Transcript Chartered Retirement Planning CounselorSM Professional

Chartered Retirement Planning CounselorSM
Professional Designation Program
Module 6
Planning for Incapacity,
Disability & Long-Term
Care
©2013, College for Financial Planning, all rights reserved.
Learning Objectives
6–1: Explain the legal instruments that clients can use in
planning for mental or physical incapacity.
6–2: Describe the eligibility requirements and benefits
provided under Medicare.
6–3: Explain the Medigap problem and strategies for its
solution.
6–4: Describe the characteristics of Medicare Advantage
Plans.
6–5: Describe the policy features to be considered when
evaluating disability income insurance.
6–6: Describe the policy features to be considered when
evaluating long-term care insurance.
6–7: Describe the characteristics of Health Savings Accounts.
6-2
Questions to Get Us Warmed Up
6-3
Learning Objectives
6–1: Explain the legal instruments that clients can use in
planning for mental or physical incapacity.
6–2: Describe the eligibility requirements and benefits
provided under Medicare.
6–3: Explain the Medigap problem and strategies for its
solution.
6–4: Describe the characteristics of Medicare Advantage
Plans.
6–5: Describe the policy features to be considered when
evaluating disability income insurance.
6–6: Describe the policy features to be considered when
evaluating long-term care insurance.
6–7: Describe the characteristics of Health Savings Accounts.
6-4
Power of Attorney
•
•
•
•
•
Written document executed by one
person (principal) authorizing
another (attorney-in-fact) to act on
his or her behalf
Plan and structure prior to onset of
incapacity
General power of attorney: not an
effective tool for incapacity
Durable power of attorney: the
agent’s authority does not cease
when the principal becomes
incapacitated
Springing durable power of attorney:
agent’s authority begins upon
incapacity of principal
6-5
Conservator
• Guardian of personal property
• Resort of last measure where prior planning was
•
•
•
insufficient
Court-appointed fiduciary responsible for managing the
property and financial affairs of
o legally incapacitated person (e.g., a minor)
o mentally incapacitated person
Court may require a
competency hearing for
incapacitated adults
Court may require posting
of a performance bond for
conservator
6-6
Medicare Provisions Part A
Coverage
Benefits
Gaps
• Age 65 and eligible for
Social Security
• Hospitalization
• Deductible
• Age 65 and dependent
or survivor of person
entitled to Part A
• Skilled nursing care
• Co-payment
• Home health care (minimal;
only after hospital stay)
• Costs beyond benefits
provided (extended
hospital stays)
• After entitlement to
disability benefits for 24
months
• U.S. citizens age 65+,
enrolled in Part B and
paying for Part A
• Hospice
• Blood
• Benefits not affected by
income or assets
(true or all
parts of
Medicare)
6-7
Medicare Provisions Part B
Coverage
Benefits
Gaps
• All persons eligible for
Part A
Medical Expenses
• Deductible
• U.S. resident citizens
over age 65 paying
minimums
• Physician services
• In- & outpatient medical
services & supplies
• Coinsurance costs >
Medicare-approved
charges
• Physical & speech therapy
• Ambulance
• Home health care (primary
home health care benefit)
• Hospital outpatient
• Blood
• Care not provided:
routine physicals,
eyeglasses,
hearing aids,
dental care,
prescriptions
outside hospital,
vaccines, nursing
home
6-8
Medicare Part A Costs and Coinsurance
Duration of Benefit
Patient’s Cost
Medicare Part A Coverage
First 60 days
First $1,184 of total cost
(deductible)
All costs except first $1,184 (deductible)
61st–90th day
$296 per day (coinsurance)
All costs except coinsurance amount
91st–150th day
(lifetime 60-day reserve
can be used only once)
$592 per day (deductible)
All costs except deductible
Beyond 150 days
100%
0%
Blood
First three pints
Blood transfusions after first three pints
each calendar year
*
A spell of illness is unrelated to any particular malady. Instead, a spell
of illness begins when the person is hospitalized, and it ends when the
person has been out of a hospital or skilled nursing facility for 60 days.
1-9
Medicare Part B
Services
Benefit
Medicare Pays
Patient Pays
Medical expenses
unlimited
80% > $148
(50% mental health
outpatient)
First $148 + 20% copay
Lab services
unlimited
100%
0
Home health care
unlimited
100% svs.
(80% Equip)
0, 20%
Outpatient care
unlimited
Based on hospital cost
20% of hospital cost
Blood
unlimited
80% > after third pint
first three pints
6-10
Medicare Part D: Prescription Drugs
Individual
Medicare
Deductible - $325
$
325.00
$0
Coverage - $2,645
Donut Hole - $3,763.75
Total
$
661.25
$ 3,763.75
$ 4,750.00
$ 1,983.75
$0
$ 1,983.75
Total
$
325.00
$ 2,645.00
$ 3,763.75
$ 6,733.775
6-11
Learning Objectives
6–1: Explain the legal instruments that clients can use in
planning for mental or physical incapacity.
6–2: Describe the eligibility requirements and benefits
provided under Medicare.
6–3: Explain the Medigap problem and strategies for its
solution.
6–4: Describe the characteristics of Medicare Advantage
Plans.
6–5: Describe the policy features to be considered when
evaluating disability income insurance.
6–6: Describe the policy features to be considered when
evaluating long-term care insurance.
6–7: Describe the characteristics of Health Savings Accounts.
6-12
Gaps in Medicare Coverage
• Medicare-approved charges not paid
•
•
by Medicare are called Medigaps
o Deductibles
o Co-payments
o Coinsurance amounts
Medigap insurance
policies only cover
Medicare-approved charges
Medicaid may cover gaps for
impoverished people who
cannot afford a Medigap
insurance policy
6-13
The 12 Standard Medicare Supplemental Insurance Policies
Benefits
Basic care package
A
B

Skilled nursing care
Part A deductible
Part B deductible
Excess doctor’s
charge
Foreign travel
At-home recovery
Prescription drugs
Preventive
screening

C

D

E†

F*

Plans
G
H†



















J*†



100% 80%

I†






100% 100%




K
L




50% 50%


50% 50%


50% 75%











*Plans F and J also have a high deductible option. These high-deductible plans offer the same benefits as plans F and J. You must
pay a deductible of $2,000 per year before the policy pays anything. There also may be additional deductibles that must be met
including a separate prescription drug deductible per year for Plan J and a separate foreign travel emergency deductible per year for
both plans.
†As of 2010 Plans E, H, I and J will no longer be available to purchase, but existing plans can be maintained.
6-14
Details of Medicare Supplemental Insurance Policies: K & L
Benefits
Plan K
Plan L
Basic care package


Skilled nursing care

50%

50%
Part A deductible

50%

50%
Part B deductible

50%

75%
Prescription drugs


Preventive screening


Excess doctor’s charge
Foreign travel
At-home recovery
6-15
6-15
Medigap Plans M & N
Offered as of June 1, 2010. Both plans should
have somewhat lower premiums than other plans.
Plan M
•
•
•
•
Covers 50% of the Part A inpatient hospital deductible.
Does not cover the Part B deductible.
Covers the core benefit and skilled nursing facility (SNF) daily
coinsurance charges
Has the foreign travel emergency benefit.
Plan N
•
•
•
100% coverage for the Part A inpatient deductible.
Does not cover the Part B deductible.
Coverage for the Part B coinsurance charge is subject to a new
copayment structure with co-pays of up to $20 for office visits and
up to $50 for emergency room visits.
6-16
Employer-Provided Health Coverage
Health Reimbursement Arrangement (HRA)
• Available to all employees
• For actual (substantiated) medical expenses
• Can be used to pay health insurance premiums
Retiree Medical Account (RMA)
• Notional accounts (not pre-funded)
• Provides health care benefits during retirement
Voluntary Employee Benefit Association (VEBA)
• Usually an employee benefit trust
• For all types of employee benefits – including retiree
health care
6-17
Medicare Advantage (Part C) Medicare Managed Care
Options
• Health Maintenance Organization (HMO)
o Beneficiary may only have to pay Part B premium
and copays (e.g., for office visits)
o If HMO plan terminates, beneficiary may select
another HMO (if available) or shift to traditional
Medicare coverage (i.e., Medicare Part A; Part B; and
perhaps Part D)
• HMO with Point of Service option (POS)
• Preferred Provider Organization (PPO)
• Special Needs Plans
• Private Fee-For-Service plans (PFFS)
6-18
Part C: Medicare Medical Savings Account (MSA)
• Medicare makes a
•
•
deposit into
beneficiary’s account
Withdrawals used to
pay medical expenses
are not taxable
NOTE: Medicare MSAs
were not replaced by
Health Savings
Accounts (HSAs)
6-19
Learning Objectives
6–1: Explain the legal instruments that clients can use in
planning for mental or physical incapacity.
6–2: Describe the eligibility requirements and benefits
provided under Medicare.
6–3: Explain the Medigap problem and strategies for its
solution.
6–4: Describe the characteristics of Medicare Advantage
Plans.
6–5: Describe the policy features to be considered when
evaluating disability income insurance.
6–6: Describe the policy features to be considered when
evaluating long-term care insurance.
6–7: Describe the characteristics of Health Savings Accounts.
6-20
Short-Term vs. Long-Term Disability Policies
Short-term disability
coverage
• Normally provides benefits for
six months up to a year
• Some policies provide
coverage for disabilities for up
to two years.
• Waiting period typically =
zero to seven days.
• Usually are offered as group
policies.
Long-term disability
coverage
• Insures against the risk of
longer periods of disability,
o often until age 65 in the
case of illness
o for life in the event of an
accident
• Waiting period typically = 30
days to two years
• Companies may offer
as group policies
• Individual policies
are widely
available.
6-21
Disability Insurance (DI) Terminology
• Elimination period: period between start of
•
•
disability and beginning of policy benefits
o Also called the waiting period
Benefit period: period during which policy
benefits are paid (e.g., to age 65)
Benefit amount: the percentage of monthly
income that will be replaced by the policy
o Benefits are based on income and job
classification
o Normal underwriting will limit maximum
benefits to a percentage of income; policies
do not cover 100% of pre-disability income
6-22
Definition of Disability
•
Social Security
Unable to work
Disability must be expected to last at
least 12 months or result in death
Any occupation
o
o
•
Normally cannot work at any
occupation
Modified any occupation
o
•
Unable to work at any occupation for
which individual is suited by
education, training, experience, and
prior economic status
Own occupation
o
•
o
o
Unable to work at own (specific)
occupation
Only available to select occupations
6-23
D.I. Underwriting & Renewal
• Primarily based on job classification
• Better benefits, policy definitions, renewal terms, and
•
policy rates go to higher job classifications
o Blue collar (lowest)
o White collar (mid)
o Professional (highest)
Renewal options
o Noncancellable
• Cannot increase rates (unless identified in initial contract)
• Guaranteed renewable
o Guaranteed renewable
• Rates can be increased (must be for an entire rate class)
6-24
Long-Term Care Insurance (LTCI)
Long-term care (LTC)
• medical and personal services
provided to individuals who have lost
their ability to live independently due
to prolonged illness, disability, or
cognitive disorders.
Activities of Daily Living (ADLs):
benefit triggers for HIPAA-qualified
Policies (for potential tax benefits)
• Dressing
•
•
•
•
Bathing
Toileting
Maintaining Continence
Transferring (bed to chair; chair to
bed)
• Eating
• Plus Cognitive Impairment
6-25
LTCI Terminology
Waiting period
• As with DI policies; the period between a qualifying
event and the start of benefit payments
Daily benefit
• The dollar amount of benefits paid to a beneficiary
o May be per diem amount or
o Reimbursement for actual expenses (usually with a
daily cap)
Skilled nursing care
• Care by a Registered Nurse (RN)
(normally round-the-clock, while in a nursing home)
• Required by Medicare for benefits
6-26
Health Savings Accounts (HSAs)
• HSAs allow individuals with high-deductible health
•
insurance coverage to contribute cash each year for
current or future health care expenditures.
Advantages include:
o tax-deductible contributions
o contributions and earnings thereon grow tax-free
o withdrawals may be used to pay for qualified
medical expenses are tax-free
o are portable
o may be rolled over
into other HSAs
o may be used to pay for
qualified medical
expenses during retirement
6-27
Question 1
Which is not a typical way to plan for the
management of property if a client becomes
incapacitated?
a.
b.
c.
d.
Appoint a conservator of the property.
Spend down the assets.
Create a durable power of attorney.
Create a trust.
6-28
Question 2
All are true regarding living wills except
a. they apply to routine illnesses.
b. they must be signed.
c. they must be witnessed by people who are not
heirs of the maker.
d. they allow the maker to dictate what life-sustaining
measures may be taken if the maker becomes
incapable of consenting to treatment.
6-29
Question 3
Occupational classification affects many aspects of
private disability policies. Which of the following is not
true regarding occupational classification?
a. Blue-collar workers usually obtain lifetime benefits,
b.
c.
d.
while professionals normally receive shorter benefits.
More policy riders are available to white-collar workers
than to blue-collar workers.
The definition of disability is less liberal for blue-collar
workers.
Occupations can be moved between classifications due
to claims history.
6-30
Question 4
Custodial care helps individuals perform activities
of daily living (ADLs). ADLs do not include
a.
b.
c.
d.
dressing.
driving.
bathing.
eating.
6-31
Question 5
Which of the following is not true regarding the taxdeductibility of qualified long-term care insurance (QLTCI)
premiums?
a. Individuals and couples filing jointly can deduct medical
b.
c.
d.
expenses that exceed 7.5% of adjusted gross income (AGI).
QLTCI premiums qualify as medical expenses.
Self-employed individuals can deduct QLTCI premiums as a
business expense.
Partners can deduct QLTCI premiums as a business expense.
QLTCI premiums are deductible for this year only, after which
they are no longer deductible.
6-32
Chartered Retirement Planning CounselorSM
Professional Designation Program
Module 6
End of Slides
©2013, College for Financial Planning, all rights reserved.