Groups Not Covered By The Hold
Several groups are not covered by the hold-harmless provision. The following groups may receive reduced Social Security benefit payments due to Medicare premium increases that are greater than the Social Security COLA:
- New enrollees to either Medicare or Social Security 63
- Medicare Part B enrollees who do not receive Social Security benefits
- High-income individuals who pay income-related Medicare Part B premiums
- Low-income beneficiaries who are in a Medicare Savings Program .
Medicare Part B enrollees who do not receive Social Security may include individuals who spent their careers in employment that was not covered by Social Security, including certain federal, state, and local government workers. This includes civilian federal employees who were hired before 1984 and are receiving Civil Service Retirement System benefits. Although CSRS benefits are increased annually by the same COLA applied to Social Security benefits, the benefits are not Social Security benefits and thus its beneficiaries are not protected under the hold-harmless provision.64
Premiums For Part A Only
Social Security determines if someone has to pay any premium for Part A based on work history while paying taxes. Most people get Part A premium-free, but not all do.
If a person has to pay a premium for Medicare Part A but does not receive Social Security retirement income, that person must pay premiums directly to Medicare. In these cases, Medicare sends a monthly bill for the Part A premium.
Coverage would begin after the initial payments, but the exact length of coverage delay depends on when you enroll during your seven-month Initial Enrollment Period .
Surrounding a persons 65th birthday, one can begin to apply for Medicare. Elsewise, those who enter Medicare coverage before age 65 due to disability get this IEP surrounding their 24th month of receiving disability benefits.
In most cases, if Part A is not premium-free, then the enrollee must also have Part B and pay its premiums.
Subscribers can pay the monthly Part D premium the same way as Original Medicare.
In order to sign up for any Part D coverage, a person must also have both Parts A and B. This stands whether acquired as a separate Part D plan or as part of a Medicare Advantage plan.
At the time of enrollment, they can choose to have automatic deductions from Social Security, or another payment method.
Applicants can also change this by contacting their private Part D insurance carrier.
There Are Two Types Of Plans
Plans come in two basic types. The most simple is a prescription drug plan , which covers only drugs and can be used with your traditional Medicare and/or a Medicare supplement plan. The other type combines a prescription drug plan with a Medicare Advantage plan and includes medical coverage for doctor visits and hospital expenses. This kind of plan is called Medicare Advantage plus Prescription Drug, or MA-PD.
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Easy Steps To Choosing The Medicare Part D Plan That Is Right For You
Even if you are currently in a Medicare Part D plan you should reevaluate it every year. Heres how:
What If I Dont Want Part B Coverage
It is possible to defer your Part B coverage to a later date. This is quite rare to do, because you may end up paying more for late enrollment. If you dont want your Part B Medicare plan, youll have to get in contact with Medicare directly. It also makes sense to double-check with Social Security, so you can be sure that the Part B premium wont be deducted from your check.
Its also possible to be covered by your employer group plan at the same time as Part B if youre still working when you become eligible. However, this can end up not being worth it for some people, as your group health insurance will have to provide most of your coverage in most instances. This may be worth it for some to avoid the late enrollment penalty, but theres no way to tell without looking at your individual scenario.
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Are My Medicare Premiums Tax Deductible
Medicare premiums are tax deductible. However, you can deduct premiums only once your out-of-pocket medical expenses reach a certain limit.
The IRS has set that limit at 7.5 percent of your adjusted gross income . Your AGI is the money you make after taxes are taken out of each paycheck.
The IRS allows you to deduct any out-of-pocket healthcare expenses, including premiums, that are more than 7.5 percent of your AGI.
So, if you have an AGI of $50,000, you could deduct healthcare expenses after youve paid $3,750 in medical expenses. Depending on your premiums and other healthcare spending, you might not reach this number.
If your spending is less than 7.5 percent of your AGI, you cant deduct any healthcare expenses, including premiums. However, if your healthcare spending is more than 7.5 percent of your income, you can deduct it.
Keep careful track of your out-of-pocket medical expenses throughout the year so you can make the proper deductions at tax time.
You can pay your Medicare bills online or by mail if they arent automatically deducted. You wont pay an added fee for parts A, B, or D, based on your payment method.
There are several ways to pay:
D Late Enrollment Penalty
If you do not enroll in Part D on time, you may owe a late enrollment penalty. This includes if you enroll after your Initial Enrollment Period is over, or if theres a period of 63 or more days in a row when you dont have prescription drug coverage. You will be required to pay this penalty for as long as you have Medicare drug coverage.
Medicare calculates the penalty by multiplying 1% of the national base beneficiary premium times the number of full, uncovered months you didnt have Part D coverage. In 2022 it is $33.37. Premiums are rounded to the nearest $0.10.For example, if you go for 12 months without prescription drug coverage, your penalty will be 12% of $33.37, or $4.0044. Rounding to the nearest $0.10, you will pay an additional $4 on your plans monthly premium.
When you join a Medicare drug plan, the plan will let you know if you owe a penalty and what your premium will be. As long as you have a drug plan, you will not have to pay the penalty.
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How To Make Premium Payments
Your Part B Medicare premiums are billed directly through Medicare, while your Part C premiums are billed through the private insurance company associated with your Medicare Advantage plan. Heres how you pay Medicare and your private insurance company.
- Premium Payments to Medicare: If you receive Social Security, Office of Personnel Management, or Railroad Retirement Board benefits, Medicare will automatically deduct your Part B premiums from your benefits check. If you dont receive these benefits, you will receive a bill called Notice of Medicare Premium Payment Due. You can then pay by mailing a check, use your banks online billing to make payments every month, or sign-up for Medicares bill pay to have the premium come out of your bank account automatically.
- Part C Premium Payments to Private Insurance Companies: If your insurance company charges a premium for your Medicare Part C plan, you can set your payments to come from your Social Security benefits. But this is not an automatic action. You must submit a request to Social Security, and they have to approve your request before your Part C premium payments will be deducted. If you dont get Social Security, you can mail in a check or have your premium automatically drafted from your bank account.
What About Part C Part D And Medigap
You pay these bills directly to your plan provider. Each company may have a preferred method of payment.
Your insurer will let you know all your options for paying your bill. These may include:
- autopay, which automatically deducts the amount from your checking or savings account on a specific date each month
- paying by check
- paying by debit or credit card, either online or by mail
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What Is The Late Enrollment Penalty
Another factor influencing the cost of your premium is when you enroll. For each full month after eligibility that you dont have prescription drug coverage, youll typically have to pay 1% of the base premium , and youll have to pay that for as long as you have Medicare prescription drug coverage.8 The penalty amount may change from year to year.
What About Part C And Part D
Youll pay your Part C or Part D bill directly to the insurance company. Each company has their own preferred methods, and not all companies accept all payment types.
Generally, you should be able to:
- pay online with a debit or credit card
- set up automatic payments
- mail a check
- use your banks automatic bill pay feature
You might also be able to set up a direct deduction for your retirement or disability payments.
You can contact your plan provider to find out what payment options are available. They can also let you know if theres anything you should be aware of with each payment type, such as added fees or time delays.
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When To Pay For Original Medicare
If you have original Medicare and arent yet collecting Social Security, youll receive a bill from Medicare either monthly or once every 3 months in these cases:
- If you dont have premium-free Part A, youll receive a monthly bill for your Part A premium.
- If your income exceeds a certain amount, youll receive a monthly bill for your Part D income-related monthly adjustment amount surcharge.
- If you have only Part B, the bill for your Part B premium will be sent quarterly and will include the cost of 3 months worth of premiums.
These bills are paid in advance of coverage. For example, if you applied for Medicare to start in August, youll receive a bill in July for your August, September, and October Part B premiums.
If you also pay for Part A or a Part D IRMAA surcharge, the bill you receive in July will be for Augusts premium.
If youre already collecting Social Security or RRB benefits, your monthly Medicare premium will be automatically deducted from your benefit amount.
Understand What Creditable Coverage Is
You can sign up for Medicare and a prescription plan without a penalty after your Initial Enrollment Period if you have from another source.
Typically, this means you have insurance from your own or your spouses employer-sponsored plan. Some people delay enrolling in Medicare because they have other insurance thats cheaper or has other advantages. Those advantages wont matter if your plan doesnt count as creditable coverage and you have to pay a late enrollment penalty.
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How Do I Get A Medicare Low
Many people dont realize theres a subsidy available to reduce Part D premiums and out-of-pocket costs for medications. People with Medicaid automatically qualify for the Extra Help subsidy.
However, you can obtain Extra Help, even if you dont qualify for Medicaid. When your income is low, a subsidy can help reduce Medicare premiums and other costs.
Can I Delay Enrolling In Medicare Part B
Some people may get Medicare Part A premium-free, but most people have to pay a monthly premium for Medicare Part B. Because Medicare Part B comes with a monthly premium, some people may choose not to sign up during their initial enrollment period if they are currently covered under an employer group plan .
If you are still working, you should check with your health benefits administrator to see how your insurance would work with Medicare. If you delay enrollment in Medicare Part B because you already have current employer health coverage, you can sign up later during a Special Enrollment Period without paying a late penalty. You can enroll in Medicare Part B at any time that you are still covered by a group plan based on current employment. After your employer health coverage ends or your employment ends , you have an eight-month special enrollment period to sign up for Part B without a late penalty.
Keep in mind that retiree coverage and COBRA are not considered health coverage based on current employment and would not qualify you for a special enrollment period. If you have COBRA after your employer coverage ends, you should not wait until your COBRA coverage ends to sign up for Medicare Part B. Your eight-month Part B special enrollment period begins immediately after your current employment or group plan ends . This is regardless of whether you get COBRA.
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What Deductions Are Taken From Social Security Paychecks
In 2010, more than 54 million people in the United States received $58 billion in Social Security benefits. Social Security checks are distributed from three benefit programs — retirement, survivors and disability — tax-free. However, benefit payments are decreased through deductions authorized by the federal government. If beneficiaries owe taxes, federal debt or have support orders, the amounts owed are deducted from their Social Security checks.
Eligibility For Part D
Anyone with Medicare is eligible to enroll in a Part D plan. To enroll in a PDP, the individual must have Part A OR Part B. To enroll in an MA-PD, the individual must have Part A AND Part B.
Enrollees must live in their plans service area. In the case of homeless persons, the following may be used as a permanent residence: a Post Office box, the address of a shelter or clinic, or the address where the person receives mail such as Social Security checks.
PDPs are usually national plans, but MA-PDs have delineated regions, sometimes by state, sometimes by counties within states ). For this reason, MA-PDs may not be appropriate for those who travel a great deal or who maintain summer and winter residences in different areas of the country. NOTE: Some MA-PDs offer passport plans that allow members to obtain benefits outside their normal service areas.
Individuals who reside outside the United States* are not eligible to enroll, but may do so upon their return to the country. Incarcerated individuals may not enroll in Part D, but they may enroll upon release from prison. Prior to 2021, people with end-stage-renal-disease could not enroll in an MA-PD. Starting in 2021, people with ESRD can enroll in Medicare Advantage plans during the annual Open Enrollment Period.
There are no other eligibility restrictions or requirements for Part D.
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What If Im Not Receiving Social Security Benefits
If you become eligible for Medicare and arent receiving Social Security benefits, then youll be billed for Part B as you would for any other insurance health plan. Medicare will bill you every three months for your coverage. If you dont pay your bills up to the point that they get delinquent, you can lose your Part B coverage.
This is one reason why having your Part B premiums taken out of your Social Security payments is such a big benefit. If you have your payment taken out of your check each month, you dont have to run this risk at all.
How Do I Know If I Should Sign Up
You will need to review your options carefully to see if a Part D plan is right for you. Part D plans are designed to provide financial savings to most people with Medicare. As insurance plans, they provide protection against future, unexpected costs. They also provide additional financial assistance for people with lower incomes.
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Medicare Part B Premiums For Those Not Held Harmless
As noted earlier, certain individuals receiving Social Security benefits and those not receiving Social Security benefits are not protected under the hold-harmless provision. However, by law, standard Medicare Part B premiums are calculated to cover 25% of the expected costs of Medicare Part B program costs. In years in which a large number of individuals are held harmless and pay reduced premiums, aggregate Part B premiums may not cover 25% of costs unless the entire share of a premium increase is shifted onto those not held harmless. Thus, in certain years, those not held harmless may bear the burden of meeting the 25% requirement disproportionately. For example, in 2010 there was no Social Security COLA and approximately 70% of Medicare Part B enrollees were held harmless from the Medicare Part B premium increase. Those who were held harmless, on average, paid a Medicare Part B premium of $96.40 whereas Medicare Part B beneficiaries not held harmless paid the 2010 standard Medicare Part B premium of $110.50 .65
Low-income beneficiaries who receive premium assistance from Medicare Savings Programs are not held harmless. However, because they do not pay the Medicare Part B premiumâMedicaid will typically pay low-income beneficiaries Medicare Part B premiumâthe costs of low-income beneficiaries rising Medicare Part B premiums generally would be borne by Medicaid rather than by the beneficiaries themselves.
How Long Does It Take For Part D Premiums To Be Withheld
Be prepared for it to take up to three months from the time you request your premium be withheld before you start seeing the premiums withheld from your Social Security payment. In the meantime, youll receive a bill from your drug plan, and you will have to pay the premiums by check or electronic funds transfer.
The timing depends on when the plan gets your enrollment request. For example, if you enroll immediately during the Annual Open Enrollment Period, the request may be processed in time where premiums will be withheld from the start of your enrollment in the plan.
In cases where you didnt withhold premiums for one or two months after you enrolled in a Part D plan, or you enroll late in the Annual Open Enrollment period, youll get a bill for the months your drug plans premiums aren’t withheld and youd have to pay those premiums directly to your drug plan.
Your drug plan will also let you know if there are any issues withholding premiums from your Social Security payment.
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