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New to Medicare? Watch out for these costly mistakes

Baby boomers are leaving the workforce in droves: an estimated 10,000 per day, the Census bureau says, a trend that will continue through 2029 or so. If you’re one of them, congratulations on leaving the rat race behind.

But don’t hit the golf course just yet: you’ve got to make some key moves that could save you huge amounts of money. One of the biggest is when you should apply for Medicare. If you began taking Social Security early, at age 62, you’ll automatically be enrolled in Medicare when you turn 65. But if you delayed taking

Social Security (and your monthly Social Security checks are much bigger if you wait until age 67), then you have to apply for Medicare at age 65.

It’s a bit confusing (what else would a huge government health care program for tens of millions of people be?), and you have to be careful, because if you enroll for Medicare at the wrong time, it could cost you plenty.

Here’s when to enroll: Let’s say you turn 65 on April 10. You have three months to sign up before your birthday month, and three months after your birthday month. So your Medicare enrollment period (it’s called an initial enrollment period, or IEP) extends from January through July. Not to muddy the waters, but you’re also eligible if you’re younger than 65 but have a qualifying disability or health condition, or if you have an “end-stage” renal disease (ask a doctor for details).

Read: Here’s a way to get a pension-like benefit in retirement

Here’s where getting any if this wrong could cost you. If you miss your initial enrollment period, you can sign up the next year, between January 1 and March 31, and your Medicare coverage begins that July 1. But you may have to pay a penalty, in the form of higher premiums. The premium depends on how much you worked during your career.

It gets complicated again here. If you worked for 10 years (or 40 quarters in government parlance), you get Medicare “Part A” (which covers hospital costs) for free. If you didn’t, that’s where the premium kicks in. But everyone pays a premium for Medicare “Part B,” which covers things such as doctor visits, lab tests, X-rays, mental health care, and being transported in an ambulance. Sign up late for Medicare and you’ll pay a penalty for your “Part B” premium.

Read: Got $1 million to retire? Here’s how long it will last in each U.S. state

The penalty is 10% of the premium for each 12 month period you could have had Medicare but didn’t. Aren’t health care premiums high enough already? Who wants to pay more? Get a calendar and mark your enrollment dates and don’t forget—unless you like tossing money out the window.

If you’re new to all this, there’s more to this alphabet soup. There’s also “Part D” which concerns prescription drug plans. Uncle Sam doesn’t pay for your meds, so

unless you want to personally foot the bill for them—a costly proposition—you’ll need private insurance. Given how expensive medication can be, Phillip Moeller, a research fellow at the Center on Aging and Work at Boston College, tells the Washington Post. But he calls Part D plans “essential, must-have protection.”

There’s also Medicare “Part C,” also known as “Medicare Advantage,” which essentially are health plans run by private companies. They combine coverage for hospital stays with coverage for doctor visits. There are options galore here; you can get Plan C coverage with or without prescription drug coverage, for example.

This is all big, complicated and costly stuff. Obviously, you’ll want to take your time, research, and ask around before making any decisions.

Shifting gears, if you’ve heard that you’re getting a federal tax break this year, don’t get too excited. The Medicare Part A premium I mentioned? If you have to pay because you don’t have enough work credits, you’ll have to fork over about 2.2% more this year, either $232 or month or $422. Not a huge change, but enough to notice. And If you have to go the hospital, those deductibles are also about 2% higher: $1,340. So think twice before you go out and blow your tax windfall.

More from MarketWatch Retirement

Source

https://www.marketwatch.com/story/new-to-medicare-watch-out-for-these-costly-mistakes-2018-01-10

Azar talks list prices, mandatory Medicare pilots

Dive Brief:

  • Trump administration nominee Alex Azar fought back against assertions that his ties to the pharmaceutical industry make him ill-equipped to serve as HHS Secretary at his Senate Finance confirmation hearing.
  • The former Eli Lilly executive identified potential actions to lower drug prices, and an openness to mandatory pilot programs in some cases.
  • Despite opposition from Democrats, Azar is likely headed towards confirmation, as Republicans can confirm him without any minority support.

Dive Insight:

Democrats blasted Azar as too cozy with drugmakers to fairly regulate drug prices, tying him to insulin price hikes by Lilly when he was CEO of the company’s U.S. division.

Azar, who also served at HHS under former President George W. Bush, acknowledged that incentives spurring drugmakers to post high list prices are skewed.

Democrats pressed Azar on whether Lilly ever dropped the price of a drug during his tenure at the company. He sidestepped the question, but acknowledged prices are moving in just one direction throughout the industry.

“I don’tknow that there is any drug price of a branded product that has gone down from any company in the United States because every incentive in this system is for higher prices,” Azar said.

His top prescriptions to bend high drug costs echoed his testimony before the Senate HELP Committee, endorsing increasing generic drug competition and preventing the gaming of exclusivity and patents.

“There’s not one action that all of a sudden fixes this. The most important thing we have to figure out is, can we reverse the incentive on list prices?” Azar said.

“We need to be able to test hypotheses, and … I want to be a reliable partner. I want to be collaborative in doing this. I want to be transparent and follow appropriate procedures. But to test a hypothesis there around changing our healthcare system, if it needs to be mandatory as opposed to be voluntary to get adequate data, then so be it,” Azar said.

But it does not appear that Azar is open to popular ideas floated to put a dent into drug prices, such as letting Medicare negotiate drug prices or allowing drug importation.

Azar argued that pharmacy benefit managers already negotiate to get discounts from list prices in Medicare Part D, and echoed his idea that such practices should be explored in Medicare Part B. Currently, the government cannot directly negotiate drug prices in Part D.

Azar has spoken against the idea of importing drugs from abroad unless HHS can certify such practices are safe, a position held by several FDA commissioners.

Recommended Reading:

  • Senate Finance Committee Hearing to Consider the Anticipated Nomination of The Honorable Alex Michael Azar II, of Indiana, to be Secretary of Health and Human Services
  • Healthcare Dive Advocacy groups slam Azar ahead of committee hearing next week
  • Healthcare Dive What you need to know about the new nominee to lead HHS

Source

http://healthcaredive.com/news/alex-azar-senate-finance-hearing-hhs/514421/

HHS nominee Alex Azar outlines priorities: lower drug prices, improve Medicare outcomes

Democratic members of the Senate Finance Committee on Tuesday grilled Health and Human Services Secretary nominee Alex Azar about hikes in drug prices while he was CEO of the pharmaceutical company Eli Lilly.

Azar addressed the drug pricing issue during his opening statement, before being questioned.

“First, drug prices are too high,” Azar said, listing four priorities should he become the next secretary of Health and Human Services.

His priorities are addressing the high drug prices while allowing for innovation, making healthcare more affordable and available, harnessing the power of Medicare to shift from paying for sickness to paying for outcomes, and the opioid epidemic.

Azar, 50, is President Donald Trump’s pick to become the second HHS secretary in less than a year. Former secretary Tom Price resigned in September over the controversy of using private jets for business travel.

Azar is the former CEO of Eli Lilly, from 2012 to 2017. He also served as chairman of the U.S. drug pricing committee.

He was former HHS secretary from 2005-2007 and worked at HHS for about six years, where he helped to implement Medicare Part D. 

Once the Senate Finance Committee finishes its evaluation, Azar’s nomination moves to the full Senate.

Senate Finance Chairman Orrin Hatch of Utah, who has announced his retirement after serving for 40 years in the Senate, said opponents have said Azar’s work in pharmaceutical industry should disqualify him.

This has not the standard for other nominees who have worked in the private sector, Hatch said.

“We’re not talking about anything unethical,” Hatch said of Azar’s work in the industry.

Ranking member Democrat Ron Wyden and other members of the committee thanked Hatch for his service with Wyden telling the chairman, “You’ve always been a gentlemen,” and “40 years a boxer. That’s real endurance.”

Wyden had staff hold up charts showing drug prices doubling under Azar’s tenure.

“The same Donald Trump who said price hiking drug companies were getting away with murder, has nominated a drug executive with a history of raising drug prices,” Wyden said.

The osteoporosis drug Forteo increased in price from $1,000 to $2,700 for five years under Azar’s tenure, Wyden said. Revenue for the drug increased 58 percent in 2016, he said.

Bringing down the cost of drugs is complex, Azar said. It will take a change in the current system. 

“There’s no silver bullet,” he said. “Not one action that fixes this.”

There must be incentives to bring down list prices, he said. 

“All drug prices are too high in this country,” he said. “This is what is so bizarre about how the system is organized. During the same period, the net realized price for the company stayed flat.” 

Senator Debbie Stabenow of Michigan asked Azar if he supported having the federal government negotiate prescription drug prices.

Azar said it should be looked at but added, “For the government to negotiate, we would need a national formulary. I don’t believe we want to go there and restrict patient access.”

Azar also was asked about Medicaid. 

“I share a commitment to the Medicaid program, it’s a vital safety net. If confirmed my goal would be to make that program as efficient … as possible.”

During the hearing, Hatch said there is a bipartisan agreement to fund the Children’s Health Insurance Program, CHIP.

CHIP funding needs to be extended by Jan. 19.

“We have a bipartisan agreement reported out of committee,” Hatch said. 

Source

http://www.healthcareitnews.com/news/hhs-nominee-alex-azar-outlines-priorities-lower-drug-prices-improve-medicare-outcomes

Trump Officials, After Rejecting Obama Medicare Model, Adopt One Like It

Medicare has traditionally paid a separate fee for each service. Seema Verma, the administrator of the federal Centers for Medicare and Medicaid Services, said the new bundled payments were “an important step in the move away from fee-for-service and toward paying for value.”

The Obama administration tried to accelerate that shift by testing new methods of payment under the supervision of an office created by the Affordable Care Act. The Trump administration was at first skeptical. The new agency, the Center for Medicare and Medicaid Innovation, “has gotten off track,” Mr. Price said last year.

Dr. Elliott S. Fisher, the director of the Dartmouth Institute for Health Policy and Clinical Practice, said the new initiative was “very encouraging.”

“The current administration would like to reverse everything associated with the Affordable Care Act and the Obama administration,” Dr. Fisher said. “But this week’s announcement shows that there is a bipartisan consensus on the need to change the way we deliver and pay for health care.”

The goal of the new project is to save money for the government while improving care for Medicare patients. The lump sum payments encourage health care providers to work together and coordinate care.

Medicare will make bundled payments for 32 types or “episodes” of care. These include hip and knee replacement operations, heart bypass surgery and procedures to open clogged coronary arteries, as well as treatments for heart attacks, stroke, pneumonia and chronic obstructive pulmonary disease.

The lump sum payment will cover the services of doctors and hospitals, clinical laboratories, nursing homes, home health agencies and hospices, as well as reimbursement for some medical equipment like wheelchairs and certain drugs given to patients in doctors’ offices.

Dr. Patrick H. Conway, the No. 2 official at the Centers for Medicare and Medicaid Services under President Barack Obama, praised the new initiative as “a very good model.” In similar programs started in the Obama administration, “quality over all seems to be going up, and costs down,” said Dr. Conway, who is now the president of Blue Cross and Blue Shield of North Carolina.

As a member of the House, Mr. Price denounced bundled payment initiatives. In September 2016, he and 178 other House Republicans sent a letter telling the Obama administration that it had no legal authority to require doctors and hospitals to participate.

But Mr. Trump’s new nominee for health secretary, Alex M. Azar II, said Tuesday that mandatory participation might sometimes be needed.

“If, to test a hypothesis around changing our health care system, it needs to be mandatory as opposed to voluntary, to get adequate data, then so be it,” Mr. Azar said at his confirmation hearing before the Senate Finance Committee.

In unveiling the pilot project, the Trump administration said doctors and hospitals must not restrict patients’ access to “medically necessary care” as a way to reduce Medicare spending.

The Trump administration said Medicare beneficiaries could not opt out if they were receiving services in an episode of care covered by the new bundled payment program. But, it said, patients are free to choose other health care providers who do not participate in the demonstration project.

Jonathan W. Pearce, a health care consultant who closely follows Medicare policy, said the bundled payment initiatives tested in the past few years had been “positive for just about everyone,” especially the patients. They provide doctors with much more information about what happens to patients who leave the hospital, he said, and using this information, “doctors and hospitals have redesigned care in ways that significantly benefit the patient.”

For example, Mr. Pearce said, after knee replacement surgery, patients receive more physical therapy, and “the use of nursing homes has dropped like a stone.”

A version of this article appears in print on January 11, 2018, on Page A14 of the New York edition with the headline: Trump Officials Rejected An Obama Medicare Idea, But Now Adopt One Like It.

Continue reading the main story

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Trump asked why Medicare couldn’t just cover everybody: Wolff book

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President Donald Trump asked aides about expanding Medicare to all, according to Michael Wolff’s new book.

President Donald Trump asked his aides why the Medicare program couldn’t be dramatically expanded, according to Michael Wolff’s new book “Fire and Fury: Inside the Trump White House.”

Trump, Wolff writes, impatiently wondered aloud during a discussion about health care why the federally administered program could not be expanded to cover “everybody.”

‘Why can’t Medicare simply cover everybody?’


President Donald Trump, as quoted in ‘Fire and Fury’ by author Michael Wolff

Trump’s promotion of the idea reportedly shocked aides, including Steve Bannon, with whom the president has now broken over statements in the book, which Trump has called “phony.”

See:Trump Today: President rips Bannon after ex-aide’s critical comments in book.

Aides “were careful not to react to this heresy,” Wolff writes.

Trump slammed Sen. Bernie Sanders’s “Medicare for All” bill, which the independent from Vermont, who ran for the Democratic presidential nomination, introduced in September.

Trump is portrayed in the book as being “rather more for Obamacare than for repealing Obamacare.” But, Wolff writes, Bannon insisted on trying to repeal the law.

Despite holding a majority in both the House and Senate, and controlling the White House, Republicans have failed to repeal the Affordable Care Act. They have weakened it, however: The recently enacted tax law repeals the mandate for individuals to have health insurance.

Also read: Trump’s latest move wants to weaken Obamacare — but will it work?

Source

https://www.marketwatch.com/story/trump-asked-why-medicare-couldnt-just-cover-everybody-wolff-book-2018-01-05

Doctor overseeing CBD oil study faces Medicare fraud charges

SPRINGVILLE — The physician poised to oversee cannabidiol oil studies for the recently formed Endo-C, a limited liability company based in Springville, could also be facing 80 counts of Medicare fraud in federal court. 

According to a federal complaint filed Jan. 10, 2017, in Salt Lake City’s U.S. District Court, Dr. Steven Warren of Bountiful allegedly billed Medicare 80 times from February 2012 to July 2014 for visits to nursing home patients outside of Utah, and received $4,230 in overpayments as a result.

If found guilty under the federal False Claims Act, Warren could be on the hook for treble damages — or three times the amount overpaid — and could also face civil penalties of $5,500 to $11,000 per claim. For 80 claims, that total could fall somewhere between $440,000 and $880,000.

Warren is listed on Endo-C’s website as the company’s primary investigator for its CBD oil study, and Chris Cannon, a former U.S. representative from Utah, serves as its chairman. The business took root after state lawmakers approved House Bill 130 in March, legislation that Cannon, an attorney, helped craft. Sponsored by Rep. Brad Daw of Orem, HB 130 paved the way for CBD oil research to be conducted under the supervision of a doctor and an institutional review board.

The case against Warren came close to dismissal due to U.S. Marshals’ inability to serve him with the complaint at his residence on three occasions between Feb. 21 and March 3. On Feb. 27, Warren filed for Chapter 7 bankruptcy, and in September, federal prosecutors signaled their intent to pursue the Medicare fraud charges once the bankruptcy case is finalized. 

Melodie Rydalch, spokeswoman for the U.S. Attorney’s office, said Thursday that the Medicare fraud case against Warren is temporarily stayed until the bankruptcy action concludes.

“We’re waiting for full completion of that case to move forward,” Rydalch said.

Neither Warren nor his attorney could be reached for comment regarding the Medicare fraud claims. But in an interview last month, Warren attributed his bankruptcy woes in part to former partners who failed to fulfill their financial obligations.

Reached Wednesday, Cannon said he’d been unaware of the federal case against Warren. But after viewing court documents, he preferred to give him the benefit of the doubt.

“We’re all mortals, we all make mistakes. Centers for Medicare & Medicaid Services often overreaches, and people who are caught often think they’re innocent,” Cannon said. “I don’t have an insight into this particular issue, but $4,230 doesn’t seem to be worth an $880,000 complaint.”

More than two decades ago, Warren briefly abused prescription narcotics while serving as the only physician in San Juan County. In 1993, he pleaded guilty to five felonies and served five years on probation. He was also prohibited from reapplying for a controlled substance license for two years. But he currently holds licenses in Utah to practice family medicine and to prescribe controlled substances and has had no disciplinary actions for at least 10 years.

“I like Dr. Warren immensely. We’re working through our relationship and think his personal experience with opioid addiction is helpful,” Cannon said. “So he will always be at least an advisor (with Endo-C).”

Source

http://standard.net/Government/2018/01/08/Doctor-overseeing-CBD-cannabidiol-oil-study-faces-Medicare-fraud-charges-Endo-C.html

Michael Kitces: Medicare surtax, IRMAA, Part B planning

Since 2007, the Medicare Modernization Act of 2003 has required high-income Medicare enrollees to pay an Income-Related Monthly Adjustment Amount surcharge, or IRMAA, on their Medicare Part B premiums. This lifts the premium from covering just 25% of costs up to as high as 80% of results, and increased Part B premiums by as much as 219% in 2017 alone.

This year, the IRMAA surcharges on Medicare premiums will apply more broadly, as changes under the Medicare Access and CHIP Reauthorization Act of 2015 reduce the top Modified-AGI (MAGI) threshold from $214,000/year down to $160,000 for individuals, or $320,000 for married couples. And taxpayers with MAGI as low as $133,500 or married couples at MAGI of $267,000/year will be forced into a higher IRMAA tier than before, resulting in a nearly $1,000/year increase in IRMAA surcharges.

Granted, IRMAA surcharges still only amount to a roughly 1% to 2% cost increase relative to the income the household must have to be subject to IRMAA in the first place. So while managing taxable income is important, it’s equally crucial not to let the tax tail entirely wag the dog (unless, perhaps, you’re very close to the next threshold!).

Nonetheless, the new IRMAA rules will make Medicare-related tax planning more popular than ever. For advisors seeking yet another way to demonstrate value to their clients, it pays to know the strategies available to them — and what makes the most sense this year and beyond.

Health insurance is expensive, especially for retirees, who tend to have more frequent health complications.

To help manage costs, in 1965 President Johnson signed into law the legislation that established Medicare as the health insurance foundation for senior citizens over the age of 65 — which was further supported by the creation of Medicaid for certain low-income individuals.

Under Medicare, the federal government pays for 100% of Part A insurance, generally understood as hospital care, and generates the revenue to cover those costs through the 2.9% Medicare component of the 15.3% FICA tax on employment income. In addition, the Federal government covers about 75% of the cost of Part B insurance, relating to other medical services and paid from general revenue, with the other 25% of the cost of Medicare Part B paid directly by Medicare enrollees in the form of a monthly Part B premium. Each year, the Part B premium is set by the Centers for Medicare and Medicaid Services (CMS).

Since 2006, under the Medicare Modernization Act, Medicare enrollees have access to, also pay a portion of, the Medicare Part D (i.e., prescription drug) coverage with ongoing monthly premiums as well.

For most individuals, Part B and Part D premiums are simply paid by being withheld from their monthly Social Security checks, though those who are delaying Social Security benefits but have already enrolled in Medicare must pay their premiums directly.

The Medicare Modernization Act of 2003, which introduced Medicare Part D prescription drug coverage for the first time, also shifted how Medicare Parts B and D are funded by requiring high-income Medicare enrollees to pay a higher-than-25% portion of their Medicare premiums, beginning in 2007.

Specifically, the rules require that Medicare enrollees whose MAGI exceeds $85,000 as an individual, or $170,000 as a married couple, must pay 35% of the total Part B premium — up from 25% — rising as high as 80% of the total Medicare Part B premium cost once income exceeds $214,000 of Modified AGI for individuals, or $428,000 for married couples.

Similarly, beginning in 2011 under the Affordable Care Act, higher-income individuals are now also required to pay a surcharge on their Medicare Part D prescription drug coverage. Unlike the Part B surcharge, which applies a surcharge to enrollee premiums to ensure it covers a target percentage of total cost, the Part D income-related surcharge is simply a flat dollar amount, starting at $13.30/month and rising as high as $76.20/month for those in the highest income tier.

Notably, these IRMAA surcharges are applied based on modified AGI, which in this case is simply the individual’s AGI plus any tax-exempt bond interest that must be added back to determine if the thresholds are reached. And each of the four surcharge tiers are so-called cliff thresholds, meaning even $1 of income past the threshold results in the entire higher surcharge amount being applied.

Because Medicare premiums are set for the coming year at the end of the current year — for instance, 2018 premiums were set by October 2017 — a household’s IRMAA tier for Medicare is determined by using prior-prior-yearincome instead. Thus, for 2018, the household’s Medicare Part B and Part D surcharges — or lack thereof — and the ultimate issuance of any applicable IRMAA Determination Notice will be based on the 2016 tax year (i.e., the prior-prior year), using the tax return data filedin 2017.

The annual MAGI thresholds for IRMAA Medicare premium surcharges are adjusted annually for inflation, although under the Affordable Care Act, the inflation adjustments to the MAGI thresholds were frozen in place from 2011 to 2019. As a result, the impact of inflation on household incomes itself will cause at least some people to creep into a higher IRMAA tier, although overall the IRMAA surcharges are still projected to impactfewer than 5% of Medicare enrollees.

Although they have been in place for barely a decade, Medicare IRMAA thresholds have already undergone several changes — from the additional IRMAA premium charges to Medicare Part D in 2011 to the freezing of the MAGI threshold inflation adjustments. And under Section 402 of the Medicare Access And CHIP Reauthorization Act of 2015, the IRMAA rules were changed again, substantially decreasing the MAGI threshold to reach the topfifth tier at which households must cover 80% of their Premium Part B premium costs — and pay the maximum $76.20/month Medicare Part D surcharge.

Specifically, the new rules shift the top fourth income tier of IRMAA downfrom $214,000/year for individuals, or $428,000 for married couples, to only $160,000/year for individuals, or $320,000 for married couples. In turn, what was previously the third tier shifts down to the upper end of the second tier, and the prior second tier is further compressed.

The end result is that it now takes far less income for a household to reach the top IRMAA tiers.

As an individual’s income moves from $85,000 to $160,000 of MAGI, the taxpayer moves through all fourtiers, shifting Medicare Part B premiums up an additional $294.60/month, or $3,535.20/year — on top of adding another $74.80/month of Medicare Part D IRMAA surcharges — for a total of $369.40/month, or $4,432.80/year.

And a married couple will experience these surcharges twice — once as each member of the couple enrolls in Medicare — as household MAGI rises from $170,000 to $320,000/year. These amounts come in additionto the baseline Medicare Part B premium itself, $134/month in 2018, plus the cost of the household’s chosen Medicare Part D premium, if applicable.

For those who were previously in the second or third IRMAA tiers, the impact is even more substantial, as they will effectively be shifted upan entire tier, boosting the IRMAA surcharge from $133.90/month (in 2017) to $214.30/month (in 2018), or from $214.30/month (in 2017) to $294.60/month (in 2018). This amounts to a nearly $1,000/year increase in IRMAA surcharges.

It’s also notable that those who are subject to IRMAA Medicare surcharges are not eligible for the so-called Hold Harmless rules that cap the annual increase in Medicare premiums at the dollar amount increase of Social Security’s COLA increase — which, as occurred in 2016, can cause Medicare Part B premiums to spike for those impacted by IRMAA.

However, for better or worse, given that the first IRMAA surcharge tier — the threshold where the first surcharge applies — is still the same $85,000 for individuals and $170,000 for married couples, the new IRMAA thresholds won’t impact high-income Medicare recipients any more now than they have in the past.

While many higher-income individuals will find themselves perpetually subject to IRMAA based on ongoing income that exceeds the MAGI thresholds, others may find that IRMAA impacts them only in occasional years where the first — or higher — IRMAA tiers are reached.

Accordingly, it’s important to recognize that even if a household has been subject to IRMAA in the past, it will not automatically be subject to the IRMAA surcharges in the future. Instead, the determination is made based on the individual’s reported income each year. The only caveat is that, due to the nature of the prior-prior-year income calculation, a household could have a reduction in income in the currentyear and still be subject to IRMAA due to higher income in prioryears.

For instance, a married couple that had higher income in 2016 and 2017, due to a series of substantial Roth conversions in retirement that put their household income (MAGI) over $170,000, would be subject to IRMAA surcharges on their Medicare Part B and Part D premiums in 2018 (and 2019). This would happen despite their income being well below the specified threshold in 2018, when they’re no longer doing Roth conversions.

Still, because the 2018 premiums and surcharges were calculated based on the couple’s 2016 income, IRMAA will apply. Granted, the couple will benefit from lower income in 2018 — which eventually shields them from IRMAA — but the lower Medicare Part B and Part D premiums, without IRMAA surcharges, won’t apply until 2020, when income from the 2018 tax year is used.

On the other hand, sometimes a household’s income declines due to “life-changing” circumstances beyond its immediate control, such that using prior-prior-year income is no longer an accurate reflection of the household’s current financial status. In such situations, those impacted by IRMAA may submit Form SSA-44 — Medicare Income-Related Monthly Adjustment Amount Life-Changing Event — to request a surcharge reduction.

To have IRMAA surcharges reduced, the life-changing event must specifically be one of those listed on Form SSA-44, which includes:

  • Marriage
  • Divorce/annulment
  • Widowing/death of a spouse
  • Work stoppage (i.e., retired or laid off)
  • Work reduction (i.e., material reduction in work hours)
  • Loss of income-producing property due to a disaster or similar circumstance
  • Loss of pension income (e.g., due to a pension default)
  • Income for the year stemming from a settlement with an employer for the employer’s bankruptcy or reorganization

Newly minted retirees over age 65 who start Medicare immediately after retirement will usuallyneed to file Form SSA-44 to report their work stoppage (i.e., retirement) and avoid having their pre-retirement wages treated as part of their MAGI when determining IRMAA surcharges in the first full year of retirement.

Fortunately, in subsequent years this is typically a moot point, as the post-retirement years with lower income often reduce MAGI below the first IRMAA threshold. Nonetheless, in the initial year or two of retirement, this can produce a multi-thousand-dollar savings on Medicare premiums for a married couple.

For those who have experienced a life-changing event that does notfit the specific list of choices on Form SSA-44, it’s also possible to file a formal appeal on Form SSA-561-U2. Officially dubbed a “Request for Reconsideration,” Form SSA-561-U2 is used to appeal a number of Social Security retirement or disability scenarios — including the application of Medicare IRMAA surcharges, which are technically determined by the SSA.

It’s important to recognize though, that mere substantial changes in portfolio and investment income — including various types of retirement withdrawals — are nottreated as life-changing events eligible for an IRMAA surcharge exception.

Thus, a household that has a single or even multi-year big income event, from liquidating substantial portfolio capital gains to selling a primary residence — where the value was over and above the up-to-$500,000 capital gains exclusion under IRC Section 121 — taking sizable IRA withdrawals or engaging in substantial partial Roth conversions will have to pay IRMAA surcharges on Medicare premiums associated with that high income year. Though again, if the income event only lasts for a year or two, so too does the IRMAA Medicare premium surcharge.

While it’s fortunate that Medicare enrollees who experience income-reducing life-changing events may be able to file Form SSA-44 to avoid IRMAA surcharges on Medicare premiums, it’s preferable to simply manage income to stay below those thresholds.

At the same time though, it’s crucial to recognize that — relative to the income levels it takes to hitIRMAA thresholds in the first place — IRMAA is really just the equivalent of a modest income surtax.

The optimal IRMAA planning strategies will typically manage those clients alreadyclose to the threshold, where a relatively small shift in the timing of recognizing capital gains or harvesting capital losses can get a household below it. This makes it essential for advisors to know which clients have household incomes approaching an IRMAA threshold — as again, a mere $1 over the line can instantly result in a $600 to $1,000 Medicare premium surcharge.

Advisors must also be aware of clients whose income levels exceed the IRMAA threshold, but may legitimately be able to claim a life-changing-event exception via Form SSA-44 — especially recent retirees, whose retirement itself will render them eligible.

Nonetheless, with the 2018 changes to the IRMAA thresholds, the upper IRMAA tiers now impact retirees more quickly as their income rises, which in turn increases the value of IRMAA planning. That in turn increases the value of the advisor who has good planning strategies.

So what do you think? Do you plan around IRMAA surcharges for your clients on Medicare? In what other “surprising” situations have you seen IRMAA have an impact? Please share your thoughts in the comments below.

Source

http://onwallstreet.financial-planning.com/news/michael-kitces-medicare-surtax-irmaa-part-b-planning

It’s Social Security, Medicare, and Medicaid, Stupid

The Democratic party feels out to lunch. Wishy washy. Uninspiring.

However, the Republicans are absolutely bonkers. Their latest “gift” to Americans is tax legislation giving permanent breaks to the wealthiest people and temporary breaks to the vast majority of Americans. Those proudly prudent balance-the-budget legislators okayed a $1.5 trillion addition to the deficit.

The election of Doug Jones in Alabama is supposedly a good sign. A guy who essentially was kicked out twice as Chief Justice of the Alabama Supreme Court only lost the race for the U.S. Senate because he’s a perv. If it takes running against a Roy Moore for the Dems to win a state, we are on the road to (greater) disaster.

The Democrats have it wrong at the big-picture level and they have it wrong at the strategy level. If they want to rally support, they should stick with a single theme of panic. Social Security, Medicare, and Medicaid are at stake. The sky is falling!

Where does “Stupid” (in the headline) come into the discussion? It dates back to James Carville’s mantra during Bill Clinton’s successful run for the presidency in 1992: “It’s the economy, stupid.”

Let’s start with the big picture

The Republicans push some crazy idea that Social Security, Medicare, and Medicaid are bad because they are “entitlements.”

Damn right they are.

We are entitled to these benefits. We’ve paid in and we are entitled to collect when eligible.

It’s not an issue of laziness or greed or being UN-entitled.

It’s a promise among the generations. Everyone pays in; everyone collects when and if their time comes.

The Democrats should stand on this loud and clear.

The Republicans imply that everyone should be self-sufficient in saving for retirement. Anyone who can’t go it alone should be ashamed.

For Social Security, Medicare, and Medicaid to work, we must guarantee all three to younger workers who are now paying into the system. It’s crazy that those who are grandfathered in or almost grandfathered should claim benefits while denying the same security to younger payers.

Especially when these younger payers have less job security, huge college loans, very likely no pensions, and almost no unionization. Jeez…. It defies reason.

There used to be a thing called the three-legged retirement stool

Traditional retirement planning is based on a three-legged stool: Social Security, defined-benefit private pensions, and personal savings including 401ks. That model is pretty much disappearing from retirement planning.

It’s not because it’s an unsound model. It’s because the last two legs are so wobbly and Social Security isn’t a sure thing either.

We assume that all three are going to disappear or at least diminish substantially, and no one is shouting out in their long-term defense.

The Republicans claim the systems are not financially viable in the long-term . . . but they are OK adding to the national debt for tax breaks.

Pensions are disappearing in favor of 401ks and other defined-contribution plans, which means more financial risk for employees.

As a former corporate financial writer, I used to write about mutual funds in 401ks. We harped on the point that employees, especially younger ones, must take more risk to meet long-term financial goals. We also recommended that employees not take on more risk than they are comfortable with.

Research shows that many investors are very uncomfortable with risk, and the Great Recession less than a decade ago freshened our discomfort with risk.

See the contradiction? People need more help with financial risk, not governmental abandonment.

In addition, when employees are laid off en masse or individually (which can be for almost any reason at all), they draw down these retirement funds. It can take quite awhile to get another job and meanwhile, assets keep dwindling.

Now back again to that Social Security leg, which Paul Ryan and others are hot to amputate.

They may try again to “fix” it. One obvious “adjustment” is to raise the usual retirement age by a year or two. Looks perfectly reasonable from an actuarial standpoint but misses the prevalence of age discrimination. In practice, it’s rare to land a new job that pays as well as the previous one after a certain age. So if you find yourself unemployed in your early 60s, good luck getting another job as good as your last one.

How much personal savings are enough to assure a secure retirement?

If people are not so lazy and irresponsible as to claim some “entitlement” that they should not be entitled to, how much should they have set aside?

Who knows?

Let’s say that $1 million sounds pretty good. Ah, to be a millionaire.

Considering that prudent people are probably estimating they will die in their nineties but become unemployed in their sixties, that sounds at first like a reasonable figure to assure a modest but not luxurious life.

Actually, very few people put away that figure during their career, and many people who were en route to significant nest eggs got waylaid by career woes and investment / housing market financial setbacks along the way.

So a million bucks sounds like a lot of money but it’s not all that much to carry you through 30 years. Furthermore, many responsible people can’t amass that much.

Where are the Democrats on this?

They have been tricked into impotence by the crafty way that Republicans manage the legislative process to appear disorganized but in reality push bills through with minimal public awareness of what’s in them.

Insufficient time and debate to examine legislation, deals and tinkering to the last minute, a mess of detail on a complex issue (in this case, taxation) with hurried, last-minute analysis by the Congressional Budget Office and interested parties.

The Dems allow themselves to get distracted by a raft of issues, some big, some small, and some highly specialized, while the Republicans invent a crisis around artificial deadlines, as though screwing the vast majority of the American public is more of an achievement if it takes place in 2017.

Dems should stick to the knitting. The knitting is Social Security, Medicare, and Medicaid. (Also probably healthcare.)

They may seem boring, but these are of the utmost importance to the vast majority of voters. All Representatives and Senators who voted Republican may as well have their votes tattooed on their foreheads by the Dems for the rest of their political careers.

These issues are sure winners. Even Donald Trump promised not to muck around with SS. Would he have been elected if he had endorsed change? Hell no.

Can such a sure-fire winning Democrat strategy be screwed up?

Yes, of course. The Democrats merely have to veer to the far left and start babbling about Socialism, or even Democratic Socialism. Freak out middle of the roaders.

Instead, Dems should handcuff Republican incumbents to their out-of-touch votes and claim the middle ground in the 2018 and 2020 elections. Campaign for any progressive program they wish but ban the feared S-word from their vocabularies.

After all, Republicans already in office have moved so far to the right that they will have to shake the repositioning Etch-a-Sketch and jeopardize big-donor campaign contributions to claim the middle ground.

A reasonable forecast

I believe that the Democrats can claim every single seat in the House of Representatives and the third of the Senate seats that are up for votes in upcoming elections.

Well, perhaps not every district and state.

But they should be able to take those in which there are substantial populations who are older, or who are getting older, or who are disabled, or who fear they may someday become disabled, or have older or disabled family members they may need to support financially if government programs fall apart.

This may be just enough votes.

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http://www.chicagonow.com/girl-born-in-51/2018/01/its-social-security-medicare-and-medicaid-stupid/