Personal Finance

Here are options for easing Medicare costs if your income has dropped

Key Points
  • Of Medicare's 62 million beneficiaries, about 7% — 4.3 million people — pay more in premiums for Part B (outpatient care coverage) and Part D (prescription drug coverage) through income-related monthly adjustment amounts, or IRMAAs.
  • If you pay those surcharges and your income has dropped significantly, you can ask the Social Security Administration to reconsider its assessment of your financial situation.
  • For other recipients, there may be options available through the Medicare program and your state to ease the costs.

Medicare isn't free. And for beneficiaries whose income suddenly has dropped, that fact may now be more challenging.

More than a third (37%) of Medicare recipients have experienced income loss due to the coronavirus crisis, according to a recent survey from ehealth.com. Younger beneficiaries are more likely to have suffered: 40% of respondents age 65 to 70 said they have experienced an income loss, compared with 30% of those age 80 or older. 

Roughly 62 million people are on Medicare, the majority of whom are age 65 or older. In addition to premiums for certain parts of the program, beneficiaries pay deductibles and other out-of-pocket costs.

John Fedele

While it depends on your circumstances — i.e., what you already were paying for your coverage, your current income and why it is suddenly lower — there may be options available to ease your how much you're paying for Medicare.

Reducing monthly surcharges

If you've been paying more than the standard premium amounts for Part B (outpatient care coverage) or Part D (prescription drugs) through so-called income-related monthly adjustment amounts, or IRMAAs, a sudden reduction in income may justify eliminating or reducing those surcharges.

Of Medicare's 62 million beneficiaries, about 7% — 4.3 million people — pay IRMAAs, which kick in if your modified adjusted gross income is more than $87,000. For married couples filing joint tax returns, they start above $174,000.

The standard monthly premium for Part B this year is $144.60, which is what most Medicare beneficiaries pay. (Part A, which is for hospital coverage, typically comes with no premium.) The surcharge for higher earners ranges from $57.80 to $347, depending on income. That results in premiums ranging from $202.40 to $491.60.

For Part D, the surcharges range from $12.20 to $76.40. That's in addition to any premium you pay, whether through a standalone prescription drug plan or through an Advantage Plan, which typically includes Part D coverage. While the premiums vary for prescription coverage, the average for 2020 is about $42.

The process to get rid of IRMAAs (or getting them lowered) involves asking the agency to reconsider. However, local Social Security offices are closed because of the coronavirus pandemic, and there are long waits to get through on the phone, said Patricia Barry, author of "Medicare for Dummies." The alternative is to appeal via an online form you can download and mail in. (The Social Security Administration did not have information immediately available about whether there is any delay in processing these requests.)

You'll also need to provide supporting documents to justify your appeal. Suitable proof may include a letter from your former employer or something similar showing evidence that your income has dropped.

The required form includes a list of "life-changing" events that qualify as reasons for reducing or eliminating the IRMAAs, including marriage, death of a spouse, divorce, loss of pension or the fact that you stopped working or reduced your hours.

"This could result in Social Security re-assessing your Part B premium and lowering it now," said Danielle Roberts, co-founder of insurance firm Boomer Benefits in Fort Worth, Texas.

And, as long as you meet one of the qualifying reasons, "most of the time it gets adjusted," said Elizabeth Gavino, founder of Lewin & Gavino in New York and an independent broker and general agent for Medicare plans.

If it doesn't, you can appeal the decision to an administrative law judge, although the process could take time and you'd continue paying those surcharges in the meantime.

Medicare Savings Programs

Depending on how far your income has dropped, you may be able to enroll in a Medicare Savings Program, which is administered through state Medicaid offices, said Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League.

There are several versions of the program, each of which depends at least partly on your cash flow. For instance, one program lets you have up to $1,084 in monthly income (in most states) if single and $1,457 if married. Each of the options also come with limits on your available resources (i.e., savings).

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How to control future health care costs

Depending on which program you qualify for, your Part B (outpatient care coverage) premiums could be paid, as well as other out-of-pocket costs such as deductibles, coinsurance and copayments. Help for Part D prescription drug coverage also is typically automatic if you qualify for one of the programs.

Johnson recommends that beneficiaries who are struggling to pay their Medicare costs reach out to their state health insurance assistance program, or SHIP, as options can vary from state to state.

"You can get free one-on-one counseling and learn about programs that might be able to help lower your health care costs," Johnson said, adding that the counseling can be done by phone.

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