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Medicare

Q&A: How do I avoid a Medicare surcharge?

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Dear Liz: I will be applying for Medicare next year. Last year I received an inheritance, and also sold a second home which increased our taxable income for the year. I once read that there is a form that needs to be completed to let Medicare know that this is only a one-time occurrence. However, my tax advisor said that there is no need to let Medicare know and he had not heard of any such form. I feel he does not understand that the higher income might affect our Medicare premiums. My understanding is that if I don’t submit the form, my Medicare payment will be a lot higher than expected. Can you suggest what I should do?

Answer: There is such a form, but it’s unlikely to help in your situation.

Medicare premiums are based on your income from two years earlier, as shown on your tax returns. People with higher incomes face “income related monthly adjustment amounts” (IRMAA) that can substantially increase their Medicare Part B and Part D premiums. (Part B covers doctor’s visits and Part D covers prescriptions.)

Form SSA-44 is designed to help people whose income has taken a hit because of major life changes, such as retirement, divorce or the death of a spouse. It’s not designed to spare people who had taxable windfalls, such as capital gains from a property sale.

Inheritances generally aren’t taxable events, however, with a few exceptions. If you inherit someone’s IRA, for example, you generally must start withdrawals which are typically taxable. Otherwise, inherited money and assets typically don’t show up on your tax returns or affect your Medicare premiums.

Q&A: Should I get Medicare supplemental insurance?

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Dear Liz: I’m about to retire and have decided on original Medicare with a Medigap policy rather than Medicare Advantage. Can a Medigap company cancel your medical plan, and can they deny a medical procedure? Are there extra charges for preexisting conditions or other coverage issues?

Answer: Medigap is another name for Medicare supplement insurance. This coverage is provided by private insurers to help pay out-of-pocket costs such as deductibles, co-payments and co-insurance for treatments approved by Medicare.

If you apply for a Medicare supplemental policy during your initial enrollment period, you have something known as “guaranteed issue rights.” The insurer offering the policy can’t deny coverage or charge you extra for preexisting conditions. If Medicare approves a treatment or procedure, the supplemental coverage applies — the insurer can’t independently decide to deny you.

If you miss that initial enrollment period, however, you may be subject to medical underwriting. An insurer can charge you more, impose waiting periods or refuse to issue you a policy.

Your initial enrollment period typically starts when you turn 65 and sign up for Part B, the part of Medicare that covers doctors’ visits. If you delay Part B because you have employer-provided health insurance, then the six-month open enrollment period will start after you sign up for Part B. (You have eight months after your employer coverage ends to enroll in Part B without penalty.)

An insurer can cancel a Medigap policy only if you stop paying your premiums, you provide false information on your application or the insurer becomes insolvent. If you lose your coverage through no fault of your own, you would have guaranteed issue rights to buy a Medigap policy from another insurer.

Q&A: What you can expect from a fiduciary advisor

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Dear Liz: This is concerning the couple in their 70s who were persuaded to move their nearly $2-million retirement portfolio to a different broker, resulting in a capital gain of $184,000 and a capital gain tax bill for $50,000.

The question I wonder is whether the $184,000 capital gain also kicked them into a higher Medicare premium bracket (which you frequently warn your readers about) or whether they were already in the higher bracket for other reasons (i.e. the amount of their annual required minimum distribution, plus the size of their Social Security or pension benefits).

The problem with their new broker is that this couple seem surprised to learn they would have a capital gain and a sizable capital gain tax bill by transferring their portfolio from their existing broker to the new broker. Shouldn’t the new broker, with its “fiduciary” duty, have warned them that they would incur a huge capital gain and a sizable capital gain tax bill and also checked to see what the influence of the capital gain would be on this couple’s Medicare premium (if any)?

Answer: The couple did not say they were surprised by the tax bill. They said their accountant was not pleased, which apparently caused them to question their decision.

Let’s define some terms. “Broker” in this context typically refers to a stockbroker. Stockbrokers normally aren’t fiduciaries, meaning they’re not required to put their clients’ best interests first. Instead, stockbrokers are usually held to a lower “suitability” standard, which means they can recommend investments that aren’t the best option for their clients as long as those investments aren’t actually unsuitable.

Registered investment advisors, on the other hand, are fiduciaries. This couple’s new RIA should have explained why the investment sales were necessary and detailed the costs, including the tax bill and any affect on Medicare premiums. The RIA should have explored other options as well, such as leaving the portfolio alone or extending the investment sales over multiple years. The RIA would have recommended a course of action, but would execute whatever plan the couple ultimately chose.

Q&A: Medicare premium increase offsets cost-of-living boost

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Dear Liz: My wife and I are well over 70 and receive Social Security. We pay for Medicare Part B as well as IRMAA (Income-Related Monthly Adjustment Amount) for Part B and Part D via deductions from our monthly checks. We just received our annual notice from the Social Security Administration of the 2.8% cost-of-living increase for 2026. At the same time, our Medicare deductions were increased such that we ended with a monthly $20 increase in Social Security for my wife and $80 for me. That hardly goes along with the sentence in the standard letter from the SSA that the COLA helps us keep up with the cost of living. Are we just lucky that our monthly checks from the government did not actually decrease?

Answer: In a word, yes.

The cost of healthcare and healthcare insurance typically rises faster than the general rate of inflation. Medicare costs haven’t increased as quickly as those for private insurance. However, it’s still not unusual for higher Medicare premiums to wipe out Social Security cost-of-living increases for the year.

Fortunately, you have other resources to help you cope with inflation. IRMAA is a Medicare surcharge that kicks in for people with modified adjusted gross incomes over $109,000 if single or $218,000 if married filing jointly. The surcharge is determined by your income tax return from two years ago, so your 2026 IRMAA is based on your 2024 filing.

Q&A: Couple worries about soaring ACA health care premiums

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Dear Liz: My wife and I have health insurance through the Affordable Care Act exchange. With the enhanced tax credit ending this year, our insurance bill could go up from $500 a month to about $2,000 a month. Are there any good options or plans you can recommend? Would filing taxes separately help if my wife’s income made her eligible for MediCal?

Answer: ACA premiums for next year have not been set, although the cost of coverage is expected to rise sharply after Congress ended enhanced premium tax credits that made coverage more affordable. The Peterson Center on Healthcare and KFF estimate that out-of-pocket premium payments will increase about 75% on average next year because of this change. In addition, insurers are asking for premium increases to cover rising healthcare costs and tariffs may further add to the cost of drugs, medical equipment and supplies.

Shop carefully during open enrollment, and consider a plan with a higher deductible to help control costs. You also could talk to a tax pro about ways to reduce your income in 2026, if it will help you qualify for a premium subsidy.

Just filing your taxes differently won’t get your wife qualified for MediCal, which is California’s Medicaid health insurance program for low-income people. MediCal looks at household income when determining eligibility. Actually being separated might work, but discuss this option with an attorney and a tax pro since it will have many legal and tax implications.

Q&A: Inherited IRA could increase tax bill and Medicare premiums

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Dear Liz: If someone inherits my retirement account, is there any way they can avoid having their Medicare premiums increased for one year?

Answer: A large-enough retirement account could affect their Medicare premiums for up to 10 years, not just one.

Normally inheritances aren’t taxable, but retirement accounts are the exception. Withdrawals from inherited retirement accounts are usually taxable as income, and most non-spouse inheritors must drain a retirement account within 10 years. Withdrawals from inherited Roth accounts aren’t taxable, but the accounts still must be drained by the inheritor within a decade.

If the inheritor is on Medicare, taxable withdrawals could boost income enough to increase their Medicare premiums, thanks to the income-related monthly adjustment amounts (IRMAA). This surcharge starts once modified adjusted gross income exceeds certain amounts, which in 2025 is $106,000 for single filers and $212,000 for married couples filing jointly.

Anyone who inherits a retirement plan should get advice from a tax pro, but that’s particularly important when withdrawals might affect tax brackets and Medicare premiums. The pro can help determine how quickly or slowly the money should be withdrawn to maximize how much the inheritor gets to keep.