Medicare and High-Income Beneficiaries – What You Should Know

Guest Post Author:  Danielle K. Roberts | Boomer Benefits 

Before entering Medicare, many people expect it will be free. They often don’t expect to pay for coverage. The reason people believe this to be true is that they have been paying into Medicare throughout their working lives.

What they don’t realize is that they have only been paying into Medicare Part A. This can come as a shock to most people. To avoid other unwanted news, here’s what you should know about Medicare premiums if you are a high-income beneficiary.

Medicare Part B Base Premium

Unlike Part A where most people pay a zero-dollar premium, everyone must pay a premium for Medicare Part B. Most people will pay the base premium of $135.50 for Part B in 2019. However, if you are a high-income beneficiary, you will pay a higher premium.

The Social Security Administration (SSA) sets each beneficiary’s Part B premium based on their annual gross income. The SSA uses the most recent tax forms they have on file for each beneficiary. Usually, these tax forms are from two years prior.

For instance, if you are enrolling in Medicare in 2019, the SSA will use your tax forms from 2017 to determine your 2019 Part B premium.

Your Magic Number

Luckily, you don’t have to sit around and wait for the SSA to figure out what your Part B premium will be – you can do it yourself. You have a magic number that you can calculate from your filed tax returns that the SSA uses to determine your Part B premium. That magic number is your Modified Adjusted Gross Income (MAGI).

This number includes income such as pension income, wages, dividends, capital gains, interest income, and non-taxable Social Security income. Your MAGI can be calculated by adding lines 37 and 8b from your IRS 1040 forms together.

2019 Income Tiers

Your MAGI determines which Medicare income tier you’re put in by the SSA. In 2019, there are six total income tiers, five of which are high-income tiers.

If in 2017, you filed individually, and your MAGI was $85,000 or less ($170,000 or less jointly), you will pay the base premium for Part B in 2019. However, if your MAGI was any higher than that then, you will land in a high-income tier, and therefore, will pay a higher premium.

Depending on your income tier, high-income beneficiaries could pay anywhere from $189.60 a month to $460.50 a month for Part B in 2019.  The amount that you pay that is beyond the base premiums is called your Income-Related Monthly Adjustment Amount. We refer to is as your  IRMAA.

Other Affected Parts of Medicare

If you pay a higher monthly premium for Medicare Part B, then you will undoubtedly pay a higher monthly premium for Medicare Part D as well. Medicare Part D oversees your drug coverage. To purchase Part D coverage, you must enroll in a Part D drug plan from a carrier that sells these types of plans. The plan itself will have a premium that the carrier has pre-set.

Depending on which high-income tier you are in, you will also pay an extra amount on top of the pre-set premium for your Part D drug plan. For example, if your Part D drug plan is $35 a month and you fall into income tier number two, then you will pay $12.40 extra each month. Bringing your new Part D monthly premium to $47.40. You can find a chart showing the Part B and D premiums based on income here.

Prepare Ahead of Time

It’s important that you figure out your Modified Adjusted Gross Income and higher income tier ahead of time. If you were to enroll in Medicare without knowing you are in a high-income tier, you could experience some serious sticker shock when you find out your new Part B monthly premium.

To adequately save for healthcare costs in retirement, you must know which income tier you’ll likely be in. If you expect to pay the base premium of $135.50, but instead are told you must pay $270.90, you may realize that you don’t have the savings to afford such a higher monthly premium.

Fortunately, the Social Security Administration reviews your tax forms every year and will automatically adjust your Part B premium accordingly. However, you don’t have to wait until the end the year to try and have your Part B premium adjusted.

Request for Reconsideration

If you have a legitimate reason as to why you think you shouldn’t have to pay your higher Part B premium, then you can file a Request for Reconsideration. A popular reason as to why someone would file a Request for Reconsideration would be because they retired, and their income is now lower than what their tax forms show from two years ago.

This appeal is filed through the Social Security office. The final decision of the appeal is ultimately made by the Social Security office as well. To file for this appeal you must fill out a Request for Reconsideration form as well as provide the Social Security office with documentation supporting your case.

There is no fee to file a Request for Reconsideration. So, even if you aren’t 100% sure your appeal will get accepted, it’s worth a shot.

About the Author:

Danielle K Roberts is a Medicare insurance expert and co-founder at Boomer Benefits where she and her team help baby boomers find suitable Medicare supplement coverage. You can reach them on Facebook or tweet them on Twitter.

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