Editor’s Note: Journalist Philip Moeller, who writes widely on aging and retirement, is here to provide the answers you need in “Ask Phil.” Send your questions to Phil.
Check out his new Recommended Reading section with links to notable stories and reports at the end of today’s post.
Anna – Ill.: If the powers that be are looking at health outcomes when they spend Medicare dollars, why did Congress decide in 2008 that a cut in therapy benefits was a smart thing to do? In 2008, I was not yet 65, so I didn’t notice this change. But now that I am past 65 and having balance “issues,” the 2008 cut in therapy benefits does affect me. One of the leading causes of sending seniors into assisted care facilities is balance issues (falls), and many seniors soon run out of funds and have to rely upon Medicaid to pay for housing them in these facilities. Is it not more fiscally responsible to spend a few thousand dollars on balance therapy now rather than tens of thousands of dollars each month to “house” seniors in such facilities?
Phil Moeller: Caps on Medicare therapy services have been a contested topic for years. For 2016, the caps are $1,960 for physical therapy and speech-language pathology services combined, according to the Centers for Medicare & Medicaid Services. There’s another limit of $1,960 for occupational therapy services. However, there is an exceptions process that permits people to seek coverage when their total incurred therapy expenses exceed $3,700 during a calendar year. This exceptions process was in place in 2008 and has been extended every year since then. The American Physical Therapy Association has an extensive legislative history of therapy caps that provides the details. So, on this score, it’s not clear to me what cuts your referring to. Having said that, you and many other reasonable people could argue that the caps themselves are too low and need to be raised.
Diane – Md.: I am 65 and enrolled in Medicare. After this enrollment, I took a position with a 1,500-person firm and now have Blue Cross as my primary health insurance with Medicare as my second. I would like to use the health savings account option with Blue Cross, but have been told that I can’t have an HSA and Medicare. Is this true even if Medicare is the secondary provider?
Phil Moeller: Yes, according to the Medicare Rights Center. Having Medicare in any capacity makes it illegal for you to participate in an HSA or continue participating if you had one when you enrolled in Medicare. Further, as I’ve written before, signing up for Social Security requires you to have Part A of Medicare, which also nixes HSA participation.
However, the fact that you went back to work and now have employer insurance provides you the right to drop Medicare without facing penalties later on when you leave work and need to re-enroll. If there are benefits having Medicare as a secondary payer, you should compare them with the tax benefits of having an HSA plan and decide which path is better for you.
If you do decide to drop Medicare, Social Security rules require a personal interview before approving your request. You also must complete form CMS-1763 — Request for Termination of Premium Hospital and/or Supplementary Medical Insurance. Be warned: Supplementary Medical Insurance is Medicare’s term for Part B; don’t confuse it with Medicare Advantage.
Connie – Ontario: I’m a 68-year-old U.S. citizen with dual U.S.-Canadian citizenship, and I reside in Canada. When I turned 65, both my Canadian husband (non-U.S. citizen resident) and I qualified for and received Medicare cards (Medicare A only). If we were in an accident or serious illness while in the U.S. that required hospitalization, what would and would not be covered?
Phil Moeller: You certainly would be able to use your Part A insurance for hospital expenses and related institutional medical care, according to counselors at the State Health Insurance Assistance Program. If your husband’s Part A was valid, so would he, although it’s not clear to me why he would qualify for Part A unless he had spent substantial time working in the U.S. Part A only covers hospital expenses. If you needed to pay for doctors, outpatient costs, medical equipment or drugs, these would not be covered unless you had additional Medicare coverages for which you would need to pay premiums. In that event, you might face stiff late-enrollment penalties for not signing up for Parts B or D of Medicare when you first turned 65 and enrolled in Part A.
If either of you have Canadian health coverage, which I assume you do, you should explore whether it helps at all with medical needs that occur in the U.S.
Linda Jo – Mich.: My mother is 93 years old and has been living abroad for several years. Until recently, her Medicare Part B premium was deducted from her monthly Social Security benefit payment. She asked to change this and stop paying Medicare Part B premiums. She was told by a person in a U.S. embassy Social Security office that she could reclaim from 12 to 18 months of payment of the Medicare Part B that had been deducted from her monthly benefit. Is this correct?
Phil Moeller: I don’t think so, but the Social Security spokeswoman I contacted was not able to give a definitive answer without more specifics about your mother’s situation. By law, Part B premiums must be deducted from Social Security payments for anyone participating in both programs. So the only way to stop these premiums from being deducted is to disenroll from Part B. I assume this is what your mother wanted to do and further assume it’s because Medicare doesn’t cover her outside the U.S., and she doesn’t travel back here enough to want the coverage when she is in the states.
If she does leave Part B, she normally would not be entitled to any premium refunds. See pages 30 and 31 of this document for details.
The only wild card here I can think of is whether she may be able to make a case that her effective Part B termination date should have been 12 to 18 months earlier, thereby entitling her to refunds tied to that earlier termination date. Your note makes no mention of this, so my best judgment is that the person in the embassy office was incorrect.
Many readers had questions about a recent Ask Phil piece on high-income surcharges for Medicare premiums dealt with how selling a home can affect your premiums.
Steve – Wyo.: I just read your response to the woman who wondered about the potential effect of selling her home, with a capital gains realization, on her Medicare benefits. Your response clarified the issue with regard to triggering “surcharges” above the $85,000 threshold. What if that capital gain is immediately reinvested in another home? Would it count as income as such?
Charles – La.: Is this after the $250,000 to $500,000 home sale exclusion (primary home)? Do you understand that gains on the sale of a second home are taxable?
Sharon – Calif.: If I sell my principal residence and get $500,000 profit, I am qualified for the $500,000 tax exemption for couples so my profit will be zero in my tax return. In my case, I don’t have to worry about IRMAA, do I? [IRMAA stands for the Income-Related Monthly Adjustment Amount, which is the mouthful of words used to describe these surcharges.]
John – Calif.: In 2018, I will be hit with a very substantial MAGI [modified adjusted gross income] surcharge due to a one-time event, the sale of my business in 2016. My annual MAGI after the sale of my business will, once again, be less than $170,000. Is there a way to get my MAGI surcharge removed? I am married and retired in 2016.
Smilie – Maine: The sale of a primary residence owned and used as such for two out of five years would, under the facts of your recent post, be excluded from capital gain recognition ($250,000 exclusion per spouse), and I believe the instructions to Form 1040 provide that such sales should not be reported. See Internal Revenue Code section 121.
Phil Moeller: Thanks to all. It seems to me the key variable here is whether the income event (sale of a home or business for these readers) is included in MAGI. This is the definition of income that is used to calculate IRMAA surcharges. In the case of the sale of a primary residence, only amounts above the exclusion thresholds would be included in MAGI. The sale of a business would be a different matter, as would the sale of a second vacation home (which was the case in the Ask Phil column). Any bump in MAGI that triggers IRMAA surcharges should go away as soon as MAGI declines, keeping in mind that there is a two-year lag between the year the income is taxed and when Medicare premiums are determined. So, as John notes above, his 2018 IRMAA will be determined by his 2016 tax return.
Hospitals have the right to accept patients for what are called observational stays as opposed to formally admitting them. Medicare has different insurance rules for these situations and may charge people more for observational stays than formal admissions, even if the care is identical. In addition, Medicare will not cover subsequent care in a skilled nursing facility if a patient’s hospital stay was only observational. This is a bad policy, as described last year in an Ask Phil column. Under terms of a new law, hospitals will have to at least tell patients their admission status, which might help some people save money or appeal the hospital’s decision while there is still time to do something about it. Better still would be to revise the rules altogether and change the underlying rules. (Source: The New York Times.)
Social Security Administration officials warn that the latest appropriations bill supported by congressional Republicans would further harm the agency’s already compromised ability to serve growing consumer demand for help. (Source: The Washington Post.)
The Centers for Medicare & Medicaid Services recently issued a single star rating on the nation’s hospitals. Its stated goal was to give people a single, easy-to-understand summary of the quality of the nation’s hospitals. Reducing the many complexities of hospital operations and quality to a single indicator has provoked considerable opposition. (Source: Modern Healthcare.)