Editor’s Note: Journalist Philip Moeller is here to provide the answers you need on aging and retirement. His weekly column, “Ask Phil,” aims to help older Americans and their families by answering their health care and financial questions. Phil is the author of the new book, “Get What’s Yours for Medicare,” and co-author of “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security.” Send your questions to Phil.
Whether it’s the Affordable Care Act repeal, President Trump’s slash-and-burn “skinny” budget proposal or the certainty of upcoming Republican efforts to cut Social Security and Medicare, older Americans are under attack, along with poor, sick and disabled citizens.
There is no way that enacting the American Health Care Act or the Trump budget in their current forms would not make life much, much harder for these groups. Fortunately, it looks like Republicans will be amending their health care reform efforts. And there is loud bipartisan opposition to Mr. Trump’s proposal to pay for big defense spending increases with broad and deep cuts to other discretionary federal spending programs.
I doubt Mr. Trump ever expected his budget to be approved in its present form. Outrageous negotiating positions are a hallmark of his business dealings. Startle your opponents, move them out of their comfort zone and keep them off balance. Framing the discussion in your terms is more likely to yield favorable results than pursuing a balanced process where the parties begin at the 50-yard line.
Does he have a specific goal in mind here? I don’t think so. He just wants to get the best deal he can. Many of the programs marked for extinction in this draft budget thus will escape that fate. But who doubts that the odds of serious funding cuts are much higher than before the Trump budget was unveiled? That should be the basis for evaluating the success of his efforts.
Ironically, being targeted by this president is good for business. Subscriptions to many news organizations have soared since they were singled out as enemies of the people. Likewise, I hope and expect that donations to Meals on Wheels will skyrocket. Ditto for the Corporation for Public Broadcasting, and other social, arts, scientific and environmental organizations facing federal funding cuts.
But make no mistake. If you are old or getting there, your life may get harder. Your health care is likely to become more expensive, and perhaps even harder to get and of diminished quality. Social Security benefits will also be subject to proposed cuts.
Further, with the national debt on its way to $20 trillion, federal deficits are being waved in front of conservatives like so many red flags before the bulls run in Pamplona. I don’t think deficits should drive fiscal policy right now. But they do matter. And with the Federal Reserve Board committed to raising interest rates in the face of a strengthening private economy, rising interest payments on our national debt will once again become a big deal.
I won’t tell you what to do here. That’s your call. But I will tell you what I am doing. I am watching what I spend. Retirement has never looked appealing to me, but the idea of not working is a non-starter these days. I am taking the best possible care of myself, yet I am also maxing out the health insurance benefits I now enjoy. Getting ready for harder times seems the rational response here. If I’m wrong, which I hope I am, I will throw myself a party with my extra savings!
And now, on to this week’s reader questions.
Sally – Washington: My mother is turning 62 in June of this year. We went to the local Social Security office and felt like we had to pry answers out of them. My mother still works full time (her only source of income), but would like to slow down, as her job is very physical. However, she has to make enough to support herself and pay the mortgage. My dad died in 2010 at the age of 58. She has not claimed any of his benefits. She does not want to claim any benefits that would reduce her benefit amount later. Can you advise us or tell us where a person can go to get walked through these things?
Phil Moeller: The basics of claiming Social Security are fully explained in our book, “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security,” however I can guide you through your question here.
The short answer is that your mom can claim a survivor benefit without adversely affecting her own retirement benefit, which I assume will be larger if she waits to file. She can file now, but will face early claiming reductions. Still, if she knows she is going to file later for her own retirement benefit, the best course usually would be to file right away and then hold off on filing for her own retirement until she turns 70. At that age, her retirement benefits will have reached their maximum amount.
Her decision could be complicated by Social Security’s earnings test. If she is still working, her wages could reduce her Social Security benefits. The thresholds in 2017 are that her Social Security benefits would be reduced by a dollar for every two dollars she earns above $16,920.
Benefit reductions caused by the earnings test are not lost forever, but will begin being added back to her benefits — in the form of higher lifetime benefits — once she reaches full retirement age.
But here is where things get tricky for someone in your mom’s situation. The restoration of earnings test reductions applies to the specific benefit a person is receiving. In your mom’s case, this will be a survivor’s benefit. However, she plans to switch later to her own retirement benefit. I’m assuming she will wait to claim this benefit until at least 66 (her full retirement age), and it will begin growing at that age by 8 percent a year until she turns 70, when this benefit reaches its maximum value.
Her retirement benefit, however, was never subject to earnings test reductions, so there’s nothing to be restored. What this means is that the restorations to her survivor’s benefit would be lost when she filed for her own retirement benefit. I apologize if you’re totally confused by now. Welcome to the wacky world of Social Security benefits!
The point I’m trying to make is that if her earnings test reductions are large enough, she might want to hold off filing for her survivor’s benefit until her full retirement age, when the earnings test no longer applies to wage earnings.
You can help her determine the best strategy by looking at the earnings test rules and then opening an online Social Security account to see what her retirement and survivor benefits would be like at various claiming ages. Your dad died before becoming old enough to file for his own benefits. Social Security has special rules in such cases for determining what her survivor benefit should be. They are — surprise! — very complicated.
Once your mom has a good idea of her own retirement benefits, she should get in touch with Social Security to find out the agency’s calculation for her survivor’s benefit. She should be careful here NOT to actually file for any benefit, but just to gather the information she needs. Once she knows when she wants to file for a survivor’s benefit, she should do so. At that time, she also should make it clear to the agency representative that she wishes to file only for a survivor benefit and defer filing for her own retirement benefit. Good luck!
Judith – New York: My husband and I are both 72 and receive Social Security benefits. He is still working, so we now have employer health insurance. We both avoid doctors like the plague, and the rare times we go, we have to pay, because there is no way we meet the deductibles. I refuse to go the HMO route where they limit your choice of doctors. We take no meds, not even aspirin. When he retires, I am confused as to what Medicare coverage we’ll need. I really think just catastrophic coverage will do, as the several hundred dollars we usually pay each year is easily managed. Can you suggest what plans we should choose?
Phil Moeller: Even though you are healthy now, the odds are that one or both of you will need substantial medical care when you’re older. It is this “future you” that should drive your Medicare decisions.
Having said that, your basic pathway when your husband retires is:
1) Basic Medicare (Parts A and B) plus a Part D drug plan and perhaps a Medigap plan
2) A Medicare Advantage plan, which includes all of these items, although with benefits that aren’t always as generous as those for people with a comprehensive Medigap policy
Going with #1 allows you to be treated by any licensed caregiver who accepts Medicare and is seeing new patients. If you went with #2, you might save money, but could face HMO-like restrictions in who could treat you.
While #1 sounds like the path for you, it won’t be cheap. The catastrophic protection you seek would require a Medigap policy, and they can be expensive. You could get the cheapest available Part D drug plan and then change this coverage as needed during Medicare’s annual open enrollment period, which runs from Oct. 15 to Dec. 7 each year.
If you have a little time, you could also read my Medicare book, which reviews these choices in detail.
Sharon – Virginia: Can I be refused Part B of Medicare? I need it to qualify for TRICARE for Life, the insurance program for military veterans. Social Security is telling me I refused Part B when I applied for Social Security benefits, which were denied, because I hadn’t worked enough hours. But I never worked enough hours to qualify for Social Security on my own. And I never would knowingly refuse Part B. I don’t think I should be penalized for this, as I was never told these things. I applied for Part B by mail, but have still not heard back from the agency.
Phil Moeller: I am so frustrated on your behalf. Unfortunately, these kinds of things happen all the time. You cannot be refused Part B. So, even if there has been a bureaucratic snafu with your enrollment, you should still be able to get Part B and thus still participate in the TRICARE for Life program.
I suggest you call TRICARE and see if someone there can help you through the enrollment process. If this doesn’t work, there are free Medicare counselors available at the State Health Insurance Assistance Program.
Lastly, while there are late-enrollment penalties for Part B, they don’t kick in until you’re a full year late in enrolling. Your main job now is not to worry about penalties, but to plow ahead and get your health coverage.
Vicki Mramor — Ohio: I have just been informed that my Social Security benefits will decrease, because Medicare will be deducting their fees! I already have Medicaid. Can I cancel Medicare? This is going to cause me a great financial burden!
Phil Moeller: I’m assuming that you already were on Medicaid and, when you turned 65, were told you also must have Medicare. You cannot cancel Medicare without losing valuable health benefits and also exposing yourself to lifetime financial penalties should you later decide to enroll.
Millions of lower-income seniors have both Medicaid and Medicare, a situation commonly referred to as being “dual eligible” for both programs.
As a lower-income person on Medicaid, the odds are that you qualify for Medicare programs that can reduce what you need to pay, and thus lessen or even completely remove the Medicare premiums being deducted from your Social Security payments.
You can get free counseling help to take advantage of these programs by calling a local office of the State Health Insurance Assistance Program.
Sam: If your present Medicare Part B premium is capped by the hold harmless provision, but in future years, the cost of living adjustment (COLA) for Social Security increases greater than the Medicare premium for those years, will Medicare “take” your excess COLA to make up for the years in which your premium was held back by the cap?
Phil Moeller: Good question! There is so much confusion over the hold harmless rules and what will happen in the future. The short answer to your question is “no.” What you describe as your excess COLA gains will not be subject to a Medicare claw back.
Medicare rules require the agency to collect about 25 percent of total Part B program expenses from everyone’s Part B premiums. If future COLAs permitted the agency to raise premiums for everyone, the agency would only set the premium high enough to hit that 25 percent threshold. It would not collect past premiums that were lost due to the hold harmless rule.
In the process of normalizing Part B premiums, everyone’s premium would move toward the same level. People whose Part B premium has been frozen at or near $104.90 a month would see it increase. People who had been paying $134 a month would see their premium decline.
For more perspectives on health care, view our continuing coverage of the American Health Care Act.