Medicare Costs for Hospice – Officials Weigh Options

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Medicare officials are considering changes in the hospice benefit to stop the federal government from paying twice for care given to dying patients. But patient advocates and hospice providers fear a new policy could make the often difficult decision to move into hospice even tougher.

Patients are eligible for hospice care when doctors determine they have no more than six months to live. They agree to forgo curative treatment for their terminal illness and instead receive palliative or comfort care. However, they are also still allowed Medicare coverage for health problems not related to their terminal illness, including chronic health conditions, or for accidental injuries.

Medicare pays a set amount to the hospice provider for all treatment and services related to the terminal illness, including doctor’s visits, nursing home stays, hospitalization, medical equipment and medicine.  If a patient needs treatment that hospice doesn’t provide because it is not related to the terminal illness — or the patient seeks care outside of hospice — Medicare pays the non-hospice providers. The problem is that sometimes Medicare pays for care outside the hospice benefit that it already paid hospice to cover.

To reduce the chances of these duplicate payments, Medicare officials have announced that they are examining whether to assume “virtually all” the care hospice patients receive should be covered under the hospice benefit.

Medicare has been paying millions of dollars in recent years to non-hospice providers for care of terminally ill patients under hospice care, according to government reports.

The Medicare Payment Advisory Commission (MedPAC), an independent organization that advised Congress, found that in 2012, Medicare paid $1 billion to hospitals, nursing homes, therapists and other providers of services for hospice patients unrelated to their terminal illness.

The commission did not estimate how much of that was incorrectly billed and should have been covered by hospices. Prescription drug plans received more than $33 million in 2009 for drugs that probably should have been covered by the hospice benefit, according to an investigation by the Department of Health and Human Services’ inspector general.

Hospice is growing rapidly among older Americans. Of those Medicare beneficiaries who died in 2013, nearly half used hospice, double the rate in 2000, MedPAC also found. Over the same time period, Medicare spending for hospice services grew five-fold, to $15 billion.

Medicare officials initially mentioned last year that they were exploring possible changes. Concerns about duplicate payments “strongly suggests that hospice services are being ‘unbundled,’ negating the hospice philosophy of comprehensive, holistic care and shifting the costs to other parts of Medicare, and creating additional cost-sharing burdens to those vulnerable Medicare beneficiaries who are at the end-of-life,” they wrote in regulations containing this year’s hospice payment rates and other program rules. Officials have not yet issued a formal proposal.

“There will always be exceptions for people who have terminal conditions and have other conditions that need to be attended to,” said Sean Cavanaugh, deputy administrator at the Centers for Medicare & Medicaid Services (CMS). “But the majority of their services would be provided through hospice.”

Seniors’ advocates are worried that putting all coverage under the hospice benefit will create obstacles for patients. Instead, Medicare should go after hospice providers who are shifting costs to other providers that Medicare expects hospice to cover, said Terry Berthelot, a senior attorney at the Center for Medicare Advocacy, who urged the government to protect hospice patients’ access to non-hospice care.

The easiest thing for CMS to do is to say everything would be related to the terminal illness and then there would be no billing problems,” Berthelot said. But federal law, guarantees hospice patients Medicare coverage to control diabetes, blood pressure or other conditions not related to their terminal illness.

“If your blood sugar gets out of control, that could hasten your death,” she said. “But people shouldn’t be rushed off to die because they’ve elected the hospice benefit.”

Cavanaugh said the government is not trying to restrict drugs or other Medicare benefits for hospice patients.

“It’s more about getting the payment right,” he said. “The question is how to clearly circumscribe the benefit, to define what’s in the hospice benefit and what is not.”

That’s not always easy to figure out.

If a lung cancer patient in hospice slips on some ice and breaks something, the injury could have happened because the cancer has attacked the bones, making them thin and brittle, said Dr. May Al-Abousi, medical director for hospice services at University Hospitals in Cleveland. Treatment for the injury would be covered by hospice.  But the injury would not necessarily be part of the hospice benefit for someone with a terminal illness other than cancer, she said.

Medicine has no cookbook, where we can apply all-or-none rules,” she said.

Sometimes a hospice provider may not even know when a patient has gone to the hospital and there’s usually no way the hospital knows the patient is in hospice unless the patient makes that clear, said Judi Lund Person, at the National Hospice and Palliative Care Organization which represents nearly 2,000 hospice companies.

“The emergency room physician should be aware that this is a hospice patient with lung cancer as opposed to an 85-year-old male who fell at a neighborhood park,” she said.

Patients and their families may be afraid to volunteer that information, said Dr. Al-Abousi.  “A lot of people get scared when they hear the “H” word,” she said.  “They think once they sign that paper for Medicare, nothing else is going to be covered.”

Enrolling Late for Part B Can Trigger a Lifelong Penalty

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If Richard had not casually mentioned his upcoming 65th birthday to a good friend, he might have missed his window to enroll in Medicare. “My friend said you better sign up now because there’s a penalty for signing up late. I didn’t know that,” says Richard, a 65-year-old former tow truck driver who lives in Torrance. 

Everyday 10,000 baby boomers — people age 51 to 69 — turn 65 and become eligible for Medicare. According to a recent survey by the Medicare Rights Center in New York, many are unclear about whether and when to sign up for Part B, which covers outpatient medical care, including most doctor visits.

Last year, the organization fielded 14,000 questions through its national help line. Trouble enrolling in Medicare Part B topped the list. Many people had difficulty navigating specific hurdles, didn’t understand enrollment periods or were confused about eligibility.

Confusion can cause people to sign up late for Medicare Part B, which can lead to a hefty penalty that sticks with a person for life. For example, one recent caller to the Medicare Rights Center help line reported enrolling late for Part B and, as a result, paying an additional $52.45 a month, or $629 extra a year.

There’s a seven-month window to enroll in Medicare that starts three months before the 65th birthday month and extends for three months afterward.

If a person who is collecting Social Security benefits when they turn 65, they are automatically signed up for an insurance package that includes both Medicare Part A (hospital) and Part B (doctor). Part A for most people is free and Part B has a standard 2015 monthly premium of $104.90.

If a person hasn’t yet tapped into their Social Security benefits, they need to take decisive action to enroll in Medicare. Missing the deadline can sometimes result in a lifelong penalty of 10% a year on the Part B premium for each accumulated year they fail to enroll.

According to the Centers for Medicare & Medicaid Services, just shy of 700,000 people were paying the late fee in 2012.

The best way to avoid trouble is to start asking questions early because if someone isn’t collecting Social Security benefits, they won’t get an official notice telling them to sign up, says Judith Stein, executive director of the Center for Medicare Advocacy in Connecticut.

“When a person turns age 64, they should start to think about this,” Stein says. And there’s plenty to think about.

The details can get sticky. “There are all sorts of little ripples and nuances, so what works for your neighbor may not work for you,” says Casey Schwarz, policy and client services counsel with the Medicare Rights Center.

Here, experts outline some common scenarios that affect enrollment in Medicare Part B, and what to consider as your 65th birthday approaches:

Employer Insurance: If at the time of your 65th birthday you’re still receiving health benefits through your or your spouse’s job, you may be able to delay signing up for Medicare Part B without incurring a penalty.

But there’s a caveat: You can’t delay enrollment and avoid the penalty if you work for a firm with fewer than 20 employees. “That is one of the areas of most confusion,” Schwarz says.

Once you leave your job, you have eight months to sign up for Medicare Part B before incurring a late penalty.

Extending Coverage: Elaine Wong Eakin, executive director of California Health Advocates, says a common mistake people 65 and older make is continuing their employer’s health plan through COBRA after they’ve left or lost their job.

“COBRA is not considered coverage based on active enrollment” and therefore is not a substitute for Medicare, she says.

Also common, Wong Eakin says, is for companies to offer to extend work-based insurance for a period after employees leave a job. Mistakenly, people assume that they have eight months from the time their work-based insurance coverage ends to sign up for Part B. But that’s not the case.

“When you sign up for Part B, Social Security will ask when employment or insurance coverage ended, whichever is earlier,” she says.

Important: To avoid a penalty, you need to sign up within the eight months of your job ending.

Retiree Benefits: If you have retiree health benefits from a former employer, you still must enroll in Medicare during your initial enrollment period to avoid a Part B penalty.

Private Insurance: If you’re covered by a health insurance policy you purchased yourself, sign up for Medicare when you turn 65.

To cancel your private policy, contact your insurer. Insurers are not allowed to terminate your coverage unless you tell them to do so.

Taking Good Notes: Medicare Part A and Part B enrollment is handled by the Social Security Administration. You should contact your local office about how and when to enroll to avoid both a penalty and a gap in coverage.

Be sure to document all of your conversations. If you’re given inaccurate information that causes you to incur a penalty, you may have recourse.

“One thing we want people to know is if they call or go to Social Security and someone tells them anything, they should make a note of the person and the date,” says Stein with the Center for Medicare Advocacy. “If it happens to be incorrect, they have a right to rely on that information” and appeal. Or a better option: reach out to an independent broker.

Richard, the former tow truck driver in Torrance, says “a little more information about Medicare enrollment would have been welcome. It’s like taxes, there are a lot of things that nobody says a word  about and if you don’t do your research you find out later you were misled.”

The Wrong Way to Save for Retirement

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It is a truth universally acknowledged that Americans are under-prepared for retirement. And given this sad fact, there’s a growing movement on the left saying we need a government solution, stat: specifically, an expansion of Social Security benefits.

Perhaps we are confused. Weren’t we just talking about entitlement reform so that we could spend less on the program? Why, yes, we were. But since no one, left or right, really wants to take on our vast army of retirees, that chatter has died down. Now that it has, progressives who are ideologically opposed to shrinking the welfare state and are, of course, worried about retirees have decided that the best defense is a good offense. Instead of reluctantly agreeing to a compromise where some of those in Congress let some taxes rise and others agree to entitlement cuts, they’re demanding bigger tax hikes to fund bigger entitlements.

At the core of their argument is a good point: Americans really do need more money for retirement. Missing, however, is a realistic discussion of where to acquire that money.

And it’s a lot of money. The OASI Trust Fund (the portion of Social Security that covers old-age benefits) already pays out more in benefits than it collects in tax income. In 2014, the Social Security Trustees expect the system to collect $643.9 billion in payroll taxes and spend $716.4 billion on benefits and administrative overhead. If you add in the taxes collected on Social Security benefits, you get $671.9 billion in total tax revenue, which leaves a $44.5 billion deficit between outflow and inflow. Under its middle-of-the-road “intermediate” assumptions, the trustees’ report predicts that by 2023, the gap between taxes collected and benefits paid will be almost $170 billion. The only reason that the system isn’t in the red already is the net interest the government is paying itself on the bonds in the trust fund.

Now, we don’t want to get mired in the tired old arguments about whether the trust fund is “real” — whether it’s a silly accounting abstraction or a profound moral promise on the part of the U.S. government — because this obscures the actual point we need to be concerned with: If we want to pay Social Security beneficiaries more money than we are collecting in payroll taxes, the money has to come from somewhere, and ultimately, that “somewhere” is the United States taxpayer. It is supremely irrelevant whether that money flows through the “trust fund” or Uncle Sam holds an annual ceremony in which the trustees are handed one of those giant checks they present to lottery winners; we still need to find the money to make good on that check.

Before we start adding new benefits, we should think about where we’re going to get the money to pay the ones we still haven’t funded. And then carefully count the cost of making them still more generousl.

So where is the money going to come from, for our once and future Social Security program? The unhelpfully vague answer is generally “the rich.” Some specific numbers would be useful here, and thankfully, some people from the Third Way have actually provided some.

Let’s say the top income tax rate was raised a whopping 10 points, to 49.6 percent — a level higher than anything under serious consideration. Tack on the “Buffett rule,” with its 30 percent minimum tax on millionaires to squash loopholes. And let’s take a whack at wealthy inheritances, cutting the estate tax exemption by about one-third and setting the rate on large estates at 45 percent.

If we leave entitlements be, our annual budget deficit in 2030 would still be $1.3 trillion in today’s dollars, not much different from the $1.6 trillion deficit we’d have if income tax rates for the wealthy were kept the same. Sure, raising some additional taxes on the wealthy is necessary, but it is not nearly sufficient.

Another favorite is eliminating the cap on Social Security taxes, which is a slightly less vague way of saying “the rich”. Every time Social Security is discussed, at least one upset person will demand to know how anyone can so disingenuously claim the system is in need of reform, when “all we need to do is get rid of the cap on the payroll tax.” All? “All we need to do” implies some sort of modest, unremarkable undertaking. In fact, as the Committee for a Responsible Federal Budget points out, this amounts to a 12.4 percent surtax on all income above $118,500. That’s an enormous tax hike, which would generate exactly the same pushback you’d get if you announced, well, a 12.4 percent surtax on all income above $118,500. And as the committee notes, with admirably dry understatement, “a tax increase that large would make it politically challenging to raise more revenue from the wealthy, if at all.”

By that point, the top marginal tax rate would be well above 50 percent — closer to 60 percent in high-tax blue states. That would pretty much exhaust our fiscal capacity to tax the wealthy, meaning that any new program that liberals want to implement, from early-childhood education to high speed rail, will have to come paired with an announcement that middle-class taxes will be rising significantly to pay for it. And, not even mentioned, the current programs we have to find money for, such as Medicare. Even assuming we could get such a large tax hike through Congress, is expanding retirement benefits really the one place we want to spend all the money?

Moreover, increasing the tax cap won’t even raise enough money to cover Social Security’s costs unless we also break the link between payments and benefits. Otherwise, we’ll run a surplus for a few more years, then pay out a lot of that surplus in the form of higher benefits. Progressives should think long and hard about whether they want to break that link. Social Security’s great political strength is the perception that beneficiaries have earned their benefits with previous payments. The more clearly untrue that statement becomes, the more political risk there is to the less well-off beneficiaries.

What to do about America’s anorexic retirement accounts? Friends, this isn’t an easy one. What do you think? Leave a comment.