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How Much Will Medicare Cost And How To Avoid Paying More

hank
hank   |     |   69 posts since 2016

I will be turning 65 in the not too distant future. I plan to continue working but I work for a tiny company and I won't be able to get insurance through it because of that. Because I will still be working is that going to drive up my monthly medicare cost? And what about the savings making interest? Does all this count to increase the medicare premiums? What if I invest in bonds and get tax free interest, does that also increase premiums? And how do you pay the premiums if I plan to not get social security until I am 70? Thanks



Answers
Anon1234
Anon1234   |     |   106 posts since 2010
Hank, I'm a trained, certified volunteer with the SHIP (State Health Insurance Program) in my state. SHIPs provide free help to Medicare beneficiaries who have questions or issues with their health insurance. You can locate your local SHIP by going to shiptacenter.org and clicking on "Find local Medicare help". Ask to speak with a Benefits Counselor and they will be glad to answer any questions you might have. All discussions are confidential in nature and the information is not used for any other purpose. Keep in mind that we can only provide insurance counseling and assistance and information on Medicare-related topics, but the decisions are yours. I strongly encourage you to use this resource to help you make the best choices for you.
hank
hank   |     |   69 posts since 2016
thank you Anon. I will take your advice
Anon1234
Anon1234   |     |   106 posts since 2010
I recently had to break this news to a client I was counseling so want to mention it here.

Part of "how to avoid paying more" is avoiding paying penalties. Even if you don't take prescriptions now, you should consider joining a Medicare drug plan. If you decide not to join a Medicare drug plan when you're first eligible, and you don't have other creditable prescription drug coverage (for example from an employer or union) that's expected to pay, on average at least as much as Medicare's standard prescription drug coverage, or if you don't get extra Help, then you will likely pay a late enrollment penalty if you join a plan later. Generally you will pay the penalty for as long as you have Medicare prescription drug coverage. The cost of the late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage. Also, it may increase each year.

In 20 words or less: make sure you have creditable prescription drug coverage even if you don't take any medications currently.
me1004
me1004   |     |   790 posts since 2010
There also is underwriting involved if you want to change plans later, so you better take the one you will want for the long run.
hank
hank   |     |   69 posts since 2016
thanks for your comments. So you are saying that at 65 the premiums are set independent of the individual's health history but if you change your medicare d or medigap later after the first year, you may end up paying a higher premium based on health history but if you don't change plans then health history doesn't come into play?
me1004
me1004   |     |   790 posts since 2010
Yes.

Frankly, I found the Medicare Website loaded with vagueness, details spread out all over, link to link to link, things made to seem a lot more complicated than they needed to be. This was one of the points that was almost impossible to find.
Anon1234
Anon1234   |     |   106 posts since 2010
Hank, the "no underwriting" applies to Medigap policies which you buy during your Medigap open enrollment period, which is the 6-month period beginning on the first day of the month in which you are 65 or older AND enrolled in part B. During this time you cannot be turned down for the policy (ie: pre-existing conditions are not a consideration). After this enrollment period you may not be able to buy a Medigap policy (because underwriting will come into play) or if you are able to buy one it may cost more.

There is no pre-existing consideration for part D drug plans.

Me1004's comment above applies to Medigap policies. The way the comments are aligned may be creating confusion.
Anon1234
Anon1234   |     |   106 posts since 2010
Hank, when you are looking at Medigap policies, the answers to these questions may be helpful in your evaluation:
- ask how the policy is rated
An attained-age rated Medigap plan means your rate is based on your current age and will continue to increase as you get older. For example if you enroll in a Medigap policy at 65 with a rate of $120, your premium may increase to $132 when you turn 69, and $165 at 72. Also, the premium may increase due to inflation and other factors.
An issue-age rated Medigap plan means the rate is based on the age you are first issued coverage. So if at 65 your plan’s premium is $120, it may stay at $120 at 72. But if you were to enroll at 72 your plan’s premium might start at $165, and would not be increased by your age. Premiums may go up due to inflation, but it will never go up because of your age.
A community rated Medigap plan everyone enrolled in the plan will be charged the same rate. So if you enroll in a plan at 65 or 72 you would be charged the same rate. Premiums can go up, however age will not be a factor in an increased Medigap premium.

- has the premium changed in the last 3 years and if so by how much. and how often has it changed
- how long is the wait for pre-existing conditions (this is not a factor if you are buying the policy during your enrollment period, as has been discussed elsewhere).
marcal
marcal   |     |   29 posts since 2011
You can go to www.Medicare.gov and there is detailed information on the costs based on your income.Sign up 3 months before you turn 65. Look for a supplemental plan to cover what Medicare doesn’t. You can compare the plans at www.medicare.gov and also look for a drug plan. If you’re not receiving social security, Medicare will bill you quarterly or you can have them deduct the payments out of your checking account.
Anon1234
Anon1234   |     |   106 posts since 2010
Marcal, Medicare.gov is indeed a great source of information.

There are 2 main choices for how you get your Medicare coverage. One is what you describe,
the original Medicare (includes parts A and B) + supplement (AKA "Medigap" because it fills gaps in Original Medicare coverage) + drug plan. This is the option you discuss.

The other option is a Medicare Advantage Plan (sometimes know as Part C), which includes Part A (Hospital insurance) and Part B (medical insurance). Some Medicare Advantage plans offer prescription drug coverage, others don't.
Ally6770
Ally6770   |     |   2,630 posts since 2010
Also Plan C for your supplement is no longer available and this is the last year to sign up for Plan F.
If you have a senior agency in your area it helps to get an appointment and bring your information even a list of your prescriptions and they can give you a lot of information. Many changes are being made in Medicare Advantage plans, so if possible get all the information from the experts before making a decision.Also check to see if your plan is community rated or age related for premiums and check on the Medicare.gov to see how the plan is rated. I believe it quite difficult 
to find plans that are community rated anymore in some areas. 
Anon1234
Anon1234   |     |   106 posts since 2010
The Medicare supplement (Medigap) plans are standardized. In most states they are identified by letters A through D, F through G, and K through N. All policies offer the same basic benefits, but some offer additional benefits so you can choose which one meets your needs. It's important to compare Medigap policies since the costs can vary between insurance companies for exactly the same coverage, and may go up as you get older, depending on how they are rated (Ally6770 alludes to this).

The best time to buy a Medigap policy is during your Medigap open enrollment period, which is the 6-month period beginning on the first day of the month in which you are 65 or olfer AND enrolled in part B. During this time you cannot be turned down for the policy (ie: pre-existing conditions are not a consideration).
me1004
me1004   |     |   790 posts since 2010
That income will not increase your Medicare cost unless it goes over about $85,000 in a year. Yes, the tax-free interest counts in the $85,000, although that higher premium will be delayed by a year or two (and so too would long term capital gains even though they were not earned in that year, that is they are not real income for that year, they are merely being taxed in that year).

You have some options to pay your premium if not taken out of Social Security. You can mail in a check, you can mail in a credit card payment (no charge for using the credit card, so if you have a cash-back card, that could actually lower you net cost), or you can set it up to be taken automatically from a bank account.

Don't forget, you must start Medicare within your 7-month initial signup period, or you will suffer a monthly penalty for the rest of your life.
Anon1234
Anon1234   |     |   106 posts since 2010
Me1004, IRMAA (Income Related Monthly Adjustment Amount) is a sliding scale used to adjust Medicare Part B and Part D premiums Information on how Social Security determines if you have to pay higher premiums is covered at https://www.ssa.gov/pubs/EN-05-10536.pdf The $85K figure is often quoted, but to clarify, that is for a single individual, or a married couple with MAGI (modified adjusted gross income) of up to $170k.
Anon1234
Anon1234   |     |   106 posts since 2010
with MAGI of up to $170K"

Also, want to note that Social Security uses the most recent tax return provided by the IRS to determine IRMAA. For someone turning 65 in 2019, the tax return filed in 2018 for tax year 2017 is the one used.
Anon1234
Anon1234   |     |   106 posts since 2010
Not sure why the first part of the comment disappeared. Let's try again:

To clarify my original post, "the $85K IRMAA figure if for a single individual or a married couple filing jointly with MAGI of up to $170k."
Bozo
Bozo   |     |   1,294 posts since 2011
Anon 1234, IRMAA is one of life's "good news/bad news" dichotomies. If hit with IRMAA in retirement, it signifies you truly won the retirement income age-related lottery, if you get my drift. Stated another way, it's hard to complain. My wife and I will pay IRMAA without a complaint in the world.
me1004
me1004   |     |   790 posts since 2010
Yes and no Bozo. Actually, in this day, $85,000 is not considered to be very affluent, even for a single, in a lot of places around the country.
highrate
highrate   |     |   9 posts since 2016
bozo, that's not entirely true. Think of it this way. If you were a spendthrift and spent down all of your savings and were in debt (independent of income) and have not saved for retirement, either tax deferred or not, so that person pays less. Now you have made the same income throughout your life, but you studiously saved for your retirement. You end up paying more if you saved enough. So it's not all "lottery". And I agree with me1004 that 85k is not so much if you live in the northeast
QED
QED   |     |   28 posts since 2013
Beware the IRMAA.
RickZ
RickZ   |     |   46 posts since 2010
Timely article published today.

https://www.nytimes.com/2018/10/26/health/medicare-part-b.html?action=click&module=Discovery&pgtype=Homepage
hank
hank   |     |   69 posts since 2016
thank you all for the information. I read tonight that medigap f has the best benefits and is the most expensive but it is going away so I wont be able to get that. I knew nothing about community rated until I read Ally's comments. Tonight I read that Aarp is community rated.
The income thing is quite confusing. I would think that many people have to pay higher amount when the first start medicare if they were working at least until they got medicare because it would be based on income from a couple of years before when they were still working and that would probably hold true for the following year as well. I am currently planning to keep working after I turn 65 so I may be paying a high rate. Medigap premiums are independent of income, is that right?
Ricochet
Ricochet   |     |   443 posts since 2010
This helped when I signed up
https://boomerbenefits.com/category/medicare-supplements-medigap/
Ricochet
Ricochet   |     |   443 posts since 2010
Medigap Plan G is currently outselling most other Medigap plans because it offers the same broad coverage as Plan F except for the Part B deductible, which is $183 in 2017. The only difference when you compare Medicare supplements Plan F and Plan G is that deductible. Otherwise they function just the same
Anon1234
Anon1234   |     |   106 posts since 2010
Hank, yes you are right that the income things is confusing. Many people do pay the higher amount when they first start because it is based on the tax return from 2 years prior (as noted elsewhere, the IRMAA determination for those turning 65 in 2019 is based on the tax return filed in 2018 for tax year 2017. For subsequent years, if your MAGI drops below the IRMAA threshhold but your IRMAA amount does not adjust you can file an appeal. The IRMAA documentation I mentioned elsewhere (https://www.ssa.gov/pubs/EN-05-10536.pdf) discusses this.


IRMAA - when it applies - impacts the premiums for parts B (medical insurance) and D (prescription drug coverage). It does not impact the Medigap premiums.
hank
hank   |     |   69 posts since 2016
You said if it doesn't adjust you can file an appeal but does it normally adjust when the MAGI adjusts? So is that the exception that it doesn't adjust?
Anon1234
Anon1234   |     |   106 posts since 2010
Hank, my comment was simply intended to indicate that if it doesn't adjust there is an appeal mechanism. Yes the IRMAA normally adjusts when the MAGI adjusts. You receive a letter from Social Security when the IRMAA changes. The first FAQ at https://www.ssa.gov/pubs/EN-05-10507.pdf covers this situation. The last FAQ covers life changing events causing a reduction in MAGI which occur during the last 3 months of the calendar year and may also be of interest.

If your income has gone down due to any of several situations, including that you (or your spouse) have stopped working or have reduced hours, and the change makes a difference in the income level considered for the IRMAA adjustment, contact Social Security to explain that you have new information and may need a new decision about your income-related monthly adjustment amount. Reference for this is the https://www.ssa.gov/pubs/EN-05-10536.pdf which has already been cited in prior comments.


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