8 Medical Insurance/ Legal/ Tax Things Every Special Needs ParentShould Do ASAP!!

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January 12, 2012

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UPDATED ON JUNE 4, 2014

Ok, first off I’m not a lawyer or a tax guy or a financial guy, but these are some things that we have done based on the advice of these types of experts…. I said “Special Needs Parents” because it probably applies to all special needs kids, but I’m writing this as a parent of an 8 year old boy with severe autism. We are a family of 3 (mom, dad, son) and could be considered a middle class j and live in New York State.

For some of these things I’ll try to find you some good links to give you some better background info cuz for some of them I’m not even entirely clear as to how we did it or what to do I just know it was important…

All this to say I’m no expert on any of this and I’m writing this in the most laymen’s terms ever… If you are a lawyer or an expert and I’ve made any mistakes here, or oversimplified something PLEASE LET ME KNOW and I will correct it! Also let me know if you have any other Internet links that explain these things better than I can.

Ok, here goes… In no particular order…

1) PREPARE YOUR WILLS

I don’t care how young you are or how poor you are, all parents need to have a will in place so you can lay out exactly how you want things to play out and who you want to raise your kid(s) in the unlikely event that you (& your spouse) pass away. This is even more important if you have special needs kids. And perhaps even more important than the will, but kinda part of the will process is…

2) SET UP A SPECIAL NEEDS TRUST

This may be more important if your kid is severe. Basically, after you and your spouse pass away instead of “willing” your assets to your special needs kid who may not be able to make choices/ decisions on their own behalf, you will it into a
“Special Needs Trust” in their name. And then you name some family member or friend who you trust as the trustee of the trust. And they will be in charge of doling out funds to help your disabled child have a better life.

This is also very important for tax purposes because if your adult kid has a certain amount of monetary assets in his/her name they may be denied government services like SSI or Medicaid, but if the money is in a special needs trust it doesn’t count against their assets.

Basically you work with a lawyer to get all the language iron clad and then you apply for a special tax id number thru the IRS. It’s basically like getting a separate Social Security Number for your kid. You can open a bank account for your kid using this “trust number”.

We haven’t done the bank account thing yet, but our plan was to open an account under Kyle’s Special Needs Trust number, put a dollar in it for now, and then move the small amount of money I had put in a college savings account ;-( when he was an infant into this special needs trust account. Then our wills stipulate that if both mom & dad die all our assets go into the special needs trust.

Here’s the Wikipedia page on Special Needs Trusts

Here’s a pretty good FAQ about Special Needs Trusts from a lawyers website.

(I am not promoting or recommending this lawyer just recommending their FAQs)

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3) APPLY FOR A MEDICAID WAIVER FOR YOUR SPECIAL NEEDS CHILD

Even if you think you make too much for your child to qualify for Medicaid you should look into it. Here’s why…

“Medicaid will count family income and resources in determining eligibility. However, a person with a disability under age 21 may qualify regardless of parental income and resources for what is known as a “waiver.”

The name refers to the fact that Medicaid requirements regarding parental income are “waived” when the local Department of Social Services district is determining a disabled person’s eligibility.”

This is something that the wife and I stalled on for YEARS because it seemed like a very complicated process (paperwork, choose an agency & case worker, home visits, interviews, etc) and because we weren’t exactly sure what it was. We finally were approved for Medicaid in late 2011.

We were happy because it came with a few hours per week or respite services, which is great and we sometimes use that for our “date nights” and other times as more official “therapy”…but then we discovered what else it gets us.

We now have a NY State Medicaid medical insurance card for Kyle and it acts as supplemental insurance and picks up a lot of what my insurance does not, including medicine co-pays! Plus if we go to a doctor/dentist that accepts Medicaid the whole thing will be covered. My insurance will pay what they normally pay (like 70% on dental) and the Medicaid picks up the rest! This is HUGE!!

Based on his school’s recommendation Kyle is currently seeing a Behavior Specialist because of his breath holding issues. He is going 2-3x per week. We haven’t even seen a bill. I looked it up on my insurance company’s website and he’s charging $250 a visit and as usual my insurance company is paying 70% on some, denying on others, etc. But Medicaid is covering the rest.

This whole Medicaid Waiver thing and the types of services available can vary drastically from state to state and I’ve heard horror stories of people waiting YEARS to be accepted, but it’s something you should look into ASAP and get your name on the waiting list ASAP.

Here’s a link to a website that breaks down the types of waivers and services available state by state…

4) IF YOUR EMPLOYER OFFERS A MEDICAL FLEXIBLE SPENDING ACCOUNT, USE IT!

What is a medical flexible spending account (FSA)? Here’s the Wikipedia page that explains it a lot better than I can but basically it’s a way to save money on your out of pocket medical expenses, things not normally covered by your insurance (dr visit co-pays, medicine co-pays, some over the counter drugs, some therapies, etc).

It won’t save you a TON of $ but it will save you some and EVERY PENNY COUNTS, right?

In true layman’s terms here’s how it works quoted from this cbsnews.com story…

“Say you’re a couple, both working, earning a combined $100,000 a year. You spend $5,000 annually for out of pocket medical expenses for your kids. If you don’t bother with one of these medical flex accounts, you earn your $100k, and let’s estimate you pay 25% taxes on it. So now you’re down to $75,000. Then you pay your $5,000 in medical bills – which leaves you with $70,000.

Now, assume you do enroll in a medical flex account. So you set aside $5,000 for the medical costs. Your taxable income is now $95,000. Pay your 25% taxes on that, and you’re at $71,250. You’ve just saved yourself $1,250. Which makes clipping coupons or harassing Verizon seem like small potatoes in comparison.

Putting aside even $1,000 in a flexible spending account, whether it’s for medical expenses, dependent care, or commuting costs, saves you $250 in the above example.”

Basically at the beginning of the year, you are pre-determining how much you think your out of pocket medical expenses will be. Not just for your special needs kid(s), but for you and your whole family. The max that you can put in is $5000. And your employer is reducing your paycheck by $5000 a year so you are getting taxed on $5000 less per year. So in the example above, the family’s salary was $100k (I know it’s high, but it’s just an example :-), but they are only getting taxed on $95k. Then that $5000 sits in a FSA and every time you have an out of pocket medical expense you GET A RECEIPT and you submit the receipts and a tax free check is mailed to you. Some FSA plans actually give you a debit card so if you pay with the debit card the funds are automatically deducted and you don’t need to submit receipts.

The only thing bad about FSA accounts is that it’s USE IT OR LOSE IT. If you put $5000 in and at the end of the year you’ve only spent $4000 on out of pocket medical expenses you lose that $1000…

But I’ve been doing it for 5+ years and I’ve always put in the $5k maximum and fortunately or unfortunately I’ve always reached it. Between all of Kyle’s dr & med co-pays and my wife going to a chiropractor it adds up quick. Also we pay out of pocket for some occupational therapy and we get a medical receipt each month from the provider and what my regular insurance doesn’t cover gets covered thru my FSA.

“Wait, you get your OT partially reimbursed thru your insurance company?” Yes, which brings me to my next point.

5) ALWAYS ASSUME THAT YOUR MEDICAL INSURANCE COMPANY IS SCREWING YOU!

Everything that I’m about to write about on this one applies to my situation with my kid BEFORE he qualified for Medicaid. This all might change if we use “Medicaid Providers” moving forward. Also I keep seeing these new insurance laws being signed in state by state by I have yet to see this change anything in our world. Got it? Ok disclaimers over, here goes…

Always assume that your medical insurance company is screwing you. We always heard stories of parents getting their insurance companies to cover OT & Speech. And about 3-4 years back when Kyle’s school district denied us after school services (that’s a whole other upcoming blog post) we decided to explore this.

I spoke to some people and found a few websites that gave me some guidance. Basically you start out by getting your kid’s pediatrician (not the DAN doctor, but that guy/gal you see for the sniffles) to write you out a prescription for speech & OT and on it he can specify 3 x 30, etc.

But the key is what codes does he put on the scrip? There was one year when my insurance company said they wouldn’t cover speech/ot for autism because autism is a neurological condition and because he didn’t have speech at one time in his life and lose it (like a stroke victim). So the “autism codes” wouldn’t work, but someone told me to try the “verbal apraxia codes”. So I did the research myself found those codes myself. Here’s a wiki link to some ICD-9 codes and here’s a wiki link to the CPT codes. Then I told my pediatrician what they were and he put them on the scrip. Then we found a center that did speech/ot and told them what codes to use. And they would give us an medical invoice with those codes on it.

Now I should take a step back and say that this wasn’t easy when it was going on. I was paying COMPLETELY out of pocket for speech and OT for MONTHS waiting, hoping, praying that I’d get some reimbursement while I worked all this out and it was extremely stressful. I was on the phone with my insurance company every couple of weeks. I was getting the HR person from my company involved. Trying this code and that code, denied, denied, denied and in late 2009 they magically took the Verbal Apraxia code. So I resubmitted all my claims with that code. And I finally starting getting some money back… Of course all this was considered “out of network” so I was only reimbursed 70%, but still I was happy.

Then in 2010 they stopped taking that code and starting denying it again More phone calls, more stress, more HR involvement, more denied, denied, denied, and we find out, “oh you should be using the Autism codes.” Last year, no good – This year, good. WTF?

Here’s another secret that SOME insurance companies don’t tell you. If you go to one doctor and he recommends you see a specialist and that specialist is not covers by your insurance and is considered “out of network”, but that specialist is the only doctor that has that speciality within a 50 mile radius of your home then they have to cover it as an in network doctor.

Kyle’s pediatrician recommended he see a pediatric pulmonologist recently. He was out of network, but because he was the only PEDIATRIC pulmonologist within a 50 mile radius they had to cover it.

The general rule is with anything with your medical insurance, not just for your special needs kid but for you and your whole family, just assume that your insurance company is trying to screw you. But keep calling and keep submitting and do your own research.

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6) ITEMIZE YOUR MEDICAL EXPENSES ON YOUR TAX RETURN

Ok, this gets kinda complicated but it’s important. You can itemize all your medical expenses for your whole family (that were not previously reimbursed thru your flex spending account) on your tax return IF your expenses exceed 7.5% of your Adjusted Gross Income (AGI). So for that example above of the husband & wife who earned $100,000, if their medical expenses exceeded $7500 for the year (100,000 x 7.5%) then they could itemize them and deduct anything over that $7500. So if they had $10,000 in medical expenses they could itemize and deduct $2500 (10,000 – 7500 = 2500).

So what can you itemize and deduct? Well here’s what the wikipedia page lists…

Capital expenditures that are advised by a physician, where the facility is used primarily by the patient alone and the expense is reasonable (i.e. a swimming pool for someone with degenerative spinal disorder OR an elevator for someone with heart disease)

Payments to doctors, dentists, surgeons, chiropractors, psychologists, counselors, physical therapists, osteopaths, podiatrists, home health care nurses, cost of care for chronic cognitive impairment

Premiums for medical insurance (but not if paid by another, or with pre-tax money)

Premiums for qualifying long-term-care insurance, depending on the taxpayer’s age

Payments for prescription drugs and insulin

Payments for devices needed to treat or compensate for a medical condition (crutches, wheelchairs, prescription eyeglasses, hearing aids)

Mileage for travel to and from doctors and medical treatment

Necessary travel expenses

So what does this mean for parents of special needs kids? What am I not thinking of? Well here’s some BIG TICKET expenses that you may not realize MAY be tax deductible pulled from a great article at the Autism Support Network website.

Your physical or speech therapist may recommend certain activities, such as music lessons, gymnastics, horseback riding, swimming, or other sports activities as an adjunct to the therapy. These expenses, as well as travel to and from these activities are also deductible. Be sure to ask your therapist or doctor to write an updated note recommending the suggested activity for your tax files.

In addition, you may choose to attend workshops or informative seminars or conferences about your child’s disability and treatment. The cost of these conferences as well as travel and lodging costs ($50 per night per person) may be deductible.

If your child attends a special school, tuition costs, tutoring and educational supplies (such as software, books and videos as learning tools) which designed to educate special needs children may be deductible. Sign language instruction, speech therapy, remedial reading instruction and related books and materials in addition to transportation including parking and tolls are deductible.

The cost of diagnostic evaluations including testing by a speech-language pathologist, psychologist, neurologist, or other person with professional qualifications, may be deductible.

The cost of a patient care attendant (such as a babysitter) may also be deductible, so if you must hire someone to stay with your older child or adult child while you are out keep the receipts for these expenses.

A capital expenditure, such as a home improvement or upgrade to make a home or auto accessible, qualifies as a medical expense if it has as its primary purpose the medical care of the disabled child but only to the extent that it exceeds any increase in property value. Therefore, as an example, the partial cost of a home generator, if your child has an underlying health condition, (such as asthma) may be considered a qualified medical expense.

Over-the-counter medications that can be purchased without a doctor’s prescription, such as aspirin, are not deductible. Nor is the cost of nutritional or herbal supplements, vitamins, and natural medicines are not deductible as medical expenses unless they can be obtained legally only with a doctor’s prescription. However, the cost of special foods, such as gluten free products may be deductible to the extent the cost exceeds regular food

Did you read that last sentence?! I didn’t even know that! So save your receipts and at the end of the year add it up and see if it’s over 7.5% of your adjusted gross income cuz EVERY PENNY COUNTS!

UPDATED / ADDED ON JUNE 4, 2014

7) GET ALL ASSETS OUT OF YOUR CHILD’S NAME BEFORE THEY TURN 13 YEARS OLD!
Ok, this one I just learned about and I might not have all the details so some of you folks with older kids please step in if I’m wrong about anything.

Ok, so when your disabled child turns 18 you apply for Social Security Benefits & Medicaid Benefits. And one of the stipulations to be eligible for SSI benefits is that the disabled “child” not have more than $2,000 worth of assets in his/her name. But here’s the catch. They also do a 5 year “look back” to see if he/she ever had more than $2k in their name…and if they did they may be denied benefits…

So Kyle has a bunch of Savings Bonds from when he was first born / baptised and also some money in a UTMA account which is an account that technically is in his name. According to a special needs tax asvisor I spoke with I should get all this money out of his name by the time he turns 13 years old… And my guy’s advice is regardless of when you remove it, it’s much better if you can prove that you used it for the child’s benefit…just in case the IRS comes calling.

So the bill for Kyle’s Sunday Swim lessons at the Y came up… $300 for 16 lessons. So I withdrew $300 from his UTMA account and wrote out a check for that exact amount a few days later. I will do that periodically over the next few years (before he turns 13) until I drain that account.

What about 529 accounts you ask? Great question!

I opened a 529 College Savings account when the king was first born and I socked away about $4000 over the first few years of his life. And with interest earnings it is now sitting at just over $9,000. So about $5000 in earnings. Nice! But my Kyle will not be going to college. Don’t start…. that’s just the truth…the hard facts. He will not being going to college.

So what do we do? Will that $9k affect his SSI eligibility? Well… 529 accounts are considered by SSI “to be a countable resource to the owner of the account. The owner is usually a parent or grandparent. The funds will therefore not interfere with your child’s government benefits.”

But what happens to the money?

If you have other kids you can transfer the 529 to another kid…if you don’t have other kids like me & the wife you can withdraw the money, but you have to pay income taxes on the earnings (which you wouldn’t if it went towards college)… There is also an additional IRS 10% penalty on earnings levied for “non-qualified withdrawals” but we’re certain we can get out of that because one of the exceptions is if the child is disabled and is unable to attend college. I guess maybe there’s a doctor’s note needed for that one? I’ll let you know when we get there…

So long story short… get $$ out of your disabled kids names before they turn 13… 529’s don’t count so don’t need to be drained by 13 or 18 years old, but when you do start withdrawing from a 529 you’ll pay income taxes on the earnings and you’ll need to prove your kid is disabled and cant attend college to avoid the 10% penalty….

But just to put things in perspective. The 10% penalty in my situation would be $500. (10% of the $5000 in earnings). Sucks, but not the end of the world.

8) FAMILY AND MEDICAL LEAVE ACT
This one is pretty huge. Is your job giving you problems because of all the time your taking off going to doctors appointments, school meetings, lawyer meetings pertaining to your special needs child? It didn’t happen to me. My job is great! But it happened to a friend of a friend of mine. His teenage autistic son was getting violent and aggressive and he needed to take off of work, sometimes at a moment’s notice to accompany his wife and son to doctors, psychiatrists, emergency room, etc. And his employer was giving him a really hard time. He was fearful that he might lose his job. FMLA to the rescue.

What is it? From the US Department of Labor website…

“The Family and Medical Leave Act (FMLA) provides eligible employees up to 12 workweeks of unpaid leave a year, and requires group health benefits to be maintained during the leave as if employees continued to work instead of taking leave. Employees are also entitled to return to their same or an equivalent job at the end of their FMLA leave.”

Does an employee have to take leave all at once or can it be taken periodically or to reduce the employee’s schedule?

“When it is medically necessary, employees may take FMLA leave intermittently – taking leave in separate blocks of time for a single qualifying reason – or on a reduced leave schedule – reducing the employee’s usual weekly or daily work schedule. When leave is needed for planned medical treatment, the employee must make a reasonable effort to schedule treatment so as not to unduly disrupt the employer’s operation.”

There’s lots of intricacies and loopholes to the law that you can read about here and here, but long story short basically if you need to take a lot of time off for medical reasons related to your child, you can’t lose your job for that. They have to let you take the time off unpaid. And your job and your medical benefits have to be waiting for you when you get back.

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So that’s it! That’s all I got! I hope you find this helpful… and as always I welcome and look forward to your feedback and comments…but PLEASE let’s not turn this into one of these posts where people comment and complain about how did I get Medicaid for my son when I make X amount of money, or why do I get respite hours? This is the hand I’ve been dealt. And the wife and I did ALOT of homework over the years…And we are trying to make the most of it. Alot of what I’ve written about varies drastically from state to state and NY state has some of the best services available… and we pay the highest taxes so that seems kinda fair.

So please take what I’ve written as my story, my experience that I’m jotting down to see if it can be helpful to others. And as I said in the beginning please let me know if I’ve made any mistakes or if you know of any additional links that folks might find helpful.

THANKS!!

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Written by

Frank Campagna

I’m a 48 year old neurotypical dad with a 14 year old son with severe, non-verbal autism & epilepsy. I created this blog to rant about autism & epilepsy while celebrating my son who I affectionately call “the king” :-).

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