Retirement 2.0blog

How to appeal higher Medicare premiums

Free guide now available for advisers on appealing income-related surcharges

Sep 6, 2017 @ 11:18 am

By Mary Beth Franklin

It's time to prepare higher-income clients for a nasty surprise that awaits some of them this fall. Notices of monthly surcharges involving both Medicare Part B and Part D premiums in 2018 will be sent to affected Medicare enrollees in October. But sometimes those surcharges can be reversed.

If clients' income exceeds certain levels—$85,000 for singles or $170,000 for married couples—they may have to pay an income-related monthly adjustment amount, known as IRMAA. The Social Security Administration uses 2016 tax returns to determine Medicare premium adjustments for 2018. IRMAA letters will be sent to Medicare enrollees next month.

The Medicare Rights Center is offering a free downloadable guide for financial advisers to help their clients appeal Medicare premium surcharges. The Medicare Rights Center also offers two continuing education programs to instruct advisers about Medicare rules, costs and enrollment deadlines. Both the basic and intensive courses have been approved by the CFP Board for CE credit.

(More: Emerging issues facing financial advice)

Clients can appeal a Medicare premium surcharge if they have experienced a life-changing event that caused their income to decrease or if they can prove that the income information that Social Security used to determine the IRMAA premium is incorrect or outdated.

Social Security considers any of the following situations to be life-changing events: the death of a spouse; marriage, divorce or annulment; retirement or reduced work hours for one or both spouses; loss of income-producing property due to natural disaster; or loss of a pension.

However, a one-time boost in income due to the sale of a vacation home or large portfolio distribution, for example, would not qualify as a life-changing event and would boost the client's Medicare premium for at least a year. If the clients' income subsequently declined, so would their Medicare premiums two years later.

Clients can also make a case that Social Security used outdated or incorrect information when calculating their Medicare premium surcharge if they filed an amended tax return with the IRS or have a more recent tax return that shows they are receiving a lower income than previously reported.

To request a new initial determination, clients must submit a Medicare IRMAA life-changing event form or schedule an appointment with Social Security. They will need to provide documentation of either their correct income or the life-changing event that caused their income to decline.

The IRMAA determination letters may contain an added surprise this fall: even higher premium surcharges in 2018 for both Medicare Part B, which covers doctors' visits and outpatient services, and Medicare Part D prescription drug plans. That's because some of the income brackets that determine Medicare premium surcharges in 2018 have been revised.

(More: 10 surprising facts about Medicare)

There are five income tiers based on modified adjusted gross income (MAGI), which includes adjusted gross income from the latest tax returns plus any tax-exempt interest income. If MAGI exceeds the top limit of an income bracket by just $1, clients will be catapulted into the next tier.

(More: Using IRAs to reduce Medicare premiums)

In 2017, most new Medicare enrollees $134 per month for Medicare Part B. Many Medicare beneficiaries enrolled before 2017 pay less. But higher-income retirees pay an additional surcharge ranging from $53.50 per month to $294.60 per month extra per person. Seniors who pay more for Medicare Part B also pay as much as $76 per month more for Medicare Part D prescription drug coverage.

In 2018, the initial threshold of $85,000 for individuals and $170,000 for married couples that triggers a premium surcharge will remain the same. So will the second income tier of $85,001 to $107,000 for individuals and $170,001 to $214,000 for married couples.

But upper tiers will be compressed in 2018, meaning individuals with MAGIs above $133,501 in 2016 and married couples with income above $267,001 in 2016 would pay higher Medicare premium surcharges next year than they do today.

(Questions about new Social Security rules? Find the answers in my new ebook.)

Mary Beth Franklin is a contributing editor to InvestmentNews and a certified financial planner.

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