Medicare Basics: What to Know

Many clients who are retiring or suffering job loss face key decisions about their healthcare. These Medicare basics will help make those decisions.

Medicare is a commonly misunderstood government benefit.  With so many baby-boomers retiring and especially with the impact of COVID-19 on the economy, many clients are faced with important decisions on their healthcare.  For that reason, I wanted to cover some Medicare basics to help readers understand these issues.

If you’re 65 or older and lose your job, you can keep your employer-based health insurance under a federal law known as COBRA. However, it also could be more expensive. In addition, COBRA coverage isn’t qualifying insurance in place of Medicare, and if you miss some deadlines for enrolling in Medicare without having the right coverage, you could pay life-lasting penalties, explains CNBC’s recent article entitled “What to know about getting Medicare if you are 65 or older and lost your job.”

Another critical Medicare basic is that Medicare isn’t free. However, if you find yourself currently with no employer-based insurance, it may be your best option. There are also ways to lower your costs, if your income has dropped a lot.

Provided that you have at least a 10-year work history, you’ll have no premiums to pay for Medicare Part A, which covers hospital stays, skilled nursing, hospice and certain home health services. If you don’t satisfy the eligibility requirements for it being premium-free, you could pay up to $458 per month for coverage. Either way, Part A’s deductible is $1,408 per benefit period, with some caps on benefits.

Part B covers outpatient care and medical supplies. It has a standard monthly premium of $144.60 in 2020, but higher earners pay more. There is also a $198 deductible in 2020. Once you meet the deductible, you’ll typically pay 20% of covered services. You are allowed eight months to sign up for Part B, once you lose workplace coverage.

You can get a standalone plan to have with original Medicare, or you can get an Advantage Plan (Part C). These plans are offered by private insurance companies and typically include prescription drug coverage. If you select this, your Parts A and B benefits will be delivered via the insurer offering the plan (which may or may not have a premium).

A Part D drug plan covers prescriptions. The average cost for this coverage in 2020 is roughly $42 a month, but high earners pay extra for their premiums. The maximum deductible for Part D is $435 in 2020.

If you already have Part A and are enrolling in Part B because of a job loss, there is a form that you and your ex-employer should complete to avoid late-enrollment penalties, by making certain that you had qualifying coverage during the period of time you were eligible for Part B but weren’t enrolled.

Another important issue of Medicare basics is what Medicare excludes from cover.  Consider how you’ll pay for items like dental work, routine vision, or hearing care. It also excludes long term care, cosmetic procedures and overseas medical care.  Clients often mistaken the skilled nursing facility rehab component of Medicare with long term care insurance, so see here for more detail on that.  https://www.galliganmanning.com/long-term-care-whats-it-all-about/ 

Seniors frequently use original Medicare and a supplemental policy (“Medigap”) to help cover out-of-pocket costs, such as deductibles and coinsurance. Medigap policies are standardized, regardless of which insurance company sells them and your location. However, the premiums can differ from insurer to insurer and among locations. Therefore, it is critical that you know the differences you may see when evaluating your options. Look at a carrier’s premium rating system, its claims history and its customer service ratings.

If you go with an Advantage Plan, dental and vision coverage may be included. Note that these plans have their own copays, deductibles and out-of-pocket maximums.

Reference: CNBC (June 26, 2020) “What to know about getting Medicare if you are 65 or older and lost your job”

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The Difference Between an Executor, a Trustee and Other Fiduciaries

Who is the best person to be your executor, trustee, or agent?
Who is the best person to be your executor, trustee, or agent?

When putting together an estate plan, you need to choose wisely those you trust to carry out your intent. Many people wonder what is the difference between an executor and a trustee. But those aren’t the only roles you need to consider filling when putting together your estate plan. You also may need to name agents and guardians.

The people you designate for these positions are generally called “fiduciaries.” Because these people will play an important part in the success of your estate plan you need to know what these roles entail and what kind of person would be best suited for each position.

Here is a summary of what fiduciaries you may need in your estate plan:

  • Executor  – This is the person named in your will who has the responsibility for identifying what property you own, paying your debts and final expenses, filing final tax returns, and distributing the remaining assets to your beneficiaries. Often the executor has the authority to determine what assets make up a beneficiary’s share. The executor should be organized and able to make financial decisions. The executor needs to be impartial with regard to beneficiaries. He or she should be willing to communicate regularly with the beneficiaries and keep them informed.
  • Trustee – A trustee manages a trust. As opposed to the executor, this could be a long term position, depending on how long the trust is supposed to last. The trustee must be able to communicate with the beneficiaries and be responsive to their needs while following the terms of the trust. There are many kinds of trusts, so one person may be good as trustee for one kind of trust, but may not be appropriate for another kind of trust. For example, an adult child may be a good trustee for his or her own trust, but a poor choice as trustee of a trust created for his or her step parent.
  • Guardian of a Minor or Incapacitated Child The guardian of a child’s “person” has the responsibility for making sure that the child’s day to day physical needs are met (food, clothing, and shelter). The guardian assumes the care of the minor or incapacitated child or children upon the death or incapacity of the last of the child’s parents to die or become incapacitated. The child’s guardian should be someone who holds the same values you do and someone you trust to raise your child the way you would.
  • Agent Under Medical Power of Attorney – This is the person you appoint to make decisions regarding your medical treatment when your health care provider has determined that you cannot make your own medical decisions. This person should not be afraid or hesitant to ask you what kind of treatment you would want in certain situations. He or she needs to be able to make tough decisions and be committed to making decisions based on what you want and have expressed, not on their own wishes.  It’s important to have a frank discussion with your medical agent regarding the kinds of treatment you want or don’t want.
  • Agent Under a General Durable Financial Power of Attorney This is the person you appoint to step in when you are unable to take care of your own business affairs, but you also may appoint an agent to act on your behalf when you are not incapacitated. The agent will be responsible for handling your day to day tasks, such as paying bills, managing investments, paying for your care and medical expenses, signing tax forms, dealing with insurance, social security, etc. This person should be organized and able to make financial decisions and have the time to handle your affairs. Your agent may hire outside help, like a bookkeeper or a caregiver.

Certain positions, such as an agent acting under a power of attorney, for practical reasons should probably be filled by one person at a time. For other roles, such as trustee or executor, you may wish to name two or more people. Just remember, the more people involved in the decision making, the more cumbersome the process may become.

You should also name successor executors, trustees, agents and guardians to act in the event the first person you choose is unable to take on that role.

In some situations, a trust company is the appropriate choice for carrying out your instructions as to how assets should be distributed and beneficiaries cared for. Trust companies are impartial and can be effective in diffusing emotions that may arise between beneficiaries and an executor or trustee. Another option may be to name an individual and a trust company as co-executors or co-trustees. The individual may be sensitive to a beneficiary’s needs and a trust company can take care of investing and managing assets.

In any event, your estate planning attorney will be able to help you explore further which roles you need to fill in your estate plan and the best people for those roles.

If you’re interested in learning more about how a trust company works. See https://www.galliganmanning.com/how-does-a-trust-company-work/

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