flexible spending accounts, which allow employees to put aside pre-tax earnings to be used for qualified medical expenses. A health savings account is a similar tool for people who are self-employed.
Another important thing a person with special needs might do--especially if receiving government benefits--is to create a special needs trust. "It can be established now, and funded with proceeds from a life insurance policy," says Collier. "And other income, such as gifts of money or inheritances from relatives, can be put into the trust. The trust funds can be used to pay for certain expenses the person with special needs has, including medical costs not covered by Medicare."
Keep a watchful eye
There are many other ways to prepare for your financial future. Talk to the professionals who can best serve you. And be aware of how Medicare and Medicaid revisions will affect you.
* For more info about physicians' choices, visit www.ama-assn.org/ama1/pub/upload/mm/339/ medicare-par/know-options-medicare-particaption-guide.pdf
If you'd like more information about this topic, begin your research with these websites:
www.finance.senate.gov/legislation--Go to this site and type Medicare and Medicaid Extenders Act of 2010 in the search bar for a summary of the act.
www.ama-assn.org--Go to the Advocacy section on this website to follow the American Medical Association's activities regarding Medicare reform and other issues.
www.opencongress.org/bill/111-h4994/show--Open Congress website's compilation of information on the subject, including congressional voting results, news articles, links to blogs, and more.
* The Special Care Planner receives advanced training and information in estate and tax planning concepts, special needs trusts, government programs, and the emotional dynamics of working with people with disabilities and other special needs and their families. The certificate program is offered by The American College in Bryn Mawr, PA, exclusively for MassMutual financial professionals. State insurance departments recognize that the Special Care Planner certificate program provides essential information on the profession of special care by granting continuing education (CE) credits (varies by state).
A Special Care Planner through MassMutual's SpecialCare[SM] program can assist parents in drafting Letters of Intent and can help make a difference in the quality of life for an individual with special needs, their caregiver and other family members. Through SpecialCare you will learn valuable financial strategies, identify financial strategy solutions, access vital information, and meet certified specialists who will work with you and your professional advisors--your banker, accountant or financial planner, lawyer, social workers and health care providers--to review your financial picture and offer options to fit the needs of each situation. For more details, visit MassMutual's website at http://www.MassMutual.com/specialcare, or call 1-(800)-272-2216.
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