Thursday, September 16, 2010

The Medicare Part B Trap of 2010 (and how to avoid it)

By Jeffrey A. Marshall, CELA* 

Social Security did not have a cost-of-living adjustment for beneficiaries in 2010 because the recession has been holding down the Consumer Price Index.  But while consumer prices may be steady Medicare Part B premiums -- which are designed to cover about 25% of the total costs of Part B – have gone up a lot for many beneficiaries.

Three quarters of Medicare beneficiaries do not have to pay any increased Part B premiums this year because of a "hold harmless" provision in the law. This provision prohibits Part B premiums from rising in any one year more than that year's cost of living increase in Social Security benefits

People who are covered by the hold-harmless provision are continuing to pay Part B premiums of $96.40 per month in 2010 if they have the Social Security Administration withhold their Part B premium and have incomes of $85,000 or less ($170,000 or less for joint filers).

But this “hold harmless” protection does not apply to about one in four (or about 11 million) beneficiaries who:
    (1) do not have their Part B premiums withheld from their Social Security checks, or
    (2) pay a higher Part B premium surcharge based on high income, or
    (3) are newly enrolled in Part B.

For example, I reached age 65 this year and became newly enrolled in Medicare.  As a result of my new enrollment, my Part B premium is higher than $94.60 because I have failed at least one of the three tests listed above.

The high income premium surcharge can be particularly nasty. The surcharge for 2010 is based on your Modified Adjusted Gross Income (MAGI) as shown on your 2008 tax return.  Depending upon your income in 2008, your Part B premiums this year can be as high as $353.60 per month. 5% of Medicare recipients are paying an extra Part B premium because they had high income in prior years.  The premium surcharge in 2010 is applied to individuals who had a (MAGI) of more than $85,000 and to married couples with an income of $170,000 or more in 2008.

But what if your income has declined substantially since 2008 due to your retirement or other factors?  If your income has declined since 2008 due to a “life changing event” you may be able to reduce or eliminate that nasty high income surcharge. But you will need to file an appeal to get this surcharge reduced. 

"Life-changing events," include marriage, divorce, job loss, reduced work hours, loss of income from income-producing property or cuts in pension benefits. For example, if your income has dropped significantly since 2008 because you retired last year, this “life-changing event” may allow you to file for a reduction in your Part B premium surcharge.  Unfortunately, a decline in income due to changes in investment returns does not qualify as a life changing event. 

To contest your high income premium assessment you will need fill out Form "Medicare Part B Income-Related Premium-Life Changing Event," which you can find at www.ssa.gov/online/ssa-44.pdf. For more information on high income Part B premiums see the Social Security Administration website at http://www.ssa.gov/pubs/10161.html or call Social Security at 1-800-772-1213.

*Jeff Marshall is Certified as an Elder Law Attorney (CELA) by the National Elder Law Foundation.

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