Will You Pay More For Medicare Next Year?

Next month notification letters go out to Medicare beneficiaries who will be charged a premium surcharge in 2021 based on their 2019 income.

If you are collecting Social Security, this will mean you receive a smaller deposit amount due to the larger premium.

How much income is too much?

In 2019, if your “modified adjusted gross income” (MAGI) was more than $87,000 if you are single or $174,000 if you are married, you will be charged a premium.

But You Can Appeal

The notification letter will include instructions on how to appeal the premium surcharge. The appeal is available for “life-changing events” which caused a reduction in income, such as death, divorce, disaster, work reduction, layoff, partial or full retirement. If you experienced such an event since 2019 then there will be a box to check on the letter. Check the box, return the letter and you will be asked to provide at least an affidavit and possibly backup proof.

In the case of reduced business income due to disaster, part of the proof might be to show that your income loss came from a declared disaster area. In 2020, all 50 states and the US territories were declared disaster areas due to Covid-19. Other declared disasters in 2020 also brought about life-changing event income losses, such as Iowa farmers who lost crops to flooding; rental property destroyed in the Midwest derecho; businesses put under by one of 2020’s several hurricanes; or jobs lost due to wildfires in California, Oregon and Washington.

Is It Worth It To Appeal?

That depends what on your definition of “worth it.” Using 2020 premiums, if your 2018 MAGI falls just above the limits (say $87,001 for single filers and $174,001 for married) then instead of paying $144.60 per month for Part B premiums, you would pay $202.40. That’s a 40% increase, equal to $693.60 per year.

That’s only for the first income bracket of several as MAGI increases. The annual surcharges start at $693.60, and go as high as $5,899.20 for Part B. On top of that are Part D surcharges, which start at $146.40/year and go as high as $916.80.

Help Spread the Word

2020 has seen a large share of involuntary retirements and business losses for 60- and 70- somethings. Make sure the Medicare beneficiaries in your life know about the appeal process. In 2021, every dollar will count.

For more information, visit https://www.medicare.gov/your-medicare-costs/part-b-costs and https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/monthly-premium-for-drug-plans.

Holly Donaldson

Holly Donaldson, CFP® runs an hourly and fee-for-service financial planning practice virtually from her Tampa Bay, Florida office. She also works with clients throughout the U.S. (except Texas) interested in retirement and tax planning advice without product sales or investment management. Holly is the author of The Mindful Money Mentality: How to Find Balance in Your Financial Future (Porchview Publishing, 2013) and publisher of the award-winning monthly e-letter, "The View From the Porch."

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