Medicare's income-related surcharge: Did you know you can appeal that?
The look-back rules are tricky, but high-income surcharges can be reversed when income falls
An especially onerous feature of Medicare is the Income Related Monthly Adjustment Amount (IRMAA) - a surcharge tacked on to Medicare Part B premiums for enrollees with modified adjusted gross income over certain levels. It’s not that I object to progressivity in public policy - I don’t. But here, you simply are paying more to Medicare and get absolutely nothing in return. This uneven treatment erodes the basic proposition of social insurance - we all pay in at the same rate (or nearly the same) and pretty much get the same back in benefits. (I have the same worry about Medicare’s complicated marketplaces for prescription drugs and Advantage plans, as detailed here).
But I digress. Did you know that you can appeal IRMAA in certain cases - mainly when your life circumstance change? The list of qualifying events include marriage, divorce, death of a spouse and either work stoppage or work reduction. I emphasize those last two circumstances since they are the most typical.
IRMAA brackets are defined by a modified-adjusted-gross-income formula that includes the total adjusted gross income on your income tax return plus tax-exempt interest income. The determination is made using the most recent tax return made available by the IRS to the Social Security Administration. For example, the IRMAA you pay in 2020 is based on the adjusted gross income reported on your 2018 tax return.
Let’s say you retire this month and enroll in Medicare for 2021. If your income was sufficiently high in 2018, the IRMAA will be applied - and it is not trivial. Here’s the schedule for next year:
However, if you expect your income to fall below these triggers in 2021, you can request a reconsideration using this Social Security Administration form.
For more details, see this thorough review from My Federal Retirement.
By the way, fall enrollment is still underway. If you have not re-shopped your Part D or Advantage coverage, you have until this coming Monday December 7th. Here’s why that is worth some of your time this weekend.
The future of Social Security: Three snapshots
Three quick items of interest this week on Social Security solvency and reform:
Social Security’s actuaries issued a new projection of the “exhaustion date” for the combined retirement and disability trust funds, reflecting the pandemic’s impact. The new exhaustion date is 2034, one year earlier than the last forecast and very much in line with comments the actuaries made earlier this year.
The Urban Institute published a brief comparing Democratic and Republican plans for Social Security reform. It includes some interactive tools you can use to compare various impact of the plans (Spoiler alert: the Democratic plan expands benefits and reduce poverty rates; the Republican plan also reduces poverty rates because it focuses expansion only on the lowest-income beneficiaries - but overall, it cuts benefits).
I discussed Social Security’s future this week on Minnesota Public Radio with host Chris Farrell and Nancy Altman, president of Social Security Works. It was a good conversation, and included some interesting questions from listeners. You can find it archived here.
The cost of long term care, state by state
Genworth, one of the largest underwriters of long-term care insurance policies, issues an annual survey on the cost of care that I always find worth a look. The overall trend information is helpful, and the report also contains useful breakouts by state for different types of care. The new report was issued this week, and includes these highlights on how the industry is coping with COVID19:
Assisted living facility rates increased by 6.15% to an annual national median cost of $51,600 per year.
Homemaker services, which includes assistance with "hands-off" tasks such as cooking, cleaning and running errands, increased 4.44% to an annual median cost of $53,7681, followed closely by the cost of a home health aide, which includes "hands-on" personal assistance with activities such as bathing, dressing and eating, which has increased 4.35% to an annual median cost of $54,912.2
The national median cost of a semi-private room in a skilled nursing facility rose to $93,075, an increase of 3.24%, while the cost of a private room in a nursing home increased 3.57% to $105,850.
A supplemental study of care providers examined why costs are rising.
"They told us that the same factors responsible for the continuing increase in long term care costs in recent years – a shortage of workers in the face of increasing demand for care, higher mandated minimum wages, higher recruiting and retention costs, and an increase in the cost of doing business, including regulatory, licensing and employee certification costs -- were made even worse by the pandemic," said Gordon Saunders, senior brand marketing manager at Genworth who manages the Cost of Care Survey.
All this comes as COVID19 has claimed the lives of more than 100,000 residents and staff members of nursing homes. Much reform will be needed in the years ahead, and one author argues that the pandemic highlights the need for a federal long-term care insurance plan.
On 60 Minutes: Learning from the 90-plus crowd
Over the next 30 years, the number of Americans age 90 and above is expected to triple, and an NIH-funded research study called 90+ has been trying to learn all it can from a group of men and women who've already managed to get there.
60 Minutes first looked at this study six years ago, and recently went back for an update on the research. Earlier factors associated with longer life included exercise, moderate drinking of alcohol and caffeine, social engagement, and even putting on a few extra pounds. These days, the study is focused on memory and dementia. View the video here.
Recommended reading this week
Biden’s plan for seniors is not just a plan for seniors . . . U.S. Labor Department moves to finalize its new fiduciary rule . . . Trump’s payroll tax deferral creates a predicament for Congress . . . Administration finalizes drug rebate rule at the last minute . . . After four years of Trump, Medicare and Medicaid badly need attention.
2019 tax determines 2021 IRMAA. Income two years prior or last tax filed is used.