Ask Liz Weston

Get smart with your money

Medicare

Q&A: Social Security hit from capital gains

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Dear Liz: Due to capital gains on the sale of a property, my monthly Social Security check is impacted by IRMAA, the income-related monthly adjustment amount for Medicare. Therefore not only do I not receive the recent cost-of-living increase, but my benefit substantially decreased. My question is: After a year will my monthly benefit go back to my most recent benefit, or to the increased amount I would have received without the IRMAA deduction? If the former, it seems like I lose forever.

Answer: You don’t lose forever, fortunately.

You did receive the most recent inflation increase in your Social Security benefit, but it was more than offset by the increase in your Medicare premiums. Medicare premiums are based on your income two years previously, so this year’s IRMAA was based on your tax returns from 2022. If your income went back to normal last year, then the IRMAA surcharge you’re experiencing should disappear next year.

Q&A: To shred or not to shred

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Dear Liz: In a recent column, an attorney suggested that a veteran’s information can be shredded three years after death. However, surviving spouses of veterans can be eligible for benefits to cover the costs of assisted living and would need to provide that information.

Answer: That’s an excellent point. Many people aren’t aware of the “aid and attendance” benefit that can help veterans and their spouses pay for help with activities of daily living, including bathing, dressing and using the bathroom. These custodial care costs are typically not covered by Medicare.

Q&A: A health crisis brings high medical bills. Here are tips for dealing with the costs

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Dear Liz: I have been diagnosed with Stage 4 cancer which has metastasized into at least two areas. Surgery, chemo, perhaps a stay in rehab and possibly radiation therapy will be prescribed by my oncologist. In order not to deplete my retirement savings (the oncologist estimates that I will live longer — years — if the treatment goes well), what resources can be identified to help financially with co-pay, medical and prescription costs? I already know about hospital benevolence programs. I am going to revert to my monthly “austerity” budget, watching every penny of my expenditures and trying to avoid or reduce them. I will be unable to work part time, as I have been doing, for at least this year. I am 70. I have Medicare and a Medicare supplement plan as well as a Part D prescription plan. Thank you for any suggestions.

Answer: You’ve just received a shocking diagnosis and it’s understandable that you’re worried about the costs you’ll face.

Your Medicare supplement plan — also known as a Medigap plan — is designed to cover some or all of the costs not paid by traditional Medicare, including co-payments, co-insurance and deductibles. The plans with lower premiums typically have skimpier coverage. You’ll want to carefully review your plan to see what coverage you have.

You probably will have questions, so consider connecting with your State Health Insurance Assistance Program. This program can refer you to a government-funded counselor who can provide free Medicare counseling. You can find your regional SHIP using the online locator or by calling (877) 839-2675 and say “Medicare” when prompted.

Ask your oncologist about lower-cost treatment options and any charitable programs they have or are aware of. Benefits.gov can show you what government programs might be available to help with costs, while 211.org can help you check if there are any local programs. You may be able to seek out cheaper prescriptions through online pharmacies, GoodRx, NeedyMeds, manufacturer discount programs or Medicare’s Extra Help program, which helps Medicare recipients with limited means to afford their medications.

Another option for people with catastrophic medical bills is to file for bankruptcy. Your retirement accounts would be protected, but you’d want to discuss your options with a bankruptcy attorney long before you file.

While you’re researching, keep in mind that the U.S. medical system is set up to push treatment, often regardless of the cost, efficacy or toll on quality of life. Physician and certified financial planner Carolyn McClanahan warns that people can find themselves on a “medical treadmill” that continues pushing painful, debilitating and costly treatments with little or no real benefit to the patient.

Consider having a frank talk with your oncologist about how much more time each treatment will likely get you — not just in a best-case scenario, but in an average-case scenario — and how you are likely to feel during the treatment. A second opinion may also be a good idea. These discussions can help you decide if you want to pour all your available resources into paying for treatment or if there are other options that would allow you to better enjoy whatever time remains.

McClanahan recommends picking up a copy of Katy Butler’s excellent book, “The Art of Dying Well: A Practical Guide to a Good End of Life.” Despite its title, the book doesn’t just focus on the very end of life, but also provides essential information about how to best navigate the healthcare system as an older person.

Q&A: When WEP doesn’t apply

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Dear Liz: I am a retired police officer who worked for an organization that did not pay into Social Security or Medicare. During my career I worked side jobs and paid my own self-employment taxes to get my 40 quarters to qualify for Medicare once I reach age 65. I did have Social Security earnings for about eight years prior to my law enforcement career. My understanding is any Social Security I would otherwise be entitled to will be wiped out by the windfall elimination provision. The WEP calculator on Social Security’s website isn’t user friendly so I can’t tell if I will lose all or a portion of my Social Security to WEP.

Answer: Your own Social Security benefit won’t be wiped out. The windfall elimination provision can reduce your Social Security retirement benefit by up to half when you get a pension from a job that didn’t pay into Social Security.

By contrast, another provision called the government pension offset (GPO) can and often does eliminate Social Security benefits, but only those based on someone else’s work record, such as spousal or survivor benefits.

Also, you misunderstood how Medicare works. You need to work 40 quarters to qualify for a Social Security retirement benefit, but you can qualify for Medicare at age 65 as a U.S. citizen regardless of your work history.

Q&A: Why your Medicare premium might jump unexpectedly and what you can do about it

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Dear Liz: I find myself in a very bad tax/Social Security/Medicare loop that I am sure many other seniors are in as well. First, I sold my house and had to pay $50,000 in federal taxes. Now, I have to pay $900 a month for Medicare because I showed a high income for the year I sold the house. The “profit” went to settle my divorce, pay the tax bill and make a down payment on my next house. There’s no extra money.

But as a result of my Medicare premiums going up, I will either have to find a job — which is hard for seniors — or withdraw more from my retirement funds so I can pay my mortgage. Higher withdrawals will mean a higher income, higher taxes and higher Medicare premiums. This cycle will never end!

Answer: What you’re paying is called an income-related monthly adjustment amount or IRMAA. These adjustments, which are based on your income two years previously, can significantly raise premiums for Medicare’s Part B, which covers doctors’ visits, and Part D, which covers prescriptions.

The normal monthly Part B premium in 2022 was $170.10, for example, but IRMAA can boost that premium up to $578.30 for the highest-income recipients. IRMAA added $12.40 to $77.90 to monthly Part D premiums in 2022.

If your premiums are $900 as a single person, you’re likely also paying for a supplemental or Medigap plan that covers deductibles and co-pays. You may also be paying a premium penalty if you started Medicare late.

There is a potential way out, however. Social Security, which is the agency that handles Medicare premiums, will reconsider an adjustment if you’ve experienced certain “life changing events” that lead to an income decrease.

Divorce and annulment are among the life changes the agency will consider. Others include the death of a spouse, marriage, you or a spouse stopping work or reducing hours, the loss of a pension, involuntary loss of income-producing property due to a natural disaster, disease, fraud or other circumstances; or receipt of settlement payment from a current or former employer due to the employer’s closure or bankruptcy.

Social Security should have sent you a notice alerting you to the change in your premiums before it went into effect. That document included instructions about how to request a review. You also can call the agency’s toll free number at (800) 772-1213.

Q&A: Avoiding Medicare late enrollment penalties

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Dear Liz: I have taken multiple in-person and online educational classes about Medicare prior to my 65th birthday. What I learned from these classes was that the law demands people register for Medicare Part A when we turn 65 whether we are working or not. Like the woman in your column, I also work full time and do not plan to retire until 70 (at least that is my new target date). At the time of my retirement I will apply for Medicare Part B and purchase supplemental insurance.

Answer: It’s wonderful that you made the effort to educate yourself about Medicare, which can be incredibly complicated. However, you got the wrong lesson about what’s required, since there’s no law that forces people to sign up for any part of Medicare, including Part A, which covers hospitalizations and which is typically premium-free.

The reason most people should sign up at age 65 has to do with penalties. People who delay signing up for Medicare Part B, which covers doctor’s visits, or Part D, which covers prescriptions, can face permanent, lifetime premium penalties unless they qualify for certain exemptions. One of those exemptions is having qualifying health insurance coverage from a job, either your own or your spouse’s. You can find more details at https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties.