Possible Means Testing for Medicare

[athena53]

We handled the change in Income-related monthly adjustment at the Social Security office. Had to take copy of tax return showing reduction in income. The ruling was immediate and they refunded the adjustment amount for the current year.

Seemed pretty efficient.

We've had to do this 2 years in a row - last May when I retired and DS filed for Medicare (they based the IRMA on our 2012 income which was a peak year) and again this year. A few phone calls and forms fixed it. I think we did go through the rigmarole of filling out a form they told us to complete then being told it was the wrong form.

 

[marko]

Means testing via income is fairly easy to negotiate around. Means testing based on assets is a lot harder.

But not impossible. IMHO going after the wealthy is most often a fool's errand; it feels good but they have too many options and there's just not enough of them to make a big difference.

 

[athena53]

But not impossible. IMHO going after the wealthy is most often a fool's errand; it feels good but they have too many options and there's just not enough of them to make a big difference.

Yeah, I have these discussion on FaceBook occasionally. "Take away all the pensions members of Congress get and give the $$ to Social Security recipients!" And how much would that come out to per SS recipient, exactly? People also don't understand the massive "migrations" that occur for tax reasons. Last I heard, a lot of French were getting Belgian citizenship so they wouldn't be taxed under French law.

 

[marko]

People also don't understand the massive "migrations" that occur for tax reasons. Last I heard, a lot of French were getting Belgian citizenship so they wouldn't be taxed under French law.

Yeah. back in the 60s and 70s, we called them "tax exiles"

 

[Alan]

Yep- DH and I are paying the IRMA (Income-related monthly adjustment) on his Medicare B and D premiums because I was working till mid-2014.

I've not paid any attention to this but now we are getting closer to Medicare age I guess I should. Does the IRMA income include ROTH conversions? If so I guess I'll need to take into account the extra premium costs as part of ROTH conversions between age 65 and 70.

 

[Alan]

I've not paid any attention to this but now we are getting closer to Medicare age I guess I should. Does the IRMA income include ROTH conversions? If so I guess I'll need to take into account the extra premium costs as part of ROTH conversions between age 65 and 70.

I guess it does include ROTH conversions as it is based on MAGI. Oh well, something else to think about.

If you file your taxes as “married, filing jointly” and your
MAGI is greater than $170,000, you’ll pay higher premiums
for your Part B and Medicare prescription drug coverage.
If you file your taxes using a different status, and your
MAGI is greater than $85,000, you’ll pay higher premiums.
(See the chart on pages 8-9 for an idea of what you can
expect to pay.)

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

 

[braumeister]

Does the IRMA income include ROTH conversions?

Yes.
It also includes tax-exempt income.
Nasty.

 

[haha]

I've not paid any attention to this but now we are getting closer to Medicare age I guess I should. Does the IRMA income include ROTH conversions? If so I guess I'll need to take into account the extra premium costs as part of ROTH conversions between age 65 and 70.

It's taken from "adjusted AGI", which does include any retirement distributions, including those intended for Roth conversions. The adjustments as best I can remember all bump up the figure. People are talking as if this is new, but Medicare parts B and D have been income tested for some years now. This just seems like an attempt to increase the take, but we don't really know yet. At any rate, if one is solvent, he/she will pay.

Ha

 

[ERhoosier]

quote...."....That pay-in is what buys you Part A coverage, a bit over $400 a month. You might not have noticed, but I was talking about the equivalent cost of Medicare for someone who did not have Medicare credits, but had to use the 'buy-in' option."

I did understand your comment. My response was phrased poorly- too broad. I should have clarified that one can still pay Medicare income tax for some years (up to 30 qtrs) and get hit with that $400+ contribution. Paying for "only" 31-39 qtrs still means getting charged a $200+ Part A contribution. Point is that many who must pay that full Part A contribution have also paid $$$ in past Medicare taxes.

 

[M Paquette]

I should have clarified that one can still pay Medicare income tax for some years (up to 30 qtrs) and get hit with that $400+ contribution. Paying for "only" 31-39 qtrs still means getting charged a $200+ Part A contribution. Point is that many who must pay that full Part A contribution have also paid $$$ in past Medicare taxes.

That's a mere legislative artifact, the result of electing persons who cannot understand simple algebra and substitute a table of thresholds for a terse linear equation. It is readily corrected by upgrading those who are supposed to legislate.

 

[ERhoosier]

That's a mere legislative artifact, the result of electing persons who cannot understand simple algebra and substitute a table of thresholds for a terse linear equation. It is readily corrected by upgrading those who are supposed to legislate.

Similar thresholds exist in the subsidy 'cliffs' in ACA.
Forgive my pessimism in failing to see any correction on the foreseeable horizon. The need to upgrade those who are supposed to legislate has persisted for some years now.

 

[Never2L8]

In addition to accelerating the income levels that pay a higher income-related monthly adjustment, this bill also permanently eliminates 10 years of inflation indexing of those income levels. The original legislation that implemented these premium adjustments also included inflation adjustments such that the original income level of $80,000 had grown to $85,000 by 2010. (This was based upon a comparison of the average 12 month CPI from August of 2009 to that in August of 2006.)

The Affordable Care Act froze the income levels at the 2010 amounts for 10 years. However, at the end of the ten years, the inflation indexing was to be reinstated using the original calculation. So the 12 month average CPI from August of 2019 would be compared to that of August of 2006.

This new bill sets the starting income level at the $85,000 amount for 2018 and 2019 and restarts inflation indexing by comparing each new year to the CPI from 2018. Since 2018 is essentially set at 2010's amount, which used the CPI for August of 2009, we've lost 10 years of inflation indexing. How much difference will that make? Well, we are five years into the freeze right now. If 2015 had been indexed according to the original legislation (pre-ACA), the first bump for IRMA would be at $93,000 ($186,000 for joint) this year.

The plan is to have many more people paying the income-related adjustments, and this bill will certainly accomplish that.

 

[Stevewc]

I'm so out dated and maybe a little PO'ed that I haven't gotten over the fact that my SS will be taxed at the 80% level. What frigging genius politician came up with that crap <smile>.
Steve

PS. good to see you all interested in this subject!!!

 

[kaneohe]

I'm so out dated and maybe a little PO'ed that I haven't gotten over the fact that my SS will be taxed at the 80% level. What frigging genius politician came up with that crap <smile>.
Steve

PS. good to see you all interested in this subject!!!

up to 85% of SS may be taxed at your tax rate; not taxed at 85%.

 

[sengsational]

...
The plan is to have many more people paying the income-related adjustments, and this bill will certainly accomplish that.

Wow, that is one "meaty" first post!

Sounds like rather than make the tax increase clear, the goal is to obfuscate it to the point of being understandable only by the very patient. So much harder for voters to use to beat the politicos with..."you signed a bill that (blah blah) 2009 CPI (blah blah) ten years (blah blah)" just doesn't work as well as "you signed a bill that increased the rate from 5.3% to 7.4%".

 

[audreyh1]

The legislation discussed in this thread goes into effect in 2018, and is based on your 2016 MAGI, which is your AGI plus tax exempt interest income. These are new (lower) income levels for Medicare are for the higher income folks who already pay increased premiums.

Currently a couple with $428,000 in income pay the highest part B and part D premiums over 3 times what someone at the lowest income range pays (couples under $170,000).

Starting 2018, this threshold drops to $320,000.

The threshold that used to be $320,000 drops to $267,000

This table of 2016 premiums and income thresholds shows the current means testing used and the range of premiums paid for Part B and the additional premium charge for part D above what is paid for your Part D policy. Page 8 in https://www.ssa.gov/pubs/EN-05-10536.pdf

To see the effect of the change for 2018 (in 2016 dollars), cross out the $428,000 in one level in the highest bracket and replace with $320,000. And cross out the second highest bracket at $320,000 and replace it with $267,000.

The individual thresholds are set at half the level for married couples.

 

[pb4uski]

To put the prior post in perspective.

							% of average MAGI
Single MAGI		Married MAGI		Annual cost			Single		Married
From	To	From	To	Part B	Part D		Part B	Part D	Part B	Part D
-	85,000	-	170,000	1,461.60	497.52		3.4%	1.2%	1.7%	0.6%
85,000	107,000	170,000	214,000	2,046.00	649.92		2.1%	0.7%	1.1%	0.3%
107,000	160,000	214,000	320,000	2,923.20	891.12		2.2%	0.7%	1.1%	0.3%
160,000	214,000	320,000	428,000	3,800.40	1,131.12		2.0%	0.6%	1.0%	0.3%
214,000		428,000		4,677.60	1,372.32		2.2%	0.6%	1.1%	0.3%

The table looks at the annual cost of Part B and Part D as a percent of MAGI based on the average MAGI for the bracket (other than the highest income bracket which is the % assuming they are at the bottom of the bracket since the top of the bracket is infinity). Also assumes the base cost of Part D is $41.46/month which is the high end of the range for 2016.

 

[audreyh1]

This is the 2018 change I am talking about - note the changed (lowered) MAGI ranges compared to 2016 above.

							% of average MAGI
Single MAGI		Married MAGI		Annual cost			Single		Married
From	To	From	To	Part B	Part D		Part B	Part D	Part B	Part D
-	85,000	-	170,000	1,461.60	497.52		3.4%	1.2%	1.7%	0.6%
85,000	107,000	170,000	214,000	2,046.00	649.92		2.1%	0.7%	1.1%	0.3%
107,000	133,500	214,000	267,000	2,923.20	891.12		2.2%	0.7%	1.1%	0.3%
133,500	160,000	267,000	320,000	3,800.40	1,131.12		2.0%	0.6%	1.0%	0.3%
160,000		320,000		4,677.60	1,372.32		2.2%	0.6%	1.1%	0.3%

The rest of the numbers are still 2016 as we don't know what the 2018 premiums will be.

Thanks for the table in an editable format!

 

[Fedup]

I'm still debating whether my husband should take Medicare part B. He has FEHB from the government.


Sent from my iPad using Early Retirement Forum

 

[pb4uski]

This is the 2018 change I am talking about - note the changed (lowered) MAGI ranges compared to 2016 above. ....

The percentages in the four right columns would change too.... the percentages would increase as the denominator decreases but the result would still be relatively modest.