Getting trapped in the regulatory morass of Social Security and Medicare

Editor’s Note: Journalist Philip Moeller, who writes widely on health and retirement, is here to provide the Medicare answers you need in “Ask Phil, the Medicare Maven.” Send your questions to Phil.

I will get to as many questions as I can here, but please accept my apologies that I am not able to answer everyone’s questions.

Dave – Pa.: I am an elder law attorney whose retired 66-year-old client recently implemented a file and suspend strategy for Social Security. [This is a claiming technic that was popularized by our Social Security book, “Get What’s Yours,” which we’re told contributed to its elimination in new laws.] Coincidentally, her long-time and only husband, who is considerably older, was recently admitted to a nursing home.

Before filing and suspending, my client had been paying for Medicare Part B quarterly with personal checks, but she was advised by Social Security to discontinue that since her Medicare Part B would now be deducted from her Social Security monthly distributions of income. In processing this change, her Social Security payments for some reason now reference her husband’s Social Security number. This has confused and tangled her Medicare coverage, and she has been issued letters stating her Medicare coverage has ended.

She is a retired employee of the state of Pennsylvania, which provides her a private retiree health insurance plan. The company offering this plan has canceled her coverage on the grounds that her Medicare has been canceled.

This woman is an extraordinarily detailed person who has taken notes of every call she has made as well as her response to every letter and communication she has received on this matter. Each call has offered her assurance that there is a problem with the system and that she will eventually be okay, although it might take until June to fix things. She read her notes to me just yesterday before calling me again to tell me that she just got a letter saying that now her Social Security has been canceled!

I intend to help her call Social Security today and have all of her notes transcribed. I’m writing because it seems that her problems might be shared by others. I’m also wondering what can be done to motivate Social Security to solve her problem and those of others similarly affected?

My instinct is that someone somewhere within Social Security could solve this now, but is not exerting the effort to do so because of a sadistic reaction, which enjoys vindication by seeing the “undeserving file and suspenders” getting a bit of punishment. I hope I am wrong. But as a 61-year-old former government administrator, I have seen a lot.

Phil Moeller: My heart goes out to your client and her husband for being the victims of a mess that is not of their own making. I also extend my appreciation to you for stepping up to help his client. This is the kind of support that everyone deserves from their financial advisers.

As for Social Security, you are correct that the agency has the authority and responsibility to fix this. And while it’s admirable that your client has kept meticulous records, simply documenting the problem will not necessarily get it resolved. Her situation needs to be escalated to higher-level agency employees with the expertise and authority to fix this. Sometimes, we mistakenly think that proving that something is wrong will lead to its being fixed. After all, isn’t this still America, where truth and justice will prevail? As I’ve learned in extensive dealings with Social Security and Medicare, this may be America, but justice is often thwarted by layers of bureaucracy, reluctance of people to confess their mistakes and problems in communicating your issue to the right people. I will share this sad tale with the Social Security Administration and Medicare counselors. Stay tuned for the next chapter in this story.

Marlene – Fla.: I turned 65 in 2015 when I started on Medicare. My premium was $104.90 for Part B. As I worked most of my career for the county I lived in, my Social Security check is small — only $98 a month. This year, I have been told that because my monthly Social Security check doesn’t cover the cost of Medicare, I now have to pay $121.80 a month. The reason why, I’m told, is that I am being billed once a year. This just makes no sense to me. Is this true? Any advice you have on how to correct this would be appreciated.

Phil Moeller: Marlene, like Dave’s client, you have been trapped in the regulatory morass of how Social Security and Medicare can affect one another. By law, Part B premiums for most beneficiaries must be taken out of Social Security payments. Because your premiums are greater than your monthly Social Security payments, the agency apparently decided that this can’t occur, leading it to require you to pay Part B premiums directly to Medicare. Doing so, unfortunately, has brought you into conflict with the byzantine rules that kicked in last year due to there being no increase in Social Security’s cost of living adjustment for 2016. As recounted here, there is a Social Security provision known as the “hold harmless” rule. It says that benefits can’t decline from one year to the next. With a zero cost of living adjustment in 2016, Part B premiums could not increase for people whose premiums were deducted from their Social Security payments (except for wealthier folks). Thus, their premium had to stay at $104.90 a month in 2016. For people new to Medicare in 2016 and those like you whose premiums are not deducted from their monthly Social Security payments, the basic monthly Part B premium could increase, and it was raised to $121.80 a month. Is this right or fair? Of course not. You should seek relief by calling a consumer counselor at either the State Health Insurance Assistance Program or the Medicare Rights Center. Please let me know what happens, and good luck!

Frank – Texas: I turn 65 in November of this year, and I understand that I need to sign up for Medicare then. However, for 40 years, I worked as a volunteer missionary (no salary, but expenses provided), so that means my paid work history is minimal. I’ve been working now for six years and plan to continue. I should be eligible for Social Security and Medicare coverage when I’m 69. (Even then, I plan to continue working.) What are my health insurance options after I reach 65? At the moment, I’m on an Obamacare plan. Do I need to enroll in Medicare at 65, even if I receive little or no coverage? Or will the coverage be so minimal that I should stick with my high-premium Obamacare package — and is that even possible after 65?

Phil Moeller: Frank, you qualify for an exception to the general rule that people without group employer health coverage must sign up for Medicare when they turn 65. Because you have not worked the required quarters (40) at jobs where Social Security payroll taxes were deducted from your wages, you do not qualify for premium-free Part A Medicare, which covers hospital expenses. The premiums for this coverage may exceed $400 each month. However, people 65 and older who do not qualify for premium-free Part A may continue to get their health coverage through an Affordable Care Act state insurance exchange. When you amass enough quarters of work, you will have to get Medicare. You did not mention whether you were married, but if you are, you would qualify for premium-free Part A if your spouse had enough quarters of Social Security coverage. This rule also applies to divorced spouses, by the way, assuming the couple was married at least 10 years and the spouse wishing to qualify for premium-free Part A has not remarried.

Ann – Colo.: If I change from AARP Medicare Complete to Kaiser Permanente, are the benefits and costs similar?

Phil Moeller: I have absolutely no idea, but this question provides me the chance to remind people that Medicare provides great tools to answer such questions for themselves. Go online to Plan Finder, enter your home ZIP code and look for policies from multiple insurers. You can find a more detailed shopping guide in earlier Ask Phil columns. But in brief, you need to take a good look at the kind of policy you want — especially your specific prescription drug needs. These specifics are required to get an accurate picture of how different policies compare, and it’s the primary reason you are the best person to answer your own question. Good luck!

Patricia – Calif.: Where should I start with Medicare and Social Security now that I will be turning 62 in July? Is it too early to start to put things in place? If I retire before age 66, am I still eligible for Medicare?

Phil Moeller: Here’s another general question that I am frequently asked. With 10,000 people, on average, reaching retirement age every day, I know that many new readers need to understand these basics. The complete answers to these questions can be found in the just-revised edition of our Social Security book, “Get What’s Yours,” and my companion guide to Medicare that will be published in October. In brief, you can claim your Social Security retirement benefit as early as age 62, but if you do this, your payments will be subject to early claiming reductions. I urge people to delay claiming if they can afford to and if their health and family needs don’t argue for early benefits. Benefits deferred to age 70 are 76 percent higher each and every month for the rest of your life. While you would “lose” eight years of benefits by deferring, the typical life expectancy of a 62-year-old woman is upwards of 25 years, and there’s a good chance you will see your 90th birthday. You need to have a plan to not outlive your money, and Social Security is the best longevity insurance we have. As for Medicare, you become eligible for it when you turn 65 unless you are disabled. Even when you do turn 65, however, you generally do not need to get Medicare if you are still employed and have health insurance through your work. When you do retire, you will have seven or eight months to sign up.

Barbara – Wis.: I am a stage four cancer patient currently on Medicaid, not Medicare. I’m concerned about how long I can be on this. I was told that I will be receiving Medicare by 2017. Am I still able to be on Medicaid while collecting Medicare? I’m confused and wonder if I was misinformed. Secondly, what is the difference between the two?

Phil Moeller: Medicaid is health coverage for lower-income folks. Medicare is health coverage for people who either are 65, disabled or both. People on Medicaid usually will continue to qualify to keep using it so long as they meet the income requirements. Generally, a Medicaid recipient will also qualify for Medicare when they reach the age threshold for Medicare at age 65. These people are known as “dual eligibles,” meaning they qualify for both programs. Beyond these generalities, there may be very complicated state and federal rules that govern the care and costs for dual eligibles. I suggest you call the State Health Insurance Assistance Program. A counselor there should be familiar with Medicaid rules in Wisconsin and how your coverage and care might be affected should you also become covered by Medicare.

Tom – Ariz.: I understand that if I do not sign up for Medicare Part B after reaching 65, I may be subject to permanently higher premium rates later on, unless I was covered by an employer’s health plan past the age of 65. Here is my question: Suppose that I am past 65, still working, and then I change jobs? Assume that my employer-provided health coverage from the original job ends when I leave that job and that the new job does not start for three months. The new job will provide medical coverage. Is there a grace period allowed such that a temporary period of not having employer-provided health coverage will not trigger the permanently higher Medicare Part B premium rates normally applied if one does not sign up after turning 65?

Phil Moeller: Tom, there’s not a grace period, but there are tools to help you. To avoid being without health insurance, you should get a COBRA policy that takes effect the first day you no longer have employer insurance from your first job. Then, when you get the second job, you can sign up for private insurance through your new employer. COBRA can be complicated for people of retirement age. But because the gap between the two jobs is so short, you will not trigger late-enrollment penalties for Medicare. However, if it takes longer than three months to regain employer coverage, you might need to sign up for Medicare, and then drop it when you are covered by your second employer’s plan. COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, which created it. It does not qualify as employer coverage under Medicare rules. But because your private-insurance gap is much shorter than the allowed Medicare sign-up window, you should not be dinged with late-enrollment penalties later on. Your primary concern here is not penalties, but making sure you do not lose your health coverage, even for a day.