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.
Marcy – Ill.: Is there anything I can do about prohibitively expensive medications I will need to take for the rest of my life? I take three medicines with no generic alternative. My doctor told me that they were “covered” by Medicare. Now, I’ve come to find out that even on the most comprehensive and expensive drug plans, I will pay more than $1,000 a month just for the drugs, not for the premiums or any other Medicare expenses. I have some resources, but this will deplete them in a few years. I am not poor enough to qualify for assistance, but soon will be. I know now I should have done more research on what my doctor told me and perhaps worked until I died or was fired, so I could stay on employer insurance, but that bridge is burned, and I surely will never get another job with benefits. Is there any relief for astronomical drug costs?
Phil Moeller: Marcy, I’m so sorry to learn that you have been victim of another of Medicare’s major gotchas. Medicare is prevented by law from negotiating with drug companies over their prices. This was a pro-business feature of the 2003 law that created Medicare’s Part D prescription drug insurance program. We have been paying for it ever since, and the price tag has risen at an alarming rate in recent years for people who must take expensive new drugs. Miracles or not, they can devastate personal and family finances. Even the prices of some generics have soared.
Having said this, I wonder if you’ve factored in the effect of Part D’s coverage of drugs in the so-called “catastrophic” tier of the program? Once you and your Medicare insurer have paid a total of $3,310 for drugs this year, you will enter the so-called donut hole and will need to shoulder a greater share of drug expenses until your out-of-pocket spending has hit $4,850. At this point, you will have entered the catastrophic tier of your coverage. In this tier, you need to pay only a few dollars for each prescription or 5 percent, whichever amount is greater. Now, 5 percent of a big number can still be a hefty amount. But I doubt that it will total $1,000 a month.
If you need help calculating your Part D costs, get in touch with the State Health Insurance Assistance Program or the Medicare Rights Center. Please let me know how things turn out. If your costs are still going to average $1,000 a month, there may be some other private prescription support programs available to you. Let me know, and I’ll provide information about them.
Mary – Ill.: I am turning 66 in August. Several months after I turned 65, I discovered I “had to” file for Medicare Part A at age 65. So I did about six months after I turned 65. But since I was still working and had no plans to retire until I was 66, I continued my health savings account contributions. Now, I find out what I did was illegal, and I am liable for tax fines on the HSA contributions. Our human resources manager never mentioned this conflict, which annoys me. Can I rescind this or fix it? I have since retired, two months prior to reaching my full retirement age of 66. But I have not filed for Social Security or any other part of Medicare. If I can’t rescind or fix this, can my penalty only be for the months after I filed and not retroactive to August 2015? I read you can withdraw from Part A, but also read that that could jeopardize my Medicare and benefits for life. HELP!
Phil Moeller: Mary, you have been ensnared in a nasty Medicare gotcha. First off, there was no requirement that you file for Part A when you turned 65. Whoever told you this was wrong. So long as you have active health insurance from your employer, you did not have to file for any part of Medicare at age 65 (or at any older age, for that matter). Now, I advise folks without an HSA that getting Part A at 65 is a good idea. Anyone with enough earnings to qualify for Social Security (either directly or as a spouse or even former spouse of a qualified person) can get Part A without paying any premium. Should they need hospital care, which is what Part A covers, some expenses their private health insurance does not fully cover can be picked up by Part A. It thus can help and should never cost the person more money than not having the coverage.
However, as prior Ask Phil pieces have explained, having Part A is regarded as being on Medicare, and folks on Medicare are disqualified from participating in a tax-favored HSA plan. Continuing to make such contributions is, as you note, not only disallowed, but can also expose you to tax penalties. In fact, in a rule only a crystal ball seer could love, you must stop such contributions six months before your HSA eligibility expires!
In theory, you could rescind your Part A election and continue participating in the HSA. But since you have retired, I fear getting the timing right would be a nightmare. You would need to suspend Part A up to but no later than your effective Medicare coverage date. You have several months to enroll in Medicare following your retirement and the end of your employer health insurance. But timing this too closely risks having no health insurance at all for a short period, so I think people should enroll in Medicare as soon as they need to and not risk exposing themselves to an uninsured health event.
I’d call a Medicare counselor, at the State Health Insurance Assistance Program or the Medicare Rights Center. See if someone can help you. However, while I believe you have the right to avoid an IRS penalty here, I’m afraid that in the real world you might be better off just paying the penalty and moving on. I know. I’m never supposed to admit defeat and should always argue that consumers need to stand up for their rights. Sadly, you are dealing with Social Security, Medicare and the IRS here. Don Quixote’s task was simple by comparison. Good luck, and please let me know how you fare.
Anonymous – Fla.: I live on my Social Security retirement income and am now getting $555 a month. That’s the only income I have. My medical coverage now is through the city of Jacksonville, since I live below the poverty level. I get Medicare next year when I reach 65. Will I have to pay anything out of my Social Security payments to Medicare?
Phil Moeller: You should call a SHIP counselor in Florida and find out how Medicare’s lower-income support programs for your area compare with the help you now get from Jacksonville. My first take is that you should not have to pay for Medicare if your only income is that monthly $555 Social Security payment. But you are smart to plan ahead, and counselors should be able to help you.
Sue – Pa.: I am 64 and will be 65 in January. My husband carries medical insurance for us through his work. My husband is 62. Do I have to sign up for Medicare? Would it be advantageous to do so? How would I sign up if I had to? Thank you. This is all very confusing. My home mailbox is always getting Medicare notices.
Phil Moeller: Yes, it certainly can be confusing. When a friend of mine was nearing his 65th birthday, his mail from Medicare insurers literally filed up a grocery bag! Look at my answer above to Mary’s question. You need not sign up for Medicare at 65 if you’re still covered by your husband’s health plan. But you might want to get premium-free Part A of Medicare if his health plan does not include a health savings account.
Nancy – N.J.: I am a New Jersey SHIP (State Health Insurance Assistance Program) counselor and have encountered basically the same problem as the person you wrote about in “Getting trapped in the regulatory morass of Social Security and Medicare.” Our client collected on her ex-husband’s Social Security record. She switched to her own retirement benefit at age 70 and encountered a changed Medicare number, just as in your earlier example. Usually, Medicare will see both numbers, and there will be no problem. But in this case, Social Security somehow cancelled her previous Medicare coverage. Her Medicare Advantage plan thus has been cancelled and this insurer is trying to recover earlier insured payments that it made to providers. She has been working to solve this mistake for nearly five months, including communications with her Medicare Advantage plan, Medicare, the Social Security Administration and her U.S. senator’s office. They say it will be a while longer before matters can be addressed. I am told only the Social Security Administration can fix this and not Medicare. As a SHIP counselor, I have no standing with the Social Security Administration. Your earlier column asked readers to stay tuned for the next chapter of this situation, so I am staying tuned and wonder if you have any solution or ideas?
Phil Moeller: Nancy is among an understandably large percentage of the human race that does not read and memorize every word that I write. Imagine that! As it turns out, I did provide an update to this situation in a later column. While I do love to drive up my online traffic numbers, I will save Nancy the trouble of searching for this item, which is reproduced here:
I wrote about a financial adviser whose client and her husband had run afoul of both Social Security and Medicare. The government linked their Social Security numbers and the woman’s effort to file and suspend her Social Security somehow led to her losing her Medicare coverage! As the old Ripley’s “Believe It or Not” stories used to say, we can’t make this stuff up, folks.
Her adviser reports that the women’s situation is being straightened out, but that she is still exposed to nearly a month-long period when she will have no Medicare. Let’s pray she remains in good health until her insurance coverage resumes. In the meantime, a Social Security spokeswoman reports that it is not uncommon for two spouses’ Social Security numbers to become linked. Here is what she writes:
In your message, you state that her Medicare is now under her spouse’s Social Security number (SSN). I can confirm this change occurs when a Medicare only entitlement on a SSN converts to a monthly benefit entitlement on a different SSN. However, the start date of entitlement to the Medicare coverage on the old record does not change when it converts to the new SSN.
Additionally, a new health insurance card is issued when an individual status changes. For the card issuance policy and corroboration, see HI 00901.045: Health Insurance Card – Policy and HI 00901.065: Health Insurance Card Issuance.
I include this explanation in full, because A) Social Security has on occasion quibbled with how its comments are translated, and B) you need to see how clearly the agency explains its own rules.
Of course, this response may not help Nancy or her client. So, I will send this item to the Social Security Administration, along with Nancy’s email address, with a request to please expedite this matter. Nancy, if you hear back from these folks, please let me know how things went for your client.
AND YET ANOTHER REQUEST FOR INFORMED GOVERNANCE
The aforementioned SHIP program appears to have once again dodged a wrongheaded effort to kill its $52 million in annual federal spending support. Perhaps SHIP was inadvertently caught in the fiscal crosshairs of conservative lawmakers after bigger game. Whatever its real or perceived sins, however, the program’s retention and even expansion is needed by those older and disabled Americans who must navigate Medicare and its endless gauntlet of complex if not unfathomable rules. SHIP’s funding supports a largely volunteer counseling program that millions of Medicare beneficiaries turn to, often as a last resort, for problems they cannot solve on their own. For now, the program’s annual appropriation appears secure.
I urge and implore congressional leaders to give serious thought to this question: How much healthier and financially better off would the nation be if consumers were more informed about Medicare and equipped with the tools to make better decisions about how to purchase and use it?