A lot of people with ordinary incomes find themselves faced with a bill for Medicare surcharges that they believe should be paid by people who are a lot wealthier than they are.
Medicare surcharges are levied on parts B and D for people who earn more than the levels shown in the chart at bottom. Medicare calculates these surcharges in 2015 based on your income from your tax return filed in 2014, which reflects income in 2013 or possibly the previous year if you had filed for an extension.
This lag adds to the pain for many Medicare recipients.
For instance, here’s a common scenario. Before you retired in early 2014, you received a lump sum payment for your unused sick leave at the end of 2013. You retired officially in January 2014, and in 2015, you are faced with paying substantial Medicare surcharges because of that lump sum payment in 2013.
Under certain circumstances, you can appeal these surcharges and expect to have them waived. The Social Security Administration, which administers Medicare, calls the following circumstances “life-changing events.” If you experience any of them and are able to prove it, you may not have to pay a surcharge.
Even though you earned more than the qualifying levels set by the government, you won’t have to pay a surcharge if you experience one of these life-changing events. If you think you qualify — even if you aren’t sure, Katy Votava, president of GoodCare, a Medicare advisory service and a health care economist, says, “Go ahead and apply.”
Votava says the first step after you receive a notice from Social Security saying you owe a surcharge is to call or visit the Social Security Administration and explain your situation. Do it within 60 days of the date on the notice and ask for “a new initial determination.” The person you talk to will ask for evidence — a note from your former employer saying you are no longer employed, a divorce decree, a death certificate, etc. Having it available on your first conversation or trip to the Social Security Administration will save time.
If Social Security agrees that you don’t owe the surcharge, it will reverse it and refund any surcharges that you have previously paid.
If more than 60 days have passed since you received the notice, you add another level of complexity. You must indicate to Social Security that you have a good reason for the delayed appeal. Illness is a good reason; taking an extended vacation isn’t, Votava says.
What doesn’t qualify as a life-changing event? Here are a couple of situations that Votava hears frequently that seem like they should — but don’t.
Managing your income carefully can save you from paying these surcharges in retirement, says Votava, who is also the author of “Making the Most of Medicare: a Guide for Baby Boomers.” Someone who makes a penny more than the brackets in this chart will pay significantly more for Medicare. If you can keep your modified adjusted gross income or MAGI, on which these surcharges are based, below the limits, you will save hundreds, even thousands in the course of a year.
Medicare monthly premiums for 2015 and surcharges
|Individual income (MAGI)||Married income (MAGI)||Medicare Part B||Medicare Part D*||Total**|
|Individual income (MAGI): Under $85,000||Married income (MAGI): Under $170,000||Medicare Part B: $104.90||Medicare Part D*: $44.00||Total: $148.90|
|Individual income (MAGI): $85,001-$107,000||Married income (MAGI): $170,001-$214,000||Medicare Part B: $104.90 +$42.00||Medicare Part D*: $44.00 +$12.10||Total: $203.00|
|Individual income (MAGI): $107,001-$160,000||Married income (MAGI): $214,001-$320,000||Medicare Part B: $104.90 +$104.90||Medicare Part D*: $44.00 +31.10||Total: $284.90|
|Individual income (MAGI): $160,001-$214,000||Married income (MAGI): $320,001-$428,000||Medicare Part B: $104.90 +167.80||Medicare Part D*: $44.00 +50.20||Total: $366.90|
|Individual income (MAGI): Above $214,000||Married income (MAGI): Above $428,000||Medicare Part B: $104.90 +$230.80||Medicare Part D*: $44.00 +69.30||Total: $449.00|
Source: HealthView Services
*Based on Part D national average
**Based on a 2014 report
Go ahead, help your kids out.