Ever wonder how much Medicare will actually cost you? The truth is ‘it all depends’; if you have a higher income, you could be required to pay more your certain parts of Medicare. There are, however, ways for high-income individuals to lower their Medicare costs.
One area high wage earners pay more for Medicare is with Medicare Part B.
The current base premium for Medicare Part B is $134 per month, this can increase based upon your income. Once you apply for Medicare Part B, Medicare determines the premium you will pay for both Parts A and B.
Medicare Part A does not have a premium for those who have a work record of 40 quarters, at least ten years, or if they are eligible to draw on a spouse’s work record. For those who do not meet this requirement Medicare Part A’s premium is based on a sliding scale, using your work history.
Medicare Part B’s premium uses Medicare’s Income-Related Monthly Adjusted Amount, also known as IRMAA, or “Means Testing”. While IRMAA affects less than 5% of Medicare Beneficiaries, those unaware of it are often blindsided and confused.
Those individuals paying a higher premium based on their income, are not assessed a penalty; but rather pay more of the premium than those not affected. Normally, Medicare pays approximately 75% of the Medicare Part B premium, with beneficiaries left paying 25% ($134/month in 2017).
In 2017, The IRMMA scale begins at $80,000 for those whose filing status was “individual/singe” and $170,000 for those “married filing jointly.”
Those with higher incomes pay a larger percentage of the Part B premium, ranging from 35 to 80 percent. This is calculated based on a scale pre-determined by Medicare and the Centers for Medicare and Medicaid Services (CMS).
Depending on your filing status and Modified Adjusted Gross Income (MAGI) from two years before you turn 65, you could pay as much as $428.64 per month for Medicare Part B. The IRS and Medicare confer to provide the most complete data available, sans any amendments, thus the need for a two-year lookback.
As with all things Medicare, one is able to appeal a Means Testing decision. You can seek redetermination under the following circumstances:
- You married, divorced, or your spouse passed away
- You, or your spouse, stopped working, or began working part time
- You, or your spouse, lost income-producing property due to a disaster or other event beyond your control.
- You, or your spouse, experienced a scheduled cessation, termination, or reorganization of an employer’s pension plan
- You, or your spouse, received a settlement from an employer or former employer because of the employer’s closure, bankruptcy, or reorganization.
To file an appeal or redetermination, a beneficiary must provide evidence of the event, or an estimate of the decrease in income.
It is important to note that IRMAA does not only affect Medicare Part B premiums, but Medicare Part D as well. Based upon income, a pre-determined amount is added to Medicare Part D premiums. This premium increase is not paid to the Part D insurance plan provider, but rather directly to CMS.
Any Means Testing is made known to the Medicare beneficiary either by billing, or letter, directly from Social Security. It is not unusual for those who normally would be billed for their Medicare premiums to receive a bill reflecting the standard Medicare Part B premium, and then receive a billing for their Means Testing at a later date.
Higher income Medicare beneficiaries can either lower, or at least recoup, some of their costs, by utilizing certain strategies. There are Medicare Supplemental Insurance plans that offer reduced premium, but the same coverage. These plans often have a deductible to meet, much like group insurance.
Being certain you’re in the correct Part D prescription plan is an excellent way to ensure you’ll save money; regardless of Means Testing.
As you near Medicare age, keep in mind that your income will come into play, and it may affect how much you pay for certain components. If you fall into the high-income category, it is imperative that you get assistance making these crucial Medicare decisions. This one step will help ensure you’re not paying more than you need to.
Email me at larry@mymedicarecoach.com to get help on your Medicare decision
