2022 Medicare Premiums Post Big Increases

Many people expect Medicare premiums to be adjusted downward in the wake of the government’s January 11 announcement to provisionally approve only limited use of the expensive Aduhelm dementia drug for clinical trials.

Medicare earlier announced on November 12 that it would apply big rate hikes on Medicare premiums next year. The monthly Part B premium since has risen by $21.60, or nearly 15 percent, to $170.10 from $148.50 this year.

This increase is more than double the projected $10 boost included in the annual report from Medicare program trustees that was released in August. Reasons for the jump included the possibility of large claims by users of Aduhelm, which is made by Biogen. Because this drug must be administered by licensed caregivers, it would be covered under Part B of Medicare as an outpatient service, not by Part D prescription drug plans.

The Centers for Medicare & Medicaid services (CMS) had explained its reasoning then as follows:

“Depending on utilization, the potential costs for this course of treatment range from negligible to very significant. To ensure that Part B is able to pay claims in full and on time, the Part B financing must be sufficient to provide for a realistic high-cost scenario of Aduhelm coverage. The contingency margin has been increased to accommodate this risk.”

The rational for basing a large part of its 2022 premium increases on the possibility of big Aduhelm spending has largely disappeared since then.

On Dec. 20, Biogen, said it would halve the drug’s annual price from $56,000 to $28,200. Many Medicare organizations urged CMS then to reduce Part B premiums.

On January 10, Xavier Becerra, head of the U.S. Department of Health & Human Services, also asked CMS to reassess the amount of the Part B premium increase.

CMS has not yet indicated whether or when it might change Part B premiums but the agency’s limited approval of Adulhelm seems likely to trigger such action.

Under the 2022 premiums announced in November, higher health care expenses will also be reflected in higher patient charges for Part A and in the high-income surcharges paid on Part B and Part D premiums.

Part A Deductible and Coinsurance Amounts
2021 2022
Inpatient hospital deductible $1,484 $1,556
Daily coinsurance for 61st-90th Day $371 $389
Daily coinsurance for lifetime reserve days $742 $778
Skilled Nursing Facility coinsurance $185.50 $194.50

Some people with insufficient Social Security work earnings must pay Part A premiums. “Individuals who had at least 30 quarters of coverage or were married to someone with at least 30 quarters of coverage may buy into Part A at a reduced monthly premium rate, which will be $274 in 2022, a $15 increase from 2021.” CMS said. “Certain uninsured aged individuals who have less than 30 quarters of coverage and certain individuals with disabilities who have exhausted other entitlement will pay the full premium, which will be $499 a month in 2022, a $28 increase from 2021.”

Medicare Part B Income-Related Monthly Adjustment Amounts

Beneficiaries who file individual tax returns with modified adjusted gross income: Beneficiaries who file joint tax returns with modified adjusted gross income: Income-related monthly adjustment amount Total monthly premium amount
Less than or equal to $91,000 Less than or equal to $182,000 $0.00 $170.10
Greater than $91,000 and less than or equal to $114,000 Greater than $182,000 and less than or equal to $228,000 68.00 238.10
Greater than $114,000 and less than or equal to $142,000 Greater than $228,000 and less than or equal to $284,000 170.10 340.20
Greater than $142,000 and less than or equal to $170,000 Greater than $284,000 and less than or equal to $340,000 272.20 442.30
Greater than $170,000 and less than $500,000 Greater than $340,000 and less than $750,000 374.20 544.30
Greater than or equal to $500,000 Greater than or equal to $750,000 408.20 578.30

Premiums for high-income beneficiaries who are married and lived with their spouse at any time during the taxable year, but file a separate return, are as follows:

Beneficiaries who are married and lived with their spouses at any time during the year, but who file separate tax returns from their spouses, with modified adjusted gross income: Income-related monthly adjustment amount Total monthly premium amount
Less than or equal to $91,000 $0.00 $170.10
Greater than $91,000 and less than $409,000 374.20 544.30
Greater than or equal to $409,000 408.20 578.30

Medicare Part D Income-Related Monthly Adjustment Amounts

Beneficiaries who file individual tax returns with modified adjusted gross income: Beneficiaries who file joint tax returns with modified adjusted gross income: Income-related monthly adjustment amount
Less than or equal to $91,000 Less than or equal to $182,000 $0.00
Greater than $91,000 and less than or equal to $114,000 Greater than $182,000 and less than or equal to $228,000 12.40
Greater than $114,000 and less than or equal to $142,000 Greater than $228,000 and less than or equal to $284,000 32.10
Greater than $142,000 and less than or equal to $170,000 Greater than $284,000 and less than or equal to $340,000 51.70
Greater than $170,000 and less than $500,000 Greater than $340,000 and less than $750,000 71.30
Greater than or equal to $500,000 Greater than or equal to $750,000 77.90

Premiums for high-income beneficiaries who are married and lived with their spouse at any time during the taxable year, but file a separate return, are as follows:

Beneficiaries who are married and lived with their spouses at any time during the year, but file separate tax returns from their spouses, with modified adjusted gross income: Income-related monthly adjustment amount
Less than or equal to $91,000 $0.00
Greater than $91,000 and less than $409,000 71.30
Greater than or equal to $409,000 77.90

 

Health care is moving into your home

It usually requires only three reinforcing trends to fire up my punditry genes, but there are even more when it comes to the likelihood that older Americans will be able to age in place successfully, in large measure because their health care will be delivered to them at home.

In no particular order, they include the Pandemic, health care technology, a shortage of health care workers, the ugly profile of life in a nursing home, soaring hospital costs, the dearth of long-term care, and Baby Boomers, who are growing both in numbers and chronic health problems.

Oh, and don’t forget trillions of dollars in new infrastructure and health spending contained in the two massive bills now making their way through Congress.

Let’s explore them in order.

COVID-19, which seems likely to morph into COVID-21 and so on, is involved in many factors affecting home-based care.

It forced everyone to spend time at home. Once there, we liked what we saw, and have been pouring enormous sums into fixing up and expanding our homes. Home-centric life isn’t going to change anytime soon.

The Pandemic also created enormous pressures on the existing health-care infrastructure. We don’t have enough hospital beds, nurses, doctors, and other health workers. This also triggered the movement of health care to the home.

This virus was especially deadly to nursing home residents. The reasons for this are worthy of book-length treatment. The takeaway for me is that many people will be avoiding nursing homes like, well, the plague that they have been for many occupants.

The disease spurred telemedicine and digitized health technologies. You now can put a device on your wrist that generates real-time health readings and a 24-7 connection with a health care professional. At-home health technology companies say a shortage of Internet broadband service often has been the only serious obstacle to quicker implementation of home-based care programs. Cue the infrastructure bill!

I can’t tell you the fate of proposed increases in health spending being debated in Washington. But it seems likely that Medicare will be expanded and that coverage for at-home health care will be included in the package of enhanced benefits. Providing more funds will accelerate trends already in place that favor more at-home care.

Last year, when many hospitals were overwhelmed with COVID patients, some hospitals began expanding home-based care to free up beds. This real-world experiment has produced some appealing interim findings that home-based care can be as effective as hospital care and is much cheaper.

Brigham and Women’s Hospital in Boston is a leader here. Avera Health, based in South Dakota, at one point was treating nearly 1,150 patients in their homes. Boosted in part by expanded Medicare support for home-based care during the pandemic, nearly 100 hospitals across the country are in the program providing acute care to patients who would formerly have been hospitalized.

If these trends do come together, as I suspect, the impact on the senior care industry and real estate markets could be enormous. People will no longer regard nursing homes as their only source of long-term care.

The appeal of high-end continuing care retirement communities may also dim. Why spend $500,000 for a 1,200 square-foot apartment, and then $5,000 a month for a meal plan and related services? Why not have the care you need delivered for much less money to you in your own (much larger and nicer) home?

It will take many years for these changes to become commonplace. But anyone beginning to plan for their later years should include the development of at-home health care in their thinking.

 

 

 

Research about strategies for successful aging

In a world that often seems short on facts and distressingly long on opinions, there’s nothing to beat a solid report from the Society of Actuaries, a group dedicated to fact worshippers!

A recent report from the SOA Research Institute provides a solid foundation for many of the common-sense lifestyle behaviors that most of us know we should pursue to live longer and healthier lives. The title is hardly clickbait — Maximizing Health Span: A Literature Review on the Impact of a Healthy Lifestyle on Retirement. And nearly half of the document is devoted to 346 research references.

The report’s review yields a distilled ranking of the things most likely to either kill older people or, equally important, rob their later years of enjoyment due to disabilities and steep health costs. The expression of these behavioral liabilities is labelled “health span,” which is defined as the difference between your remaining life span and the number of those years you spend in good health.

The culprits here won’t surprise you. “For both the pre- and post-retirement age groups,” the report says, “the five risk factors with the largest impacts on long and healthy lives are tobacco use, high body-mass index, high fasting plasma glucose, dietary risks, and high blood pressure.”

Getting a health span grade of zero would be a good thing, of course. A more clinical expression of this goal, which I obsessed over in my Medicare book, is “compressed morbidity” – to me, at least, a morbidly appealing concept.

Getting to zero is, however, a difficult journey and requires navigating a world of multiple medical challenges and complex inter-relationships that create their own risks. Not to worry, the SOA researchers note, “the Global Burden of Disease (GBD) Studies from the Institute for Health Metrics and Evaluation (University of Washington) is a comprehensive model that organizes these complicated relationships.”

When the dust clears from all this fact-based number crunching, the report notes that “while life expectancy at age 65 in the United States has climbed to 19.6 years, healthy life expectancy lags at only 13.1 years, and adults at age 65 can expect to live only 6.47 additional years in good health, on average.”

Here are verbatim snippets from the report about the leading health challenges we face and the quality-of-life benefits from confronting them:

Tobacco Use

Smoking trends in the U.S. are encouraging – amongst U.S. individuals aged 65-69, daily smoking prevalence decreased from 13.7 percent in 2000 to 11.1 percent in 2015, mirroring the overall decline in smoking prevalence amongst the U.S. population. (Interestingly, dietary and smoking risks tend to improve with age, whilst the converse is seen with the other factors that shall be explored. Smoking cessation prior to age 40 leads to the greatest gains in life expectancy (individuals who quit smoking between ages 25 to 34 gain an average of 10 years relative to those who continue smoking); however, even as one approaches retirement age, individuals who stop smoking between ages 45 to 54 stand to gain 6 extra years of life relative to those who continue smoking.

Body Mass Index (BMI)

As of 2017-2018, approximately 42.4 percent of United States adults were obese, a figure that has seen startling increases from 30.5 percent since 1999-2000. The prevalence of obesity persists amongst older adults – amongst those aged 65 to 69, 33.9 percent were obese. This number has increased since 2000, when – according to GBD data, amongst U.S. adults aged 65 to 69 – 25.3 percent were obese. According to 2019 GBD data, almost 12 percent of deaths (a 22.9 percent increase since 1990) and 11.3 percent of years lived in disability (a 47.5 percent increase since 1990) amongst adults 70 years and older were attributable to high BMI.

Metabolic Risks (Fasting Plasma Glucose, Blood Pressure, Cholesterol)

Amongst U.S. adults 70 years and older, 39.5 percent of deaths (a 15.6 percent decrease since 1990) and 25.9 percent (a 15.9 percent increase since 1990) of years lived in disability were attributable to metabolic risks. (Geek alert!) This excess risk is measured against minimum exposure thresholds of 4.8-5.4 mmol/L for glucose, 110-115 mmHg for systolic blood pressure, and 0.7-1.3 mmol/L for LDL cholesterol.

Dietary Risks

Amongst U.S. adults 70 years and older, 14.8 percent of deaths (a 28.9 percent decrease since 1990) and 5.2 percent (an 18.4 percent increase since 1990) of years lived in disability were attributable to dietary risks.

With age, several associated nutritional changes may affect quality of life, which makes the provision of a healthy diet even more important. These include reduced thirst and decreased body water, which increase susceptibility to dehydration; age-related changes in nutrient needs, which can lead to vitamin deficiency or toxicity; changes in taste, vision and smell, which can lead to decreased enjoyment of food; broken bones; edentulous, or missing or false teeth, which can limit food choices; increased disease incidence, which can lead to changes in nutritional requirements; increased use of over-the-counter or prescription drugs, which can lead to changes in appetite, nutrient requirements and increases in possible drug-nutrient interactions.

Physical Activity

In older adults, physical activity is associated with improved performance of daily activities, prevention of falls, improved quality of life in those with arthritis, increased longevity, lower risk of cognitive decline, and an increased sense of purpose in life. Even light/mild activity has been shown to have positive effects on healthy aging in older adults.

Older adults should at least try to incorporate multicomponent physical activity that includes balance training as well as aerobic and muscle-strengthening activities. Most evidence supports a program of exercise with the following characteristics: three times per week of balance training and moderate-intensity muscle-strengthening activities for 30 minutes per session, with additional encouragement to participate in moderate-intensity walking activities two or more times per week for 30 minutes per session.

The report also includes other behaviors that can greatly effect longevity and successful aging. These include paying attention to health screenings and immunizations, social engagement activities, adequate sleep, vision and hearing care (to which I’d add dental care), continuing to look for and engage in purposeful pursuits, managing the six ADLs, or activities of daily living (mobility, eating, dressing, bathing, toileting, and continence), and successfully aging in place in a home with “age friendly” modifications to minimize falls and other senior unfriendly challenges.

There will NOT be a later quiz on these extensive data points. Or excessive rants to “do the right” things. The facts are, well, the facts. How you respond to them is your call.

In the meantime, please raise your glasses in a toast to compressed morbidity!

Social Security COLA up 5.9 percent in 2022

The Social Security Administration announced today (October 13) that its annual Cost of Living Adjustment (COLA) will rise by 5.9 percent next year – the largest one-year boost since 1982. The increase will add $92 to the program’s average monthly benefit, which will rise to $1,657 from $1,565.

The increase was determined by the rise in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of 2021 to the third quarter of this year. Other important changes driven by the COLA include:

The ceiling on wages subject to Social Security payroll taxes will rise to $147,000 in 2022 from $142,800 this year.

Wage earners who have begun receiving Social Security but not yet reached their full retirement age (FRA) may earn $19,560 next year – up from $18,960 in 2021 — after which $1 in benefits will be deducted for each $2 earned in excess of that amount. The earnings limit for working beneficiaries who reach their FRA next year will be $51,960 – up from $50,520 this year – after which $1 in benefits will be deducted for each $3 in additional earnings.

A full list of new 2022 COLA-related adjustments may be found here.

Medicare announced unusually large hikes in premiums last November, tied in part to preparing for big drug expenses if large numbers of older beneficiaries begin taking Aduhelm, a new dementia drug that carried a $56,000 annual price tag at the time. Subsequent events indicate these big increases will be at least partly rolled back. Keep up with the current situation here.

 

2022 Medicare open enrollment

Welcome to my annual plea to spend time on Medicare’s annual enrollment process for next year. Beginning Oct. 15 and extending through Dec. 7, you can switch your current Medicare coverage, with no penalties, for plans taking effect on Jan. 1, 2022.

I wait each year to do this story until the Kaiser Family Foundation has released is initial assessments of next year’s private insurance plans for Medicare Advantage (MA) plans and stand-alone Part D plans.

Kaiser just released these reports and, as usual, they contain compelling reasons to shop around for better deals next year. Unfortunately, as Kaiser notes every year, very few Medicare beneficiaries do so, and many wind up paying more for less coverage.

Basic Medicare, which consists of Parts A and B, does not change much from year to year, other than announce what seem to be an unrelenting series of premium increases. Open enrollment decisions thus involve mostly private insurance plans.

Most experts lament how complicated these private plans have become. But the range of choices in passenger cars and trucks is even more daunting, and people manage to cope. I have not yet heard compelling reasons to return to the era of Model T Fords, yet many people believe reducing consumer Medicare choices would help consumers.

Perhaps, but sorting through the maze of available MA and Part D plans doesn’t have to be so complicated if people focused on their individual needs and not on the complexity of private offerings. This is what we do with vehicle purchases and we can do the same thing with Medicare.

Medicare Advantage

“Most Medicare Advantage plans (89 percent) include prescription drug coverage. Fifty-nine percent of these plans do not charge any additional premium beyond Medicare’s standard Part B premium,” the Kaiser MA report says. “More than 90 percent of non-group Medicare Advantage plans offer some vision, telehealth, hearing, or dental benefits.”

If you have an MA plan, make sure the doctors and other health professionals you use will still be “in network” next year. The easiest way to find out is to call their offices, not to wade through 30 or even more insurance-plan details.

Your next step is to focus on what the plans offer beyond the Part A (hospital) and Part B (doctors, outpatient, and medical equipment) coverage that Original Medicare and MA plans all must cover. More than 90 percent of MA plans provide vision, dental, hearing, fitness, and telehealth benefits. See which ones are important to you and make sure any MA plan you consider covers these items.

MA plans are touting their expanded non-medical coverage as well, but Kaiser notes that very fewer than 7 percent of standard MA plans have begun offering these benefits, which may include help paying for and delivering food and meals, pest control, transportation, and indoor air quality. MA Special Needs Plans (SNPs) that cover people with serious medical needs, including multiple chronic illnesses, cover between 8 and 20 percent of these items.

Part D Plans

It really pays to explore a new Part D plan.

“Nearly three-fourths, or 10 million, of the 13.3 million stand-alone drug plan enrollees who don’t qualify for low-income subsidies will have to pay higher premiums next year if they stick with their current plan,” Kaiser reports, “and many will also face higher deductibles and cost sharing for covered drugs.”

“The estimated average monthly premium for Medicare Part D stand-alone drug plans is projected to be $43 in 2022, based on current enrollment,” Kaiser added, “while average monthly premiums for the 16 national stand-alone drug plans available in 2022 are projected to range from $7 to $99.”

Shopping Tips

Your online Medicare account contains details of your current plans, including your prescription drugs. It is relatively easy to add or subtract drugs from these lists and to screen both MA and stand-alone Part D plans to make sure they cover your meds and how much you would pay for them next year. These out-of-pocket projections – NOT plan premiums – should guide your choice.

Medicare’s Plan Finder can help with your initial search, but you may need to visit individual insurance websites or, gulp, even call insurers to get missing details.

My current Part D plan sent me 2022 plan changes, which all Plans are required to do by the end of September each year. They showed that my premiums would quadruple next year. It took me no more than 10 minutes to find a much better deal that saves me money and covers all of my prescribed drugs.

Medicare enrollment window

Lynne – S.C.: I will soon turn 65. When do I need to sign up for Medicare?

Phil Moeller: Lynne’s window for signing up for Medicare may already have opened. Because she needs it at age 65, she is subject to the program’s initial enrollment period. It is seven months long and begins three months before she turns 65, continues through her birthday month and ends three months thereafter. She would face late-enrollment penalties for failing to get Medicare by the end of August. But the more serious penalty she faces is not having coverage if she encounters a meaningful health care need. And there is a growing gap in coverage dates the later she waits to apply during her initial enrollment period. Many people are unpleasantly surprised by these gaps:

Month 1 – Coverage effective month 4.
Month 2 – Coverage effective month 4.
Month 3 – Coverage effective month 4.
Month 4 (birthday month) – Coverage effective month 5.
Month 5 – Coverage effective month 7.
Month 6 – Coverage effective month 9.
Month 7 – Coverage effective month 10.

Mike – Calif.: I have an Affordable Care Act policy from my state exchange. I just turned 65 and wondered if I can keep it or if I need to quit this plan and enroll in Medicare to avert a late-enrollment penalty? I do not have workplace health insurance.

Phil Moeller: Yes, you must switch onto Medicare. Your enrollment period includes the month you turn 65 and the three months after. But the sooner you switch the better. You don’t want to have a big health care expenses in, say, March, only to discover that your exchange plan is refusing to pay, because it says you’ve turned 65 and should be covered by Medicare. The first thing I’d do is call your current insurer and see what types of Medicare policies it offers. If you like your current plan, I’m betting your insurer would be delighted to move you into a comparable Medicare offering. However, this is also the right time for you to take a broader look at Medicare offerings to make sure you’re making the choice that best fits your health needs. Good luck!

Medicare Part D 2022 drug plan rules

Part D drug plans have annual maximum deductibles set by Medicare—  up to $480 in 2022.

Payment obligations for specific drugs depend on which of several pricing tiers they are placed in by insurers. Plans generally have five tiers—preferred generics, other generics, preferred branded drugs, other branded drugs, and specialty medications (translation: the expensive ones). General program rules are set and overseen by Medicare; it maintains an online set of current rules.

Once a plan’s annual deductible has been met, insurance benefits kick in. Your payments will depend on the drugs you take, of course, plus charges for co-payments (a flat dollar amount) and coinsurance (a percentage of the drug’s price) that apply to whatever pricing tier your plan has selected for each of your drugs.

In the inexplicable wackiness that has attended Part D plans since their creation, your insurance simply stops once the total costs you and your plan have paid out exceed a defined spending threshold—$4,430 in 2022 (the limit rises each year with inflation).

This total is only for drugs covered by the plan and only if you have filed a claim for plan coverage. If you decide to buy a $4 subscription drug from a non-insured provider, your spending will not be included in your Part D calculations.

Once you and your plan have hit the $4,430 threshold, you will enter what’s called the “coverage gap” and, once there, you must pay the entire costs of your drugs by yourself. To soften the blow, Medicare has limited what drug companies may charge you to 25 percent of their normal charges for your drugs. Of course, that’s 25 percent of what often is a hefty price tag, and one that may have no relationship to underlying drug maker costs.

Relentless price increases for drugs—feel free to insert your epithet of choice here—have greatly increased potential out-of-pocket costs in Part D plans. You will not exit the coverage gap in 2022 until you alone (not you and your plan) have paid $7,050 for covered drugs.

Once you reach that figure, you enter what’s called the “catastrophic” phase of your Part D plan. Here, you may pay only a few dollars for each prescription and never more than 5 percent of the cost of your covered drugs. Five percent for an expensive drug can still be a big number. And there is no out-of-pocket limit on drug spending in a Part D plan.

For example, I take an expensive brand-name medication, still under patent protection, whose manufacturer charges me more than $5,000 a month. I hit the catastrophic phase of my Part D plan in February each year! Even so, I still must pay about $315 a month for this drug. By the way, my insurer pays 15 percent of that $5,000-plus amount, and Uncle Sam pays the other 80 percent! This means that taxpayers ultimately pay for my medications. This includes you, so thank you, readers!

Medicare coverage of vision, hearing, and dental needs

Mike – Tex.: I will turn 65 next year and understand Medicare does not cover vision, hearing and dental needs. How would you suggest Medicare recipients cover these requirements?

Phil Moeller: Mike highlights one of the major missing pieces of basic (often called original)  Medicare coverage. This is a big deal. The failure to get regular care in any of these areas can lead to serious health issues in later life that could cost a lot of money, not to mention reducing the quality of life in those later years.

Adding such coverage has been a major “in or out” issue in ongoing Democrat negotiations over provisions of President Biden’s “Build Back Better” legislation.

As is often noted, most private Medicare Advantage Plans to provide some vision, hearing, and dental needs. However, this does not mean that original Medicare provides zero coverage. Here are the rules.

Parts A and B of Medicare will cover some surgeries involving these needs but not routine and ongoing care.

Vision

Medicare doesn’t cover routine eye exams (sometimes called “eye refractions”) for eyeglasses or contact lenses. Medicare Part B covers some surgical, preventive and diagnostic eye exams:

Hearing

Medicare Part B covers diagnostic hearing and balance exams if your doctor or other health care provider orders these tests to see if you need medical treatment.

Medicare doesn’t cover hearing exams, hearing aids or exams for fitting hearing aids.

Dental

Medicare doesn’t cover most dental care, dental procedures or supplies, like cleanings, fillings, tooth extractions, dentures, dental plates or other dental devices. Medicare Part A (hospital insurance) will pay for certain dental services that you get when you’re in a hospital. Part A can pay for inpatient hospital care if you need to have emergency or complicated dental procedures even though the dental care isn’t covered.

Social Security’s role in Medicare

Medicare Part A

Your Social Security work history determines whether you qualify for free premiums for Medicare Part A hospital insurance. If you don’t, you could be asked to pay monthly premiums in excess of $400. In a little-known twist, people who must pay these premiums have the choice of getting their health insurance from one of the Affordable Care Act’s state exchanges and may not need to sign up for Medicare when they turn 65.

Medicare Part B

Medicare Part B premiums, as noted, must be subtracted from monthly Social Security payments. However, there is a Social Security rule that says your net monthly payments cannot decline from one year to the next. This “hold harmless” rule is triggered whenever Part B premium increases exceed Social Security’s annual cost of living adjustment (COLA).

IRMAA

This is the acronym for Social Security’s income-related monthly adjustment amount. About 7 percent of Medicare beneficiaries make enough money to trigger monthly premium surcharges for Parts B and D of Medicare. And just to make the pain a little more tortured, IRMAA is based on your tax returns of two years’ ago. These surcharges already are scheduled to rise in future years, and even more taxpayers likely will experience the joy of an IRMAA moment.

Health Savings Accounts

Health savings accounts have grown in popularity in employer health insurance plans. They permit tax-deductible contributions, often include employer contributions and can be invested in like 401(k)s. Better yet, funds spent on eligible medical expenses are not taxed either. And HSA balances can be carried over from year to year. Amidst all this good news about HSAs is one major downer: People on Medicare can’t participate in HSAs, even if they continue to be covered by employer provided health insurance plans. And in a major surprise to many people, anyone who receives Social Security payments must, by law, be enrolled in Part A of Medicare. This invalidates their continued participation in an HSA.

65 Doesn’t Mean What it Used To

Making a mistake can be costly: lifetime late-enrollment penalties and perhaps an extended period with no health coverage at all.

Turning 65 used to be the logical time to sign up for both Social Security and Medicare. The full retirement age for Social Security, after all, used to be 65 — the same age that triggers eligibility for Medicare. Mandatory retirement at 65 also was common. Today, Social Security’s full retirement age is 66 and will be 67 for anyone born in 1960 or later. Social Security benefits don’t peak at 65, of course, but at 70. Further, nearly a third of people in their late 60s are still in the workforce, and many say they will continue working — out of financial necessity or choice — until age 70 or beyond. The delinking of enrollment ages for Social Security and Medicare creates a more complicated set of decisions for both programs. Medicare has no fewer than four enrollment periods. Getting them right is challenging. Making a mistake can be costly: lifetime late-enrollment penalties (administered by Social Security) and perhaps an extended period with no health coverage at all.

Medicare enrollment and the Affordable Care Act

Frank – Texas: I turn 65 in November of this year, and I understand that I need to sign up for Medicare then. However, for 40 years, I worked as a volunteer missionary (no salary, but expenses provided), so that means my paid work history is minimal. I’ve been working now for six years and plan to continue. I should be eligible for Social Security and Medicare coverage when I’m 69. (Even then, I plan to continue working.) What are my health insurance options after I reach 65? At the moment, I’m on an Affordable Care Act (ACA) plan. Do I need to enroll in Medicare at 65, even if I receive little or no coverage? Or will the coverage be so minimal that I should stick with my high-premium ACA package — and is that even possible after 65?

Phil Moeller: Frank, you qualify for an exception to the general rule that people without group employer health coverage must sign up for Medicare when they turn 65. Because you have not worked the required quarters (40) at jobs where Social Security payroll taxes were deducted from your wages, you do not qualify for premium-free Part A Medicare, which covers hospital expenses. The premiums for this coverage may exceed $400 each month. However, people 65 and older who do not qualify for premium-free Part A may continue to get their health coverage through an Affordable Care Act state insurance exchange. When you amass enough quarters of work, you will have to get Medicare. You did not mention whether you were married, but if you are, you would qualify for premium-free Part A if your spouse had enough quarters of Social Security coverage. This rule also applies to divorced spouses, by the way, assuming the couple was married at least 10 years and the spouse wishing to qualify for premium-free Part A has not remarried.