Ask Liz Weston

Get smart with your money

Medicare

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.

Q&A: Medicare Part A

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Dear Liz: You recently answered a question from someone who was delaying signing up for Medicare because he had health insurance through his job. You mentioned that if the employer had 20 or more employees, he didn’t have to sign up until that employment ended. That’s correct, but there’s typically no cost for Medicare Part A so there’s no reason not to sign up.

Answer: That’s an excellent point. Medicare Part A covers hospital visits and typically is premium-free, so signing up at age 65 is a good idea even if you have insurance coverage through work. The other parts of Medicare require monthly premiums and can impose penalties if you don’t apply when you’re first eligible.

Q&A: Switching back to original Medicare

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Dear Liz: I’m 75 and I’ve been on an Advantage plan since I started on Medicare at 65. I’m interested in switching to original Medicare with a supplemental policy. I know I will have to enroll in a drug policy also. Will I be subject to any penalties for late enrollment for any of the three policies?

Answer: You won’t be subject to penalties but you will be subject to underwriting for the supplemental policy. That means the private insurance companies that offer these plans can deny you coverage or charge you more for preexisting conditions.

There are a few exceptions. Insurers can’t subject you to underwriting if you’re still within the first 12 months of having a Medicare Advantage plan, for example, or if you move out of the plan’s service area. In addition, four states — Connecticut, Maine, Massachusetts and New York — require Medigap companies to offer coverage to all Medicare beneficiaries.

Start shopping around and make sure your application for a supplemental policy has been approved before canceling your current plan.

Q&A: How to avoid Medicare late enrollment penalties

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Dear Liz: I am 65, still working and have health insurance through my employer. I have not enrolled for Medicare and have been told I do not need to. I plan to once I retire. There is a passage in my Social Security statement that says, “Because you are already 65 or older, you should contact Social Security to enroll in Medicare. You may be subject to a lifetime late enrollment penalty. Special rules may apply if you are covered by certain group health plans through work.” I have tried to research further through the Medicare website but can’t find a clear answer about whether or not I am OK not enrolling at this time.

Answer: If your employer has 20 or more employees, then you’re fine for now. When you stop working for that employer, you’ll have eight months to sign up for Medicare without owing penalties.

If you want your Medicare coverage to start when your job-based coverage ends, though, you should sign up a month before you retire. Similar rules would apply if you were covered by a spouse’s workplace health insurance plan. As long as your spouse is still working for the employer that provides the coverage, you can avoid permanent Medicare penalties.

If your employer has fewer than 20 employees, however, you may be required to sign up for Medicare when you’re first eligible. Check with your employer.