Medicare – Are You Paying Too Much Premium?

School of Social Security & Medicare

A traffic sign with “Medicare Just Ahead” written on it meant to indicate Medicare Planning

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Article by Patricia L. Burris, CFP® – Vice President, Corporate & Retirement Plan Services at Meld Financial

Many individuals aged 65 and older are getting their health insurance coverage through their employer or their spouse’s employer group health plan. At some point, they will need to change from their group health plan to Medicare for their insurance coverage. Due to the COVID-19 pandemic, more older workers are retiring, have lost their job, or have a reduction from full to part-time work. This is creating the need to change to Medicare for their health insurance coverage sooner, rather than later.

Steps to Enroll in Medicare

The first step to obtain Medicare coverage is to enroll in original Medicare Part A, hospital insurance, and Part B, medical insurance. You can do this through the ssa.gov website. Or if you already have Part A and have stayed on your or your spouse’s employer group health plan, you can enroll in Part B by completing form CMS-40B.

When completing form CMS-40B, write the date you want your Part B to begin in the remarks section. And remember, Medicare can only start at the beginning of the month. So, if your group plan ends mid-month, you’ll need to enroll in Part B at the beginning of that month. This way you don’t have a gap in coverage.

Also, if you’ve stayed on group coverage past age 65, you and the employer that provides your group plan will need to complete form CMS-L564. Since Social Security offices are closed due to the pandemic, you should mail these completed forms to your local SSA office or fax them to 1-833-914-2016. Once you are enrolled in Parts A and B and obtain your red, white and blue Medicare card, you can then enroll in supplemental coverage, such as a Medicare Advantage Plan or Medigap and Prescription Drug Plan Supplements.

Cost for Part A and Part B

Part A, hospitalization is free to almost everyone. Your Part B premium will be based on the income reported on your tax return two years ago. So, your 2020 premium will be based on income reported on your 2018 tax return.

The 2020 cost for Part B coverage is $144.60 per month, or more, depending upon your income. Part B premium is based on your Modified Adjusted Gross Income (MAGI) reported on Form-1040. MAGI is defined as your Adjusted Gross Income (AGI) reported on line 7, plus tax exempt interest reported on line 2a. Single taxpayers whose MAGI is greater than $87,000 and married filing joint taxpayers whose MAGI is greater than $174,000 will pay more than $144.60 per month for their Part B premium. This additional premium is known as Income Related Monthly Adjustment Amount (IRMAA) and can be $214.60 to $568.00 per month, depending on your income.

Appealing IRMAA

If you’ll have a change in income going forward because of a life-changing event, such as retirement or work reduction, you can appeal your IRMAA by filing Form SSA-44 with the Social Security Administration. Life-changing events listed on Form SSA-44 for which you can file an appeal are:

  • Marriage
  • Divorce
  • death of a spouse
  • work stoppage
  • work reduction
  • loss if income-producing property
  • loss of pension income
  • employer settlement payment

Note that neither forgoing receipt of your RMD (required minimum distribution) in 2020, as allowed by The CARES Act, nor receiving extraordinary income due to a property sale, is considered a qualifying event for an IRMAA appeal.

Form SSA-44 changes every December, so be sure to have the most current version when you file it. Also, be sure to file a separate form for both husband and wife, if one has a qualifying life changing event and you file a joint tax return.

Completing Form SSA-44

There are five steps listed on the form and the instructions are somewhat confusing. You should mail your completed form to your local SSA Office or fax it to 1-833-914-2016 within 60 days of receiving your Part B premium notice.

Step 1: You will need to check the appropriate box for your life-changing event and the date it occurred. If, for example, the husband retired December 31, 2019, then this is the date that will be put on both the husband’s and the wife’s form.

Step 2: You will complete this section with the tax year and the income for the year it was, or expected to be, reduced because of the life-changing event. Both husband and wife would put the year 2020 and related income for 2020, if the husband retired on December 31, 2019. You may need to estimate your AGI and tax-exempt interest for the year in which your life-changing event occurred.

Step 3: The form asks if MAGI will be lower the following year, and then it instructs you to enter the income for the following year. If your situation is like our example above, where the husband retired in 2019, then you would check “yes” and enter your estimated income for 2021 on both the wife’s and the husband’s form.

Step 4: You will need to include evidence of your life-changing event. Examples include a letter signed by your former employer that you retired or other acceptable documentation as listed on page 8 of the form.

Step 5: Sign the form, and include your phone number and address. This way the SSA can contact you in case they have any questions or need more information.

Also Submit Form SSA-44 the Year After a Life-Changing Event

Since your Part B premium is based on your tax return two years ago, you may also need to re-submit Form SSA-44 to appeal your IRMAA premium in the subsequent year. If, for example you retired on December 31, 2019 like our example above, you may need to file Form SSA-44 in both 2020 and 2021. This is because your 2021 premium will be based on your 2019 tax return when you were still working at which time your income may be have been higher.

Transitioning to Medicare

There are many things to consider when transitioning to Medicare that I can walk you through in a meeting or phone conversation. Feel free to call me at 205-967-4200 or email me at pat@meldfinancial.com to discuss Medicare enrollment steps specific to your personal situation.

Don’t Miss My October Medicare Webinar, Presented by Meld University

Join us for Medicare and Managing Health Care Expenses in Retirement presented by me, Patricia L. Burris, CFP®, on Tuesday, October 13th from 3:00 – 4:30 PM CDT. During this event there will be a Q&A session where you can ask your questions about Medicare.

Don’t miss this valuable and informative event. There is no cost to attend, but you must register in advance.

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