How Does Family Pay for Parents’ Care?

Women 50+ who leave the workforce to care for a parent forfeit an average of nearly $325,000 in wages, future Social Security benefits and retirement assets. Reducing their hours or leaving a job may mean buying health insurance, while also paying for caregiving-related expenses—like medications and gas for driving their parent to doctors. These expenses all add up.

Research calculates the annual unreimbursed out-of-pocket expenses average $7,000, says Forbes’ recent article entitled “Who Pays for Mom? Creating The Family Care Agreement Over A Holiday Zoom.”

However, there may be another option for families to plan and handle caregiving, which is to hold a family meeting to draw up a family care agreement. Discussing the issues can make it better for the caregiver when siblings consider what their unpaid sibling may be sacrificing, and what action is needed to fairly protect her finances.

A family care agreement, also called a “personal care agreement,” is a written agreement that details the responsibilities of the family caregiver and their compensation. It’s a formal contract that can include an “escape clause,” if the caregiver or other family members decide in coming years that the arrangement isn’t working and want to end it.

Compensation for the caregiver can include paying healthcare premiums, as well as paid vacation and sick days. Since the family care agreement can designate the caregiver as an independent contractor, the family can include funds to start an IRA (such as a Simplified Employee Pension or SEP). This type of formal arrangement can reward efforts on behalf of the family and protect against burn-out and long-term resentment.

The caregiver should maintain records of her hours and expenses. This is essential, if the person receiving care later needs to apply to Medicaid for help paying for institutional care. The records will show that the money paid to the caregiver was for legitimate expenses.

Caregivers may need some education on financial management because the caregiver’s financial responsibilities frequently evolve from simply paying bills to filing taxes and managing assets for the care recipient. They also may have to deal with Medicare or Medicaid, choosing options and a drug plan.

Reference: Forbes (Dec. 20, 2020) “Who Pays For Mom? Creating The Family Care Agreement Over A Holiday Zoom”


Does New Federal Regulation Mean Lower Prescription Drug Prices?

HHS announced a rule that would require manufacturers to give Medicare beneficiaries enrolled in the Part D prescription drug program the rebates that insurers and middlemen, known as “pharmacy benefit managers,” use to negotiate and keep monthly premiums down.

According to the nonpartisan Congressional Budget Office (CBO), this regulation would cause Part D premiums to increase, costing taxpayers $177 billion over 10 years.

AARP’s recent article entitled “New Federal Regulations Could Lead to Lower Prescription Drug Prices” says the international pricing rule, which has been called the “most favored nation” regulation, will impact only about 50 medications that are currently administered in doctors’ offices. These are generally very expensive cancer drugs provided intravenously, such as chemotherapy medicine. These therapies are paid for as part of Medicare Part B, which covers doctor visits and other outpatient services.

This rule, which is to take effect in January, would provide for a seven-year mandatory nationwide pilot that would restrict Medicare’s reimbursement to providers for administering these drugs to the lowest price available among a group of other countries whose economies are similar to the U.S. economy. Drug prices are typically much lower in those countries.

The new regulation wouldn’t impact the prices of Part D prescription drugs, which is most of Medicare spending on medications.

HHS says that this regulation could save Medicare recipients $28 billion over seven years. That’s because the lower prices of these expensive medications would decrease patients’ copays. However, pharmaceutical companies called the rule “unlawful,” and the industry is expected to file lawsuits to try and stop the regulation from going into effect. That may delay or stop the implementation of the program.

The rebate regulation, which would take effect in 2022, would apply to a limited number of prescriptions that currently receive rebates, particularly those that are very expensive and those where there are competing brand-name drugs.

This could increase drug manufacturer revenue by more than $150 billion over 10 years. Executives from major pharmaceutical companies testifying at a Senate Finance Committee hearing in 2019 wouldn’t guarantee that they’d lower their prices, if the regulation was enacted.

Reference: AARP (Nov. 23, 2020) “New Federal Regulations Could Lead to Lower Prescription Drug Prices”

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Which Medicare Expenses will Increase in Cost Next Year?

Several premiums and deductibles for those seniors with the traditional Medicare health insurance are increasing for the new year, the federal government announced in early November.

Money Talks News’s recent article entitled “These Medicare Expenses Will Jump in January” reported that the rising costs include the following:

  • The 2021 Medicare Part B standard premium will be $148.50 per month, an increase of $3.90 from $144.60 in 2020, compared with an increase of $9.10 per month one year ago;
  • The 2021 Medicare Part B deductible will go to $203 per year, a tiny bump of $5 from $198 in 2020, compared with an increase of $13 one year before; and
  • The 2021 Medicare Part A inpatient hospital deductible will rise to $1,484. That is an increase of $76 from $1,408 in 2020. That’s compared with an increase of $44 one year prior.

A bit of good news is that the Part B standard premium and deductible won’t increase by as much as they did for this year. That’s because of a recent federal law that limited the increase in Part B premiums for 2021.

Nonetheless, the Medicare cost increases for 2021 will effectively wipe out part of the 1.3% cost-of-living adjustment (“COLA”) that increases retirees’ monthly Social Security benefit payments in the new year. For the average retiree, the 2021 COLA will be only $20 a month more.

Remember that Medicare Part A covers inpatient hospital services, skilled nursing facility services and some home health care services. Nearly all (99%) of Medicare beneficiaries don’t have to pay a premium for their Part A coverage because of the length of time they’ve worked. They get this because they had Medicare taxes withheld from their paychecks during their working years.

Medicare Part B covers physician services, outpatient hospital services, certain home health services, durable medical equipment and some other medical and health services not covered by Medicare Part A. Part B premiums are based on income, and the standard monthly premium listed above applies to individuals who earn up to $88,000 and married couples who earn up to $176,000 and file a joint federal tax return.

Those with higher incomes pay higher Part B premiums. That could range from $207.90 to $504.90 next year, depending on income.

Original Medicare is the traditional Medicare program offered directly by the federal government that includes Medicare Part A and Part B. However, Medicare Advantage plans are available as an all-in-one alternative. These plans are offered by private insurance companies. The costs of Medicare Advantage plans, including any premiums and deductibles, vary by plan and the provider. On average, Medicare

Advantage premiums for 2021 are expected to be 34% lower than they were for 2017, and the average 2021 Medicare Advantage premium will be the lowest since 2007.

Reference: Money Talks News (Nov. 7, 2020) “These Medicare Expenses Will Jump in January”