| 03 January 2012
Within the first two weeks of December millions of Americans received an early present from the Social Security Administration; a letter stating that their benefits would increase by 3.6%, their Medicare Part B annual deductible will decline by $22.00, and their Medicare Part B premium will only increase by $3.50. But, 2.4 million of those Americans received a lump of coal with their letter because they had been placed on the Naughty List. Their offense: they earned too much income in 2010. Their penalty: an income-related monthly adjustment to their Medicare premiums of up to $286.20 ($219.80 for Part B and $66.40 for Part D).
Within the Affordable Care Act passed by Congress and signed into law in March 2010 new income-related premiums will be added to Medicare Part D, and the existing income-related premium thresholds on Medicare Part B will no longer be indexed higher with inflation but will be frozen at past levels through the year 2019. The result is that 2.4 million Americans are now hit with income-related premium adjustments, and that number will swell to an estimated 7.8 million Americans by 2019. Within that time, the adjustments may also inflate to as much as $683.00 a month.
In determining adjustments for the year 2012 Medicare looks to an individual's 2010 tax return; and it's within this lag time Medicare keeps its secret. If a Medicare recipient has experienced a life changing event that affects their current or future income negatively since the start of 2010, they may call into the Social Security Administration's 1-800 number, speak to a specialized group of representatives, and possibly have their income-related premium adjustment undone.
For example, suppose a highly compensated 65 year old husband/wife couple retired from their co-owned business in late 2010 and received proceeds from the sale of the business in 2011. In December they were notified that they will each pay an additional Medicare premium of $286.20 per month in 2012 due to their elevated 2010 income, and are set to continue the premium adjustments through 2013 when Medicare sees the business sale gains on their 2011 tax return. But instead, this couple knows Medicare's secret. They call into the Social Security Administration's 1-800 number, explain that their retirement and business sale are two of Medicare's seven designated life changing events, and they should be excluded from the income-related premium adjustments because their future income will be significantly less. Their phone call will save them nearly $7,000 in 2012 and 2013 and most importantly, place them back on the Medicare's Nice List.
Medicare premiums can be hard to understand, but know that with some proactive communication, you might be able to reduce them and keep your cash flow intact.
