What Medicare costs depends on a number of factors. There are standard premiums, but some people may pay more or less based on their income. Planning ahead and estimating your costs is important. You never want to be turning 65 and thinking Medicare will cost you X and then finding out it costs 3 times that because you are in a higher income bracket.
Watch our latest YouTube Video on what Medicare costs.
So if you are preparing to retire, you have a few steps to take. Visit our Medicare costs page and look up your household income on the chart there.
People whose modified, adjusted gross income on their household tax return was more than $85,000 individual or $170,000 if filing jointly will pay more. Social Security will base your Parts B and D premiums on your tax return from two years ago. Sometimes this can be problematic because if you’ve retired recently, you may be earning less now than you were two years ago.
Not to worry. Social Security has an appeal process for this, so if you receive a letter telling you that you will need to pay an Income-Related Monthly Adjustment Amount, here’s what to do.
Steps for Lowering Your Part B and D Premiums
- Visit our blog post on How to Appeal a Higher Part B Premiums
- Download the Social Security Reconsideration Request form and fill it out
- Attach documentation showing your lower income now.
- Submit to Social Security and cross your fingers
You’ll notice on the form that there are some common reasons which will qualify you for reconsideration. Generally this is loss of income, a marriage or divorce that has changed household income, and some common other factors. On the other hand, if you sold some property and got a windfall income from this two years ago, it’s possible that Social Security may tell you that you can afford to pay the higher premium.
If that happens, don’t despair. The IRS sends your tax info over to Social Security every year. They re-evaluate your premiums each fall for the next year. You’ll notice that your premiums will automatically go down when they do their annual review.
Other Ways to Lower What Medicare Costs
The premiums that you have the most control over are your Part D premiums. Every state has dozens of plans to choose from, with premiums ranging from as low as $15/month to well over $150/month depending on the plan you choose and what that plan costs in your residential area. We often find that people will automatically choose the cheapest plan without evaluating the drug formulary.
This is a huge mistake.
Part D costs include more than just premiums. You have to consider what you will spend on deductibles, copays for your specific meds and any coverage gap spending. Choosing a drug plan that is cheap but doesn’t cover some of your important meds can mean you actually spend more out of pocket. Analyze the drug plans available to see which Part D plan gives you the lowest overall annual spending for everything considered. You can do this by using Medicare’s Plan Finder Tool.
Here at our agency, our Medigap and Medicare Advantage policyholders have the option to have our team run their annual drug analysis for free. We handle tens of thousands of these every year, and I’m always blown away at some of the savings we run across for our clients. While you may not always need to change plans, sometimes your current plan is dropping one of your medications for the following year. If you don’t catch that, you’ll likely spend more out-of-pocket on that plan the following year than you would for another plan which still offers your medication.
Shopping your Medigap Policy
If you are enrolled in a Medigap policy, chances are pretty good that you’ll see a rate increase of some sort most years. You have the opportunity to shop that plan. In most states this will require health questions, but we find that many people are healthy enough to pass.
Check in with us to see if we can find your current Medigap plan or a comparable Medigap plan that would save you money. Saving just $15/month by switching every year or two to another company with a lower premium is wise. Over time the net result of all those saved premiums can be a lot.
Do you have a question about what Medicare costs? Drop it in the comments below and we’ll be glad to answer.