Posts tagged with "Part B"

Avoid having to break the bank to pay for Medicare!

We see this ALL the time!  A client comes to us when they are turning 65 or ready to terminate their employer group plan.  Since we educate our clients, we help them to figure out how much their Medicare premiums will be.  Many times, our clients’ jaws hit the floor when we tell them what they will be paying.  “But but but…I’m retiring and my income will be dramatically lower!”, is usually their response.  Weeeelllll, Social Security and Medicare can care less about that little tidbit of info.  What they look at is – what was your income TWO 2 years ago!  The next response is, “OMG…that’s when our CPA and financial planner advised us to sell our rental property!  And the next year, they suggested we convert our IRA to a Roth IRA!”.   Yikes!!  My guess is, the next conversation with those two professionals won’t go very well :/   
Affectionately known as IRMAA, the Income Related Medical Adjustment Amount will be assessed on your Part B (Doctors/Outpatient) AND your Part D (Drugs) until you can PROVE your Modified Adjusted Gross Income (MAGI) is lower.  Poor IRMAA…NO ONE WANTS TO DATE IRMAA!  There are ways to avoid and eliminate IRMAA but you may have to pay higher costs until you can prove your income is lower.  Many times, that may be till you file your taxes the next year.  Unless you plan, you may be paying significantly higher rates for up to one year 🙁
For most people, here’s how it works:
 
1)  Look at Line 37 of your personal tax return. That’s your AGI.
2)  For your MAGI (good to check with your CPA for you exact MAGI), there are a lot of items to add back in but the two main ones that we see are:
  • Untaxed social security
  • Tax-exempt interest/dividends

3)  Go to:  https://debbiehoffman.com/medicareplans/   Scroll down for the IRMAA charts.  Find your tax filing situation and you’ll easily what your IRMAA can possibly be.

How can you avoid or minimize IRMAA?  During the 1 – 3 years before enrolling into Medicare:

  • THREE (3) years before you go onto Medicare:
    • Sell any property that will incur a capital gains.
    • Be finished converting IRA’s to ROTH IRA’s by this year.
  • TWO (2) years before you go onto Medicare:
    • Contribute as much as possible to your retirement accounts.
    • If your earnings are very high and you contribute the maximum to your retirement accounts, check with your financial planner and CPA about selling some assets at a loss during both years before applying for Medicare.
    • Consider buying rental property.  Normally, you can count on the depreciation and expenses to fix up the property which many times will give you a loss during the first few years.  AND the loss appears on the front page of your 1040 which lowers your MAGI!
    • Consider starting a business.  Many times, you’ll have a loss those first few years with start-up costs and it can offset your earnings.
    • Consider holding off starting your Social Security benefits until your income will be lower.
    • If you have a lot of tax-exempt interest, consider moving those into a financial vehicle that can ‘defer’ the interest (a deferred annuity).

If there is no way to avoid it, when you can PROVE your income will be lower, file a reconsideration form with Social Security.  When the time comes, file your taxes asap and run (don’t walk) to your local Social Security office with your taxes in hand and this form:  https://www.ssa.gov/forms/ssa-44.pdf.  Social Security will then adjust your Part B and Part D premiums to your normal MAGI.

Is your head about ready to explode?  No worries!   Just call us and we easily walk you through what to do.  Better yet, have your CPA and financial planner call us and we’ll all work on together for you 🙂  Remember to reach out to us at AGE 62 or 3 years from when you will be applying for Medicare so we can really work our magic!

 

Hoffman Insurance Resources

323.455.4961

 

By calling the number listed on this page, you will be reaching a licensed insurance agent.  Debbie Hoffman and Melinda Gann are not connected with the Federal Medicare program.

medicare

Avoiding Medicare Part B Penalty, Part 1 – Medicare Eligible and Covered Under an Employer Group Plan

Welcome and thank you for reading my very first blog!  I’m extremely honored and grateful you chose to spend a few minutes of your time with me.   My goal is to bring something valuable to your life that will put you in a better health and wealth position AND make confusing subjects, easier to understand.  One of the most disheartening parts of our job as an independent insurance agent is to give bad news to a client and not being able to do anything about it.  From our vast experience, I’d like to use this blog to help you avoid some of the ‘gotchas’, pitfalls and crazy rules that could get you in a pickle later.    

If you hadn’t noticed, Medicare can be very confusing.  There are some really quirky rules in Medicare and this is one of the craziest.  It’s relatively easy to enroll into Medicare when you turn 65 and your situation is pretty straight forward.  However, if you have something out of the ordinary, you need to know the rules so you won’t get penalized in the future.  This has popped up a few times in my career so it’s good to realize it’s a problem in case you know of anyone that fits the situation. You don’t have to know ALL the rules, you just have to be aware it could be a problem and know where to seek guidance.  Unfortunately, many of Social Security’s own staff do not understand this rule.  It has to do when do you apply for Part B if you are covered under an employer group plan.  The rule (from Medicare.gov) is you can delay Part B (and avoid the penalty) if:

  • You have insurance through an employer or union.
  • You or your spouse (or family member if you’re disabled) are still working.

Notice the 2nd part of the rule…’still working‘.  That’s the part most people miss.  But wait…there’s more!  In addition to being penalized, you cannot apply for Part B at just anytime of the year unless you have a ‘special circumstance’.  This situation does NOT fall under one of their ‘special circumstances’ and therefore you can ONLY apply during the Part B Open Enrollment which is from January 1 – March 31st.  But wait…there’s even more!!  Your Part B won’t become effective until July 1st!

Here are a couple of stories that illustrate the problem:

  1.  Betty retires at age 60, her spouse, Bob, is 65.  Part of her School District’s contract with the union covers her for insurance till she turns 65.  That’s normally a great benefit, UNLESS your spouse is eligible for Medicare!  In this case, Bob delays Part B because he is still covered under the group plan.  When she turns 65, they both go into their local Social Security to apply for Part B where they are informed Bob will have to pay a penalty because he did NOT obtain Part B when she ‘stopped working’. The Part B penalty is 10% for each year he didn’t have the Part B = 50% of the current Part B premium!  For 2017, the Part B premium is $134, therefore, he pays an additional $67/month…FOREVER!  AND it will increase as the Part B premiums increase.

AVOIDING THE PENALTY:  When Betty retired at age 60, Bob should have applied for his Part B at that time. 

  1. Susan, age 64, has an accident at work and goes onto worker’s compensation.  When she turns 65 (even though she isn’t technically working), her company continues to keep her on the employer group plan.  At that time, she goes to her local Social Security office where she meets with an agent and is upfront, informing the agent that she is out on disability but still covered under her group plan.  The Social Security agent tells her that she can delay her Part B.  After 2 years of being on disability, the employer group plan stops.  She goes back to the Social Security office and they inform her that she will be penalized 20% for 2 years of not having Part B when she was eligible.  The good news is she kept VERY good notes, recorded the date/time and name of the agent.  This is IMPORTANT because everything is video recorded at the SS office and they can look back at the recordings to verify her story.  Because it was a Social Security agent that misinformed her, she is currently appealing through Medicare (we’ll discuss appeals in another blog).  My thought is she will have the penalty reversed because she kept good notes and SS misinformed her.

AVOIDING THE PENALTY:  When Betty turned age 65, she should have applied for his Part B at that time. 

So think about it, if Bob or Susan tried to apply for their Part B on April 1st, they have to wait till January 1st of the NEXT year AND they won’t have coverage till July 1st of the NEXT year.  Yikes!  That means they will have to go without doctor/out patient medical coverage for 1 year and 3 months or have to purchase an individual plan at exorbitant rates because they are over age 65 (ESPECIALLY during ObamaCare).   In my opinion, this is insane and should be changed!

In summary, keep excellent notes when you speak with Social Security or Medicare.  Record the date, time and everyone’s name you speak with!   I also suggest asking different agents the same question to see if their answers coincide.  If possible, obtain something in writing.  AND hold onto to that info FOREVER!

https://www.medicare.gov/sign-up-change-plans/get-parts-a-and-b/should-you-get-part-b/should-i-get-part-b.html#collapse-3156

 

Debbie Hoffman is an independent insurance broker specializing in Medicare and individual/family health plans, contracted with over 40 companies and Medicare certified with 13 carriers.  Located in the Los Angeles area, she is contracted in many states throughout the country.  She prides herself on educating her clients, being their advocate and exceeding their expectations.  She accepts only the insurance company commissions so there are no extra charges for her assistance and guidance.  From ObamaCare through MediCare…Debbie cares.

debbie@debbiehoffman.com    323.455.4961