Medicare premiums sometimes come as a shock to new Medicare beneficiaries. Maybe you noticed that the federal government has been deducting taxes out of your paychecks for years. And yes, these deductions go toward funding your future Part A Medicare premiums as well as your Social Security income checks.
What those taxes DON’T go toward are your Part B Medicare premiums or Medicare Part D premiums. So many people are surprised and unprepared to pay even the base premiums of $135.50 in 2019, let alone more if they have higher incomes which increase those premiums substantially.
Fortunately, there are a few ways to reduce your Medicare premiums or get Medicare assistance with paying those premiums. If you are having trouble paying premiums for Medicare, consider these ways to reduce your Medicare premiums.
File a Medicare IRMAA Appeal
If you are one of the beneficiaries who pays more your Medicare Part B and D premiums due to higher income, you may be able to appeal that. Social Security bases your Medicare premiums on your modified adjusted household gross income from 2 years prior to now.
So how are Medicare premiums calculated? Currently, if your IRS tax return from 2 years ago shows that you earned more than $85,000 as an individual or $170,000 filing jointly, then you will be assessed a higher premium.
This is called an Income-Related Monthly Adjustment Amount and Medicare premiums for high income individuals who are assessed an IRMAA can cost a bundle. You can find an IRMAA Medicare Premium chart on this page.
The most common reason that people get assessed higher Medicare premiums is because they have recently retired. Their income two years ago was higher than it is now that they are retired.
You can file a reconsideration request to appeal your Medicare IRMAA. Social Security will ask for proof of your higher income then versus now. If you can show that your income is lower than before, Social Security may reduce those premiums for you and lower or cancel your IRMAA
Pay Medicare Premiums with your HSA
Many people turning 65 today enter their retirement years with money that they have saved up in a health savings account during their working years. Many employers these days offer high-deductible health insurance plans that enable employees to open and contribute to a health savings account.
Money that you save into a health savings account is your money forever. Funds that you contribute go in tax-free and also come out tax-free when you use that money for qualified medical expenses.
One of the qualified medical expenses that you can use HSA funds for are Medicare premiums. You can pay your Medicare Part A, Part B, Part C, and Part D premiums out of your HSA account. However, you cannot use your HSA to pay for your Medigap premiums.
Since you never paid tax on that money, you are essentially reducing what you pay on your Medicare premiums.
Learn more about Medicare and HSA plans here.
Get Help Paying Medicare Premiums
There is Medicare premium assistance available through the Medicare Savings Programs. These programs can provide assistance with paying your Medicare Part B and D Premiums.
You can apply through the Medicaid office at the Department of Health and Human Services offices in your state.
If you qualify for Medicare premium assistance due to your low income, you can get help paying Medicare premiums from the federal government. You could qualify to get some or all of your Medicare Part B premiums covered.
Low Income Subsidy
If your income is not low enough to qualify for one of the Medicaid/Medicare Savings programs, you may still be able to qualify for the chance to reduce Medicare Part D premiums via the low-income subsidy program. This program helps to pay for your Part D premiums, deductibles, coverage, copays and coinsurance.
Many beneficiaries who would qualify for this program are completely unaware of it. Yet it is estimated to save qualifying beneficiaries up to $4,000 on Medicare Part D expenses.
When you are awarded the low income subsidy, you will find that your copays on your medications are greatly reduced. Depending on your subsidy qualification level, you may also pay little to no premiums for your chosen Part D plan.
Learn more about Extra Help for Part D Program Low Income Subsidy here.
Medicare Advantage with Part B Premium Reduction
Whether you decide to enroll in a Medicare Supplement or a Medicare Advantage plan, you must first be enrolled in both Medicare Parts A and B. That means that you are paying for Part B every month even if you enroll in a low-premium Medicare Advantage plan.
In some states though, particularly in Florida, there are some Medicare Advantage plans that not only have a zero-premium, but also offer you a Part B premium reduction.
The way this works is that the Advantage plan pays for a portion of your Part B premiums. For example, if you enrolled in an Advantage plan with a $60 monthly Part B premium reduction, then instead of paying $135.50 for Part B, you would pay only $75.50/month for that calendar year.
Be aware that this reduction amount is subject to change each year, so it could be that the reduction amount increases or decreases in subsequent years. I say this to make sure that you are aware you should choose a Medicare Advantage plan that really fits you in all the other ways.
It needs to have your doctors in the network and your drugs in the formulary list. But if you can find one that has all the right features and benefits and also reduces your Part B premium, then that’s a win-win.
Deduct your Medicare Premiums from your Taxes
One of the most common questions we get from our policyholders here at Boomer Benefits is: “Are Medicare premiums tax deductible?”
Yes, Medicare premiums can be deducted from taxes in the right circumstances. if you have had enough medical expenses to file an itemized deduction for medical expenses on your Form 1040.
In fact, most health insurance premiums, including Medicare supplement premiums, too, can qualify for a Schedule A deduction on your 1040, but only IF your medical spending in that year is over a certain threshold. This means you have to have had enough total medical expenses to file an itemized deduction on your Form 1040.
In 2019, you must have total qualifying expenses that exceed 10% of your adjusted gross income. Keep this in mind during years where you have more medical usage than others, and mention it to your accountant or CPA when preparing to file your IRS tax return.
Self-employed individuals may be able to deduct 100% of their premiums – check with your CPA or accountant for more information if you work for yourself or own your own company.
Grow Part-time Income to Pay Your Medicare Premiums
So what can you to reduce Medicare premiums if none of these other things apply to you? Well, you could consider creating some part-time income to help you pay for those Part B and D premiums.
In today’s digital world, this is easier than ever. You can pet-sit or dog-walk right in your own neighborhood. You can sign up on line to tutor foreign student in English as a second language. You could drive for Uber or Lyft – just a few hours a month would be enough to cover that $135.50/month Part B premium.
For more ways to earn extra income, check out our post on 50 ingenius ways to earn money in retirement.
Do you have questions about any of these ways to reduce Medicare premiums? Feel free to comment below and we’ll answer.