States Win Interesting Powers in ACA

The highly anticipated Supreme Court decision regarding the Affordable Care Act has come down as a split decision. The individual mandate is upheld not under the Commerce Clause but as a tax. By 2016, the tax will be 2.5% of gross income. So, for a household income of $150,000, you can expect to pay $3,750 if you go without health insurance. This figure is less than the cost of today's health insurance for a family of four. However, what about a single person working in Silicon Valley? If they are young, single, and make $150,000 a year, plus do not feel the need for health insurance, then they will be required to pay a tax of $3,750. The question becomes whether this $3,750 can be levied or not, because the tax cannot be more than the cost of insurance in the zip code where this person resides. For example, if the average health insurance cost in this person's zip code is $2,400, then the tax is limited to this $2,400 amount. I have a question. Who is going to figure this out for every person in America? I presume the IRS.

The second part of the decision that was struck down was that the States risk losing 100% of their Federal funds for Medicaid. The Supreme Court held that this clause was unconstitutional and termed it was like "holding a gun to the head" of the states to comply. This brings up a very interesting predicament. What if a state says that they do not want to expand Medicaid to allow those under 133% of the poverty level to obtain Medicaid coverage? What is the potential effect of this? It would seem that it would keep the status quo as it is now. These people would continue to go to the Emergency Room for their minor illnesses and continue to clog up the system.

Also, how would "everyone" obtain health insurance coverage if these people, those under 133% of the poverty level were in a state that refused to expand Medicaid to cover them? This certainly presents an interesting dilemma.

Other factors of this Affordable Care Act are some taxes that go into effect, because of it. There is a 3.8% tax on capital gains. If the current tax rates are allowed to expire at the end of this year, then the capital gains rate will climb at the highest level to 43.4%. It is 20% today.

An interesting quote from the opinion was this one. "But the Court does not express any opinion on the wisdom of the Affordable Care Act. Under the Constitution, that judgment is reserved to the people."

Perhaps the most telling quote in the decision is this one, however. "It is not our job to protect the people from the consequences of their political choices."

The voters voted for their elected officials and the ACA is the result of those voters decisions. Look on the bright side. Voters can choose a new direction this November.

A Contrarian View on High Unemployment

What great timing! The dismal Unemployment numbers dovetail right into this time period when the Obama Administration and Congress are in the middle of negotiations on the debt ceiling. This is absolutely perfect timing to "force" these people to make some significant changes.

Yesterday, I was a little disturbed by some rumors floating around that there will be no legislation done, because there simply is not enough time. The rumor was that they will all agree to something in writing. This is a manipulative tactic in my opinion to get one side or the other to back down. What concerns me about this is that the piece of paper that it would be written on would be technically worthless. The other side could simply exclaim that the terms of the agreement were violated and they are not beholden to it any more. Let us hope this kind of shenanigan does not happen.

I would like to think both sides have their "feets to the fire" now with these dismal Unemployment numbers. Hopefully, we can get some tax simplification legislation passed. In addition, instead of the cuts in Social Security, Medicare and Medicaid, or "throw granny off the cliff" as the Democrats try to claim the Republicans want to do, I would think that they could do things like raise the retirement age and perhaps raise the earning limits for paying into Social Security. The earning limit right now is $106,800. They could easily raise this a little bit and help shore up Social Security. Further, raising the Social Security retirement age a year or two is not going bother anyone. These steps do not entail throwing granny off a cliff, either.

In addition, they may be able to lower corporate tax rates, granted while eliminating loopholes. Further, there may be some risk to personal returns on eliminating some deductions, but this should also tie in with lower tax rates. Regardless of what the Democrats say, lowering tax rates is what will get us out of this economic malaise. We need tax simplification and clarity!

Stay tuned. It is about to get very interesting.

Medicaid & Elder Estate Planning

Nobody wants to end up in a nursing home and nor do they want to spend their money on a nursing home. Sadly, without proper Elder Estate Planning, this happens all too often. Most people make the mistake of assuming that they are just going to keel over one day and that will be how they die. However, the reverse is more apt to happen, where you live longer than expected with an extended illness. These extended illnesses often are unexpected and put a substantial burden on financial assets. People who do not plan for this possibility are likely to see their financial assets gone rather quickly. When you read these numbers, I want you to think about your financial assets or those of your family and consider how long it will last with these kind of expenses. Do not forgot about other expenses that will continue, such as mortgage, utilities, phone, etc. Keep in mind the expenses below are in addition to those.

In the Jacksonville, FL area, these are the Annual Costs for Long Term Care according to Genworth Financial, Inc.:

Home Care
Homemaker Services = $41,184
Home Health Aide = $45,760

Adult Day Health Care
Adult Day Health Care = $ 15,600

Assisted Living Facility
Private, one bedroom = $39,000

Nursing Home
Semi-private room = $76,238
Private room = $89,790

Definitions:

Home Health Aides help those who are elderly, disabled, or ill to live in their own homes or in residential care facilities instead of nursing homes. Typically used when family members do not have the time or resources to provide.

Homemaker Services make it possible for people to live in their own homes by helping them with household tasks that they cannot manage on their own such as cleaning house, cooking meals or running errands.

Adult Day Health Care provides service at a community-based center for adults who need assistance or supervision during the day, but who do not need round the clock care.

Assisted Living Facilities are living arrangements that provide personal care and health services for people who may need assistance with activities of daily living, but who wish to live as independently as possible and who do not need the level of care provided by a nursing home.

Nursing Home Care is for people who may need a higher level of supervision and care than provided by an assisted living facility. Skilled nursing care is provided 24 hours a day.

The Process of Aging

1. Healthy and can take care of oneself.
2. Healthy spouse or other family members takes care of ill spouse or parent.
3. Ill person needs more care than family members can provide, so a Home Health Care Aide comes to the home.
4. Ill person makes the move to an Assisted Living Facility to retain some independence, but still have nurses available for their health care. This option is not available for Medicaid patients.
5. Ill person's condition now requires 24/7 round the clock care provided only by a nursing home.

What is Elder Estate Planning?

This type of planning can only be done in conjunction with an Elder Care Attorney experienced in Medicaid Planning and Veterans Benefits. If you are very wealthy and have $3,000,000 or more in liquid assets, then you can pay for your own Long Term Care Costs. However, if you have limited assets, (less than $3,000,000) you are over age 65 and have done nothing to plan for an unexpected extended illness, then you probably need Elder Estate Planning.

As a Chartered Advisor for Senior Living™, I have specialized training and education around Elder Care issues. Further, I look out for people and their best interests. This is not only true because I am a fiduciary, but it is true because it is the right thing to do.

There are some things that can be done to protect financial assets with Elder Estate Planning. These typically revolve around a few options.

1. If you are healthy, then you may want to look at purchasing Long Term Care Insurance. A new alternative is a new hybrid type of Long Term Care Insurance where you do not lose your money if you never need Long Term Care.
2. If you are not healthy, then you will need to position your financial assets to protect them against having to use them for your Long Term Care needs. This requires significant planning by someone like me and the use of an Elder Care Attorney.
3. If you have plenty of assets that you have set aside, or you have already planned for the possibility of an extended illness and been to an Elder Care attorney and Chartered Advisor for Senior Living like me, then you probably only need an Elder Estate Planning Review.
4. If you are a Veteran, then you may be eligible for VA Aid & Attendance benefits that could qualify a married couple with up to $1,949 per month of tax free funds. A VA Accredited Attorney can help you determine your eligibility.

One thing to know is that Medicaid does not pay for Assisted Living Facilities, if you can even qualify for Medicaid in the first place. Qualifying typically means having less than $2,000 in cash and where you have not given your money away in the last 5 years. The state that you are in can claw back those funds you gave away by way of a penalty. This penalty is essentially a waiting period before the state pays a dime towards your Long Term Care Costs. This penalty period can last up to 5 years, depending on the amount of the gift.

Medicaid qualification is complex and very tricky. You cannot navigate these waters on your own. You must hire a CASL® like me, in addition to a competent Elder Care Attorney proficient in Medicaid Planning and who is also a VA Accredited Attorney. (I can help you.)

I am thinking about doing a Seminar in conjunction with an Elder Care Attorney here in Jacksonville. I think it would be a good educational and informative event for seniors and concerned family members. There is a proper way to do Elder Estate Planning and that is with tender loving care.

If you would like more information about Elder Estate Planning, then feel free to contact me at (904) 262-0888 or you can email me at rick@marianfs.com.