There are many ways people are overpaying and leaving money on Medicare's table.
An often-overlooked chance to save money is to make sure clients aren't paying too much for their Medicare Part B and D income-related monthly adjustment amount (IRMAA). When income drops because of certain life-changing events, the beneficiary may be eligible for an IRMAA reduction, which can add up to significant dollars.
IRMAA is based on a modified adjusted gross income (MAGI) sliding scale using this formula: MAGI = adjusted gross income (line 37) plus tax-exempt interest income (line 8b) from the IRS 1040.
If the MAGI is more than $85,000 per individual or $170,000 per couple, clients will pay more for Medicare Parts B and D based on a five-tier MAGI cliff bracket hierarchy. Having even $1 dollar less MAGI puts clients in the next-lower IRMAA bracket, which can result in substantial savings.
It's not uncommon for people to qualify for a reduction because their income drops by more than one bracket (as a result of a major life event), which puts even more money at stake.
The problem is that the Social Security Administration doesn't know someone is eligible for an IRMAA reduction unless the person notifies the agency.
Clients have two opportunities to request the Medicare IRMAA reduction from the SSA: When they enroll in Medicare Part B for the first time; and when they receive their annual Medicare Part B premium and IRMAA notice in the late fall for the following Jan. 1.
The SSA will consider granting the request if clients have had a change in circumstance that puts them in a lower MAGI tier than they were two years before. The qualifying events, which apply to them or their spouse, include:
1) Stopped working or reduced their work hours.
2) Lost income-producing property because of a disaster or other occurrence beyond their control.
3) Experienced a scheduled cessation, termination or reorganization of an employer's pension plan.
4) Received a settlement from a current or former employer because of the employer's closure, bankruptcy or reorganization.
5) Married, divorced or be-came widowed.
To apply for a Medicare IRMMA reduction, your client needs to:
1) Determine if a qualifying event has occurred and resulted in a lower IRMMA bracket.
2) Make an appointment at the local Social Security office to discuss the reduction process or file form SSA-44 Medicare IRMAA Life-Changing Event and associated documentation.
Respond within 60 days of receiving the Medicare IRMMA notice.
In my experience, people who meet the criteria and who pursue the reduction in a timely manner are successful in achieving it.
Be sure to keep a copy and get a dated and stamped receipt for all materials filed at a Social Security office. The agency does not accept U.S. mail or other delivery service confirmations as verification of filing.
If Social Security does not grant the request for the IRMAA reduction, clients can appeal the decision by filing form SSA-561 Request for Reconsideration.
In addition, under certain circumstances a beneficiary will need to repeat the process in the subsequent year because the tax return on file still does not reflect that person's current circumstances.
Your clients will be glad you guided them through it.
Otherwise, they could be leaving thousands of dollars on the table by not pursuing the reduction appropriately.
(Want to get more out of Medi-care? Download my e-book at InvestmentNews.com/medicare guide.)
Katy Votava, Ph.D., RN, is president of Goodcare.com, a consulting service that works with financial advisers and consumers concerning health care coverage.