Older Americans may have to postpone retirement under Republican health bill

Retirement might not be an affordable option

  BY Robert Powell, Retirement Columnist, Marketwatch
with quotes from Dr. Katy Votava
Published: Mar 11, 2017 11:52 a.m. ET


The House Republican bill to replace the Affordable Care Act (ACA) would allow insurers to charge older workers health insurance premiums five times as much as younger ones and give states the option to set their ratio, according to published reports.

Under the ACA, also known as Obamacare, plans can charge their oldest customers only three times the prices charged to the youngest ones.

Given that possible change, experts say pre-Medicare workers are likely to stay in their jobs longer to keep their employer-sponsored health insurance, even though they may be ready to retire in other ways— financially and emotionally, for instance — to retire.

“It seems entirely plausible that the new rules would discourage older workers from retiring or going out on their own to start a new business — if it means giving up employer-sponsored health coverage,” said Tricia Neuman, a senior vice president and director of the program on Medicare policy at Kaiser Family Foundation.

Read: What the House Republican bill gets wrong about the health insurance market

Under the House Republicans’ proposal, self-employed adults in their early 60s, or who retire and choose to purchase coverage on their own, could face higher premiums for their health insurance with the proposed five-to-one age bands.

 But experts can’t, at present, determine what older Americans might pay under the House Republicans’ bill. “We can’t say with precision what the payment for someone after the Republican tax credit would be because there are a lot of other changes outside of the tax credit,” said Cynthia Cox, an associate director at the Kaiser Family Foundation, noting that doing away with the individual mandate, for example, would have a significant effect on premiums. “I don’t think there is a lot of reason to believe that premium would be significantly lower under this bill than under the ACA.”
Posted in Healthcare Benefits, Medicare, retirement planning

What Medicare changes will mean for clients in 2017

By reevaluating supplemental and prescription drug coverages, Medicare enrollees can make up for premium increases

Dec 14, 2016 @ 10:00 am

By Katy Votava

Recently, I wrote about the estimated 22% escalation in Medicare Part B premiums and Parts B and D high-income surcharges. Contrary to what the Medicare Trustees projected, the Centers for Medicare and Medicaid Services (CMS) approved a 10% increase that will affect only 30% of all Medicare beneficiaries.

On top of that, the majority of current Medicare enrollees, about 70%, will not even pay a 10% increase in their Medicare Part B premiums. Why? Because of the statutory hold harmless provision. Given that the 2017 Social Security COLA was only 0.3%, the hold harmless provision limits any increase in Medicare Part B premiums beyond any increase in Social Security benefits in a year. This rule protects most of the folks on Medicare from paying more for their coverage than their incomes can sustain.

(More: Where will Medicare costs go in 2017?)

Because of the hold harmless provision, Medicare Part B premium increases are a few dollars for 70% of the beneficiaries. On average, people in this category who now pay $104.90 per month for Part B will pay $109 per month in 2017. The official announcement does not address Medicare recipients who entered new into Medicare last year and pay $121.80 and meet the hold harmless criteria.

It is not clear what their Medicare B premiums will be next. A strict reading of the CMS announcement could lead to the conclusion that those people might pay $109 per month. Until CMS issues further guidance, that question remains unanswered. It is possible that premiums for individuals who pay $121.80 per month now may spend a few dollars more per month not less.

(More: These retirees will see a substantial increase in their Medicare premiums in 2017)

Medicare Part B enrollees who are not subject to the hold harmless will pay $134 per month. They include people who:

• do not receive Social Security benefits;

• enroll in Part B for the first time in 2017;

• billed directly for Part B premium;

• are dual-eligible Medicaid and Medicare beneficiaries  and have their premium paid by state Medicaid agencies;

• pay high income-related premiums.

There will be at least two or three 2017 Medicare Part B premiums. They will vary based on what year the person started receiving Medicare Part B and whether they meet the hold harmless criteria. Individuals who entered into Medicare in 2015 or before will pay $109 per month. Folks who enroll in Medicare Part B in 2017 or are otherwise not held harmless will pay $134 per month. People who started Medicare in 2016 and meet the hold harmless criteria will either pay $109 per month or around $121.80.

CMS also released the high-income 2017 Income-Related Monthly Adjustment Amounts (IRMAA) for Medicare Parts B and D surcharges. The following table includes monthly Medicare Part B premiums and Parts B and D IRMAA surcharges. Married couples who file their taxes individually have slightly different income brackets and costs listed in this table.

2017 monthly Medicare B premium including IRMAA surcharge and Medicare Part D IRMAA surcharge

≤ 85,000 ≤ $170,000 ≤ $85,000 $134 $0
≤ $107,000 ≤ $214,000 NA $187.50 $13.30
≤ $160,000 ≤ $320,000 NA $267.90 $34.20
≤ $213,000 ≤ $428,000 ≤ $129,000 $348.30 $55.20
> $213,000 > $428,000 > $129,000 $428.60 $76.20
Source: Dr. Katy Votava
Notes: 2015 Medicare MAGI = Adjusted Gross Income + Tax Exempt Interest. The new 2017 Medicare Part B premium $134 is used here. Some beneficiaries will pay less due to the hold harmless statute. *Medicare Part D IRMAA surcharges are separate from and in addition to the Part D plan premiums.

You might be thinking: Is there any good news here? Yes, there is. Most people can save much more than Medicare premium increases by reevaluating their Medicare supplemental and prescription drug coverages. We see many cases where folks can save $2,000 to $6,500 annually by changing their coverage. The primary culprit is that their current prescription drug plans are either not covering all of their medications or not doing so at the lowest total cost.

(More: Low Social Security cost-of-living adjustment keeps Medicare premiums lower for most)

It is not too late for your clients to reevaluate their coverage. Although Medicare Annual Enrollment ended earlier this month, Medicare Advantage plan enrollees get another bite at the apple from Jan. 1 through Feb. 14. That time frame is known as the Medicare Advantage Disenrollment Period (MADP). Enrollees in Medicare Advantage can disenroll from that plan and enroll in a stand-alone Medicare Part D prescription drug plan.

I recommend they also consider enrolling in a Medigap plan at that time because when folks disenroll from their Advantage plan, they will lose the supplemental benefits they had. Your clients might find they save even more money by having a Medigap plan, particularly if they have had other high health care costs, i.e., medical equipment or out-of-network doctors.

It’s entirely possible they will have greater savings by changing their coverage compared to any increases in Medicare B premiums and surcharges.

Posted in Medicare

Where will Medicare costs go in 2017?

There are some variables under clients’ control that they can use to bring down their total Medicare costs

Nov 7, 2016 @ 1:57 pm

By Katy Votava

First of all, people are asking me where Medicare costs, specifically Part B premiums and Part B and D high-income surcharges, are going in 2017. While the final numbers are not released, we know that Medicare costs have been going up dramatically. The June Medicare Trustees Report projected that a 22% increase in Medicare B premiums is needed to balance the Medicare Part B trust fund in 2017.

That translates into the Medicare Part B premium that is $122 per month increasing to $149 in 2017. I’ve estimated what the impact will be across all income levels. The following is an estimate of where 2017 Medicare B premiums and Parts B and D income-related monthly adjustment amounts (IRMAA) will go if the 22% increase applies to Medicare beneficiaries across all Medicare modified adjusted gross income (MAGI) brackets.

While these figures do add up to significant dollars, they will pertain only to 30% of Medicare beneficiaries including high-income individuals, those newly enrolled in Medicare and people who are on Medicare but not yet taking Social Security — to name a few. The reason is the Medicare “hold-harmless” provision comes into play in the face of the flat Social Security COLA of 0.3% for 2017. Medicare premium increases cannot exceed a rise in Social Security benefits. We expect 70% of Medicare beneficiaries to be held harmless in 2017.

In the face of the Medicare hold-harmless provision, all other Medicare recipients will, by law, have to absorb the majority of the Medicare Part B cost increase for 2017. We encountered the same issue in 2015. That year, Congress intervened to dampen the massive cost-shifting but at the same time created a “kick the can” problem that we are still facing.

A logical question is what my clients can do to stave off the impact of these impending Medicare cost increases? The answer is some variables are under their control that they can change to bring down the total Medicare costs.

≤ 85,000 $1,783 ≤$170,000 $3,566
≤ $107,000 $2,682 ≤ $214,000 $5,364
≤ $160,000 $4,046 ≤ $320,000 $8,093
≤ $213,000 $5,409 ≤ $428,000 $10,819
> $213,000 $6,774 > $428,000 $13,548
 Notes: 2016 Medicare B premiums and B and D IRMAAs with 22% increase. MAGI = adjusted gross income + tax exempt interest in 2015. Source: Dr. Katy Votava

Have a Medicare checkup.

• Make sure that their Medicare coverages are the most cost-effective available. Your clients do not want to be part of the 90% to 95% of folks who overspend on Medicare and waste their hard-earned savings. Once the annual enrollment period window of opportunity closes on Dec. 7, most Medicare enrollees must wait until 2018 for new coverage.

Apply for reconsideration of 2017 Medicare Parts B and D high-income surcharges.

• It is critically important for people to review the Social Security IRMAA annual verification notice they will receive later in November that notifies them of their 2017 Medicare B premiums and Parts B and D IRMAA surcharges.  It’s not uncommon for people to qualify for a decrease because their income drops to a lower bracket because of specific life-changing events. For example, if a person has stopped or reduced work resulting in a lower MAGI, they are eligible to apply for that lower-bracket premium.

•  Since they are using a person’s tax return from 2015 to determine 2017 high-income surcharges, Social Security doesn’t know about life-changing events (unless the individual notifies the agency). Therefore, Therefore, If your clients have experienced a qualifying life-changing event that has created a MAGI reduction, they may be eligible to apply for an IRMAA decrease.

•The process to file for a modification is outlined in the Social Security Medicare IRMAA annual verification notice. Your clients can submit form SSA-44. In my experience, when people meet the criteria and pursue the matter on a timely basis, they will be successful in getting a reduction. A word to the wise is to keep a copy and get a dated stamped receipt of all materials filed at a Social Security Administration office.

(More: My client’s Medicare coverage has been canceled, now what?)

Structure retirement income to maximize cash flow and minimize MAGI.

• Work with your customers to structure retirement income to maximize cash-flow sources that are not in future Medicare MAGI calculations. You may be able to blunt the impact of Medicare B and D IRMAA increases.

• I highly recommend that financial advisers incorporate Medicare costs in tax and retirement planning. A good place to start is to get a copy of your client’s tax return on an annual basis to get an idea of their MAGI.

• Examples of methods that are useful in maximizing retirement cash flow not included in Medicare’s MAGI calculation include health savings accounts, reverse mortgage proceeds, some cash-value life insurance and annuity proceeds.

Consequently, when you work with your clients on these strategies to reduce their Medicare cost burden, they may very well save more than projected Medicare B premiums and Part B and D IRMAAs in 2017 and beyond.

Posted in Income-related monthly adjustment amount, Medicare