When you are new to Medicare, some individuals just want to enroll quickly and electronically, and get it over with.
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Do not apply for Medicare in the next 3 to 6 years if you are not familiar with the hazards highlighted in this article. What you do (or don’t do) today matters in the future, when you sign up for Medicare. I feel compelled to share real life experiences to help those in the early planning stages of “life after 65.” This includes people age 61, 62, and persons working and deferring Medicare until age 68, 70 and later. Before you reach Medicare, you should understand what you are signing up for. This article is dedicated to the many, sad phone callers like this one:
“…I signed up for Medicare 2 months ago, and then applied for Medicare Supplement (medigap) insurance, as well as my Part D prescription drug plan. I don’t understand why I just received an invoice for $1,482.00 from the Department of Health & Human Services…is this a monthly bill? Is this my new supplemental insurance?”
Individuals go to the Social Security Administration (SSA) to sign up for Medicare Part A & B. Do you understanding everything you are signing up for? 
“Best Advice: Talk to your financial advisor and an independent agent when you turn 62.”
Whereas Medicare Part A is free for most people, Part B is not. Medicare Part B enrollees pay a monthly premium representing about 25% of the Part B estimated program costs. For 2022, this so-called, Standard premium is $170.10 per month. The government subsidizes the rest, but…
In truth, many individuals residing in the Santa Clara Valley pay more, because the Standard Part B premium is adjusted higher for income: this increased amount is called “IRMAA.” My
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observation during the last 12 months: there is a real problem with SSA failing to educate applicants. Early education and understanding gives you a fair chance to delay Medicare, where possible, to reduce the IRMAA. No offense intended for the good folks at SSA, but based on the sheer number of phone calls I receive… I think the organization can do better.
Best Advice: Talk to an independent agent and your financial advisor when you turn 62. If you are working past age 65, initiate contact at least three years before you apply to Medicare or leave your current employer health plan.
IRMAA is the Acronym for Income-Related Monthly Adjustment Amount; there are two versions associated with Medicare:
The short introduction is, your cost to participate in Medicare Part B and Part D is higher if your income exceeds a certain threshold. For 2022, you trigger the first IRMAA threshold at $91,000 (filing Single). For greater detail, schedule a phone call or read Part 2 of this article. The balance of this page will keep it simple.
Here is a “good-to-know” aspect of IRMAA: the IRMAA calculation is based on IRS information provided to the Social Security Administration (SSA) from two or three years earlier. You trigger an IRMAA when your income exceeds certain thresholds. “Income” is based on your MAGI (line 11 of your 1040 Federal Income tax return), plus adjustments. Fortunately, the IRMAA is not permanent and SSA recalculates your amount each year. You may appeal the IRMAA in certain situations.
“The potential for an IRMAA should factor into the timing of receiving capital gains and your retirement date.”
The potential for an IRMAA should factor into the timing of taking capital gains. Other factors include your retirement date, and ultimately your application for Medicare. You have greater control of these factors the three or four years prior to retirement, so talk to an independent agent early in the process; definitely include your tax and financial advisors in the discussion.
An independent agent can discuss mitigation strategies and options. Perhaps you could work a few months longer than scheduled, while carefully avoiding late enrollment penalties (Part B and Part D). Good agents are highly sought after, so start a conversation early, and build that business relationship before you need it.
Would you like me to be your independent agent? Call me at 408-252-7300 to discuss if we are a good fit.
Editor’s Note: Marc Derendinger is an independent agent serving Santa Clara County residents for more than 30 years. He helped the City of San Jose establish its first-ever group voluntary long-term care plan in 2001, served as an advisor to the State of California DHCS California Partnership for Long-term Care, and currently serves as insurance broker for the San Jose Police Officers’ Association. Marc offers free assistance to new Medicare beneficiaries residing in California, at (408) 252-7300.
In the last 12 months, I received too many callers, “surprised (or shocked) by IRMAA,” which inspired a previous, introductory (Part 1) article on the topic. Today’s article, “More About IRMAA,” is Part 2, and goes into greater detail, providing resources for further research. We hope it is helpful.
Whereas Medicare Part A is free for most people, Part B is not. Part B enrollees pay a monthly premium representing about 25% of the Part B estimated program costs. For 2022, this so-called, “Standard” premium is $170.10 per month. The government subsidizes the rest, but…
Your cost to participate in Medicare Part B and Part D is higher if your income exceeds certain thresholds. For 2022, the first IRMAA threshold is triggered when a person files as Single and has income over $91,000 ($182,000 for Married, filing Jointly).
“Your cost to participate in Medicare Part B and Part D is higher if your income exceeds certain thresholds”
IRMAA is the Acronym for Income-Related Monthly Adjustment Amount; there are two versions associated with Medicare:
How bad can this get? In 2022, the max out (worst case) IRMAA is $578.30 monthly for Part B, and $77.90 for the Part D IRMAA. Consider that this cost “doubles” when a couple enrolls in Medicare A and B, meaning the annual IRMAA cost could be as high as $15,748. For the planners in my audience, the monthly budget breaks down like this:
IRMAA impacts 4% of Medicare beneficiaries, according to the Social Security Administration. In practice, we have observed it closer to 40% to 50%: Many individuals residing in the San Jose
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metro area pay more because the threshold is low i.e. $182,000 (Married, filing Jointly) or $91,000 for all other filers.
Compounding the problem, “income” is taken from two (sometimes three) years prior to Medicare, which is often the pinnacle of your career. During this period “income spikes” may occur, due to cashing in of stock options, taking capital gains etc. These show up in your MAGI (line 11), but with foreknowledge (and a little financial engineering), I believe many can reduce the size of IRMAA.
In the years leading up to your Medicare application, Individuals should consider contacting a local independent agent experienced in Medicare and bring your CPA/ tax advisor into the conversation. There are a few solid agents willing to discuss your options now, in exchange for an opportunity to represent your supplemental insurance in the future.
Recently, a delightful couple called me from I received a call from Saratoga: the younger spouse is turning 65 in two months, but the older spouse is a senior engineer, and at age 72, not yet ready to retire. The younger spouse was concerned of Medicare penalties if they did not enroll in Part A and Part B. While every situation is unique, her phone call saved the family thousands of dollars by learning how she could delay Medicare, without penalty. Do not pay too much: just to be sure, request a consult at 408-252-7300.
“Income” is based on MAGI (line 11 of your 1040 Federal Income tax return), plus adjustments for tax-free interest. Fortunately, the IRMAA is not permanent, and SSA recalculates it every year. You may file an appeal in limited circumstances.
“The potential for an IRMAA should factor into the timing of receiving capital gains and the scheduling of your retirement date.”
The potential for an IRMAA should factor into the timing of receiving capital gains and your retirement date, and ultimately your application for Medicare. Key Point: You have greater control of these factors during the three or four years prior to retirement, so talk to your tax advisor and find a local, independent agent early in the process..
A local, independent agent can discuss mitigation strategies and options, such as the fine balance of working a few months longer than scheduled, while carefully avoiding late enrollment penalties (Part B and Part D). Due to baby boomer demographics, good agents are much sought after, so start a conversation early, and build that business relationship before you need it.
Would you like me to be your independent agent? Call me and let’s have a discussion, to make sure we are a good fit. Request a phone meeting with Marc, at 408-252-7300.
Editor’s Note: Marc Derendinger is an independent agent serving Santa Clara County residents for more than 30 years. He helped the City of San Jose establish its first-ever group voluntary long-term care plan in 2001, served as an advisor to the State of California DHCS California Partnership for Long-term Care, and currently serves as insurance broker for the San Jose Police Officers’ Association. Marc gives back to the community by offering free assistance to new Medicare beneficiaries, residing in California: Call (408) 252-7300.
I finally understand why my Medicare Supplement is getting more expensive. In the beginning (age 65), most California plans are under $150 per month. Yet, if you do not take action, it will continue to increase and your smiles will turn to frowns as you get older.
My 85 year-old mother switched Medicare Supplement (medigap) insurance companies and saved $75 per month for the same plan! So, why is my Medicare Supplement getting more expensive? In my opinion, the three biggest culprits are below:
Many Medicare Supplement (medigap) plans are excellent, but they are not all the same. So if
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your Medicare Supplement is getting more expensive, research if your policy was filed with the State of California as Attained Age or Community Rated, as depicted above. Rather than do all the research yourself, find a trusted local independent agent who represents many plans. Let the agent do the work, because it costs you nothing.
In California, premiums are the same whether you buy directly from a company or with an agent’s help. And, thanks to the California birthday rule, it is easy to change Medicare Supplement (medigap) insurance companies during your birthday month, each year. Note: This is a California rule, and is not available in all states.
Do you really need Medigap (Medicare Supplement) Insurance? What is the worst-case financial exposure for those who rely solely on Medicare Part A and Part B? Many Californians are surprised to learn traditional or original Medicare does not have out of pocket limits. Yet, this type of protection is common with employer-sponsored insurance.
“Do Californians really need Medigap (Medicare Supplement) Insurance?”
Before looking closer at your potential financial out of pocket, let’s be clear on the terms we are using: Medigap (Medicare Supplement Insurance) is not Original Medicare; rather it is private insurance that supplements Original Medicare benefits, such as Part A and Part B. OK, let’s continue…
Assuming an average copayment of 20% for Part B expenses, you could face large financial liability, should you experience surgical work for Cancer, Cardiac, Hip, Knee etc. i.e. services that are not uncommon for individuals over 65.
“The short answer is yes, you do need Medigap (Medicare Supplement) insurance. “
Yet, your financial exposure could be far worse: The preceding paragraph made no mention of your copayment responsibility under Medicare Part A, should you experience hospitalization or skilled nursing services.
For example, Medicare grants each beneficiary a specified number of Hospital Days per lifetime.
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Hospital Days also have significant copayments (see example here), paid by you. A Medicare Supplement (Medigap) policy can add 365 additional days to the 60 day lifetime limit. In summary, Medigap is offered by private insurance companies to supplement the Original Medicare program. If you purchase it when turning 65, the cost is relatively inexpensive, sometimes costing less than what the government charges for Part B.
Never pay more than you have to for Medigap. It is wise to use an independent agent to research several plans at once, saving you time. Good to know: You pay the same monthly premium using an independent agent, as you would purchasing directly from the insurer. So why take a chance of paying more?
Request your free Chat with a local, independent agent