Accept/Decline Part B Coverage?

[4thandGoal]

Hello, new guy here from Nevada. My Medicare coverage begins April 1, 2016.
Situation:
Medicare used my 2014 Federal Tax filing to determine my Part B premium. It happens that in 2014 I took a large amount from a retirement account to fund a mortgage. This amount is included as income on my 2014 return and puts me in a position that my premium will be double ($243.60) rather than ($121.80) that it would have been had I not taken the funds from the retirement account.

Question:
If I decline Medicare Part B at this time and wait a year to take Part B will Medicare then use my 2015 tax return, instead of the 2014 return that they used to determine the very high premium? Or will they still use my 2014 tax return?

If I wait a year I realize I will pay a 10% penalty. The penalty will be approximately $12.00 vs the $121.80 extra premium they are charging me because of 2014 income. My 2015 income will be below the income requiring the "income related monthly adjustment" and I would not pay this extra premium. I have medical coverage from the Veterans Administration that will cover me if I wait a year.

Opinions on this will be very much appreciated. Thank you, Mike

 

[MBSC]

Hello,

Since your Part B premium was subject to the IRMAA adjustment, you should soon receive an "initial IRMAA determination" letter. It will explain that you can appeal the decision. Almost all appeals are granted when due to retirement or loss of job. Unfortunately, a majority of appeals are not granted in situations like yours when additional retirement funds are obtained or capital gains are realized. The appeal form is in the link below if you want to take a look.

IRMAA Appeal: https://www.socialsecurity.gov/forms/ssa-44.pdf

Regarding the 10% premium penalty for late enrollment:
Part B has a 7 month initial enrollment period, consisting of 3 months prior to your eligible month, your eligible month, and 3 months after your eligible month. I'm assuming April is your eligible month and you have 3 months after April to still be within the initial enrollment period.

This would make July the last month of your initial enrollment period. The 10% late enrollment penalty begins 12 months later, or July 2017. I would advise enrolling in Part B in early 2017 (Jan.-March General Enrollment Period) before the penalty becomes effective.

Penalty Example: http://www.aarp.org/health/medicare-insurance/info-05-2009/ask_ms_medicare_question_55.html

Medicare (actually Social Security) should use your 2015 tax return at that time. If they do not, follow the instructions on page 6 of the document linked to below where it says to provide a copy of a more recent tax return.

https://www.ssa.gov/pubs/EN-05-10536.pdf

 

[4thandGoal]

Hello,

Since your Part B premium was subject to the IRMAA adjustment, you should soon receive an "initial IRMAA determination" letter. It will explain that you can appeal the decision. Almost all appeals are granted when due to retirement or loss of job. Unfortunately, a majority of appeals are not granted in situations like yours when additional retirement funds are obtained or capital gains are realized.

Regarding the 10% premium penalty for late enrollment:
Part B has a 7 month initial enrollment period, consisting of 3 months prior to your eligible month, your eligible month, and 3 months after your eligible month. I'm assuming April is your eligible month and you have 3 months after April to still be within the initial enrollment period.

This would make July the last month of your initial enrollment period. The 10% late enrollment penalty begins 12 months later, or July 2017. I would advise enrolling in Part B in early 2017 (Jan.-March General Enrollment Period) before the penalty becomes effective.

Medicare (actually Social Security) should use your 2015 tax return at that time. If they do not, follow the instructions on page 6 of the document linked to below where it says to provide a copy of a more recent tax return.

Thank you so much for your response. Instead of appealing (it looks certain that I would lose the appeal) I plan to decline Part B at this time. Just to make sure I have things correctly:

If I send the recently received Medicare Card back to Medicare now, declining Part B coverage, and wait until the early part of 2017 (Jan.-March General Enrollment Period) to sign up they will (or should) use my soon to be filed 2015 tax return?

That would be great as it would show an income well below the point of the IRMAA adjustment. I am happy to see that I would also be avoiding the 10% penalty. My fear was that Medicare would always use the tax return from 2014 because I first became eligible (turned 65) in 2016. I cannot tell you how much I appreciate your help.
Mike

 

[MBSC]

If I send the recently received Medicare Card back to Medicare now, declining Part B coverage, and wait until the early part of 2017 (Jan.-March General Enrollment Period) to sign up they will (or should) use my soon to be filed 2015 tax return?

Yes, they should use your 2015 tax return in determining your 2017 Part B premium. If they don't, you can provide it to them so they update their records.

Please note that if your income increases in the future, you could become subject to the IRMAA adjustment at that point.

 

[4thandGoal]

If I send the recently received Medicare Card back to Medicare now, declining Part B coverage, and wait until the early part of 2017 (Jan.-March General Enrollment Period) to sign up they will (or should) use my soon to be filed 2015 tax return?

Yes, they should use your 2015 tax return in determining your 2017 Part B premium. If they don't, you can provide it to them so they update their records.

Please note that if your income increases in the future, you could become subject to the IRMAA adjustment at that point.

Unfortunately I do not expect an income increase in the future. Do they check your tax return every year while you are on Medicare?

 

[MBSC]

Unfortunately I do not expect an income increase in the future. Do they check your tax return every year while you are on Medicare?

Yes. In future years, they will check your 2016 return to see if the IRMAA adjustment should be applied to the 2018 Part B premium, then check your 2017 return to see if the IRMAA adjustment should be applied to the 2019 Part B premium and so on.

 

[4thandGoal]

Unfortunately I do not expect an income increase in the future. Do they check your tax return every year while you are on Medicare?

Yes. In future years, they will check your 2016 return to see if the IRMAA adjustment should be applied to the 2018 Part B premium, then check your 2017 return to see if the IRMAA adjustment should be applied to the 2019 Part B premium and so on.

I never imagined they were that vigilant. Thank you for helping me with this. It's good to know you are here because I am likely to have more questions. What you do is very kind.
Mike

 

[4thandGoal]

Unfortunately I do not expect an income increase in the future. Do they check your tax return every year while you are on Medicare?

Yes. In future years, they will check your 2016 return to see if the IRMAA adjustment should be applied to the 2018 Part B premium, then check your 2017 return to see if the IRMAA adjustment should be applied to the 2019 Part B premium and so on.

I never imagined they were that vigilant. Thank you for helping me with this. It's good to know you are here because I am likely to have more questions. What you do is very kind.
Mike

I just thought of something. In 2017 will they look at my 2015 tax return, see my income in 2015 was below the IRMAA threshold, and reduce my premiums? Or does it just work the other way around?

 

[MBSC]

I just thought of something. In 2017 will they look at my 2015 tax return, see my income in 2015 was below the IRMAA threshold, and reduce my premiums? Or does it just work the other way around?

The 2016 standard premium is $121.80. We do not yet know the 2017 standard premium but lets say they set it at $123.00. You would pay the $123.00 standard premium rate since your 2015 tax return is not subject to IRMAA.

 

[4thandGoal]

I just thought of something. In 2017 will they look at my 2015 tax return, see my income in 2015 was below the IRMAA threshold, and reduce my premiums? Or does it just work the other way around?

The 2016 standard premium is $121.80. We do not yet know the 2017 standard premium but lets say they set it at $123.00. You would pay the $123.00 standard premium rate since your 2015 tax return is not subject to IRMAA.

I am a bit confused (happens a lot lately). I need to know if Medicare will look at my tax return in each and every future year to determine my premium for the following year? Late in 2016 will they review, via IRS, my 2015 return and determine my 2017 premium, then in late 2017 review with IRS my 2016 return to determine my 2018 Medicare premium, etc.?

You made me aware that they will, in the future, look at my tax returns each year to see if I have higher income. Will they also look to see if I have lower income in the future and adjust my premiums accordingly? If that is the case I might just suffer the higher premium in 2016 knowing that my premium will drop in 2017 because of my much lower income that will be reported in my 2015 tax return. I can take one year of the higher premium but not for the remainder of my life.

I thought (hopefully in error) that the IRMAA they are charging me in this, my first year of eligibility, would remain the same regardless of future lower income forever. I do apologize for being such a pest but I have been worrying about this every day.