Editor’s Note: Journalist Philip Moeller, who writes widely on aging and retirement, is here to provide the answers you need in “Ask Phil.” 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.
Before diving into the reader mail bag, two timely topics deserve attention:
First, Medicare’s annual open enrollment period ends Dec. 7. Hopefully, you have taken advantage of open enrollment and shopped around for better coverage. But your enrollment adventures may not be over. For those who’ve signed up for a Medicare Advantage plan, there also is a Medicare Advantage disenrollment period that runs from Jan. 1 to Feb. 14. You have the option then of moving into basic Medicare (Parts A and B) and also getting a stand-alone Part D prescription drug plan. You also could get a Medigap plan, but you need to shop carefully for the best plan, particularly if you’ve had a Medigap plan before. My vote: A special “I’m Not Sure What Medicare Plans I Signed Up For” disenrollment period!
Second, there continue to be loud drumbeats from Congressional Republican leaders that they will repeal the Affordable Care Act and also consider significant changes to Medicare and Medicaid. It now looks like Republicans want to approve repealing the ACA early next year. Replacing it, however, could take years, assuming this is even possible.
Health care and insurance experts don’t see how any serious effort to unwind the law could proceed if it kept both the individual mandate, which requires people be insured, and the ban on insurers being able to deny coverage to a person based on pre-existing medical conditions.
If people were not required to get health insurance and insurance companies could not reject someone for coverage on health grounds, then only healthy people would get insurance and insurance companies could not make money insuring sicker persons unless they charged them unaffordably high premiums.
In the meantime, key senior groups say they will be on high alert for anything that reduces health benefits to older Americans or raises the cost of health care. The ACA provided substantial Medicare supports, including new free preventive health services and the phased reduction of drug prices in Part D prescription plans.
“If the Affordable Care Act goes through the appeal process in a very short time, you should be concerned about the solvency of Medicare immediately,” says Max Richtman, head of the National Committee to Preserve Social Security and Medicare. “You should be worried about the loss of preventive services. And you should be concerned about the rise in out-of-pocket drug prices.”
David Certner, a legislative expert with AARP, said the lack of specifics in Republican calls to repeal Obamacare were of great concern, as are proposals by House Speaker Paul Ryan to provide Medicare enrollees with premium-support payments, or vouchers, and let them buy health insurance in the private market.
Ryan’s long-standing interest in changing Medicare has not produced much movement in the Senate, Certner noted, and recent statements from several senior Republican senators have emphasized their lack of interest in taking up Medicare reform.
To avoid requiring 60 votes in the Senate on any legislative change (the GOP has only has 52 Senate seats), the Republicans reportedly plan to use a budget reconciliation bill. It requires only a simple majority. And while this approach cannot include legislative changes, it could alter or even eliminate key financial aspects of Obamacare. For example, while 60 votes would be required in the Senate to repeal the individual mandate, the financial penalties for not getting insurance might be removed via a reconciliation measure. Without penalties, the mandate would lack enforcement power and could be effectively killed without formal changes to the law.
Details are scant at this point, but senior advocacy groups are concerned that older Americans would receive less care and pay more for it if Republican reform plans are enacted. Most of their worries are aimed at Ryan and at Rep. Tom Price, President-elect Trump’s pick to head the U.S. Department of Health and Human Services. Richtman noted that Price, a physician, is very knowledgeable about health care. “The nomination of Congressman Price is, I think, pretty dangerous,” he said. “He’s very effective and really a smart pick” if President-elect Trump’s goal is to follow through on his campaign promise to get rid of Obamacare.
Trump also promised not to touch Medicare, Medicaid or Social Security, and AARP has already begun to mobilize its roughly 37 million members to remind him of those promises. Supporters of Obamacare also note that a recent survey by the Kaiser Family Foundation found that only a quarter of Americans support total repeal, and there is much support for several key provisions. These include the aforementioned ban on pre-existing conditions, along with the right of parents to keep children on their health care policies through age 26.
Medicare, of course, is overwhelmingly popular with the 57 million seniors and disabled Americans who depend on it. When, and if, Medicare reforms are proposed, Republicans will encounter a Democratic party that sees Medicare as a juicy midterm election issue.
And now, let’s proceed to your questions.
Bill: I bought your book and loved it, but I have several questions. It is my understanding the spousal and ex-spousal benefits do not increase after the spouse or ex-spouse has reached their full retirement age. Also, can a spouse who was 62 on Jan. 2, 2016 take her own retirement benefit and then switch to a higher spousal benefit when her husband turns 70 and files for his benefit? I assume she would not be deemed for the higher spousal benefit as a result of taking her own benefit early.
Phil Moeller: I get a lot of questions about Social Security spousal benefits. These claims often are complex, so I’m going to drone on a bit here. Sorry, but this stuff is not conducive to soundbites.
Bill, the answer to your first question is that your understanding is correct. Spousal benefits max out at full retirement age. That’s 66 for people now nearing retirement and will rise to 67 beginning in a few years.
The answer to your second question is also yes, but there are timing consequences you need to weigh.
You say the spouse in your example was 62 on Jan. 2 of this year. This is the latest date at which someone could be grandfathered in under last year’s new Social Security laws, meaning they would be able to file a restricted application for only a single benefit when they reached full retirement age, which is 66 for people nearing retirement right now. I’m assuming you chose this date on purpose because you think these new rules will affect this spouse’s claiming rights.
Now, the right to file a restricted application certainly is important under the new rules, because people who are eligible for two benefits can no longer file for just one of them. If they do, Social Security will deem them to be filing for both benefits. They won’t get paid both benefits but rather an amount roughly equal to the greater of the two. These deeming rules had formerly applied only to people who filed before reaching full retirement age, but now they apply to filers as old as age 70, which is the age at which Social Security benefits max out.
However, the spouse in your example does not need to be grandfathered in to file only for her own retirement benefit. She is not eligible for a spousal benefit, because her husband has not yet filed for his retirement benefit. So when she files for her retirement benefit, there is no second benefit to trigger.
If she does file for this retirement benefit before her full retirement age, however, she will be hit with early claiming reductions. These will adversely affect her total benefits if she were to later file for a spousal benefit after her husband claimed his own retirement benefit.
As I said before, spousal benefits reach their maximum level at full retirement age, and can equal up to half of the retirement benefit to which the other spouse is entitled at their full retirement age. This amount is known in Social Security terms as their “primary insurance amount,” or PIA.
This is only part of the story, however. Say this husband files for his retirement and then his spouse files for her spousal benefit. Social Security will look not only as his PIA but also at hers. The agency will first calculate her PIA and then subtract this amount from half of his PIA. This is how it calculates whether she is even entitled to a spousal benefit and, if so, how much it might be.
Here’s an example: Say the husband’s PIA is $2,000 and the wife’s is $1,000. In this case, she would not be entitled to any spousal benefits, because her own retirement benefit is as great as her spousal benefit. In this case, in agency lingo, her excess spousal benefit would be zero.
If her PIA is less than half of her husband’s she could receive an excess spousal benefit. However, the amount of her total benefit – the retirement benefit she already claimed and the later spousal benefit – would be reduced if she files for her retirement benefit prior to full retirement age.
Here’s another example. In this one, the husband’s PIA is $2,000 but his wife’s PIA is only $500. Her excess spousal benefit thus would be $500 a month. But it would only reach that level if she waited until full retirement age to file for it. Otherwise, it would be hit with those nasty early claiming reductions.
And remember, there also are early claiming reductions if she files for retirement before her full retirement age. In this example, if she filed for retirement at 62, she would not get a $500 monthly benefit but only 75 percent of that — $375.
Her maximum total benefit – retirement benefit plus excess spousal benefit – thus can be no more than $875 a month. And for her to reach this level, she would need to hold off filing for that excess spousal benefit until her full retirement age.
By the time you’ve waded through this answer, of course, both spouses may already have turned 70! If not, I hope this is helpful.
Alan – Calif.: I have a question about Medicare as secondary payer. I am over 65 and a part-time county government employee. As an active employee, I must be enrolled in a county health plan and can’t opt out. As a part-time employee, I can get a $500 deductible PPO [preferred provider organization] plan for a premium of around $4,500 a year or get a $5,000 deductible PPO plan for zero premium, which is what I have chosen. I am enrolled in Medicare Part A and Part D (my high deductible plan is considered not-creditable drug coverage). If I get Medicare Part B and my primary insurance has a $5,000 deductible, will Medicare Part B pay as secondary payer on a claim if the $5,000 deductible has not yet been met? I have asked this question to seven Medicare phone customer service people! Three said no, and that Medicare Part B wouldn’t pay until the entire $5,000 deductible has been met. Three said yes, and that Part B would pay on the claim. The seventh time I asked for a supervisor, who said Medicare Part B might pay on the claim! Very frustrating.
Phil Moeller: Kudos to Alan for continuing to search for an answer to this question. I am not sure I would have been so diligent. I only hope I’m up to the pressure of casting the tie-breaking vote. Fortunately, the public-information folks at Medicare (actually at the Centers for Medicare & Medicaid Services, which oversees Medicare) were unequivocal in their response. The answer is yes. Where Medicare is a secondary payer, it will pay even though the primary payer’s deductible has not yet been reached. Here is the spokesman’s precise explanation:
As long as Medicare’s deductible is met, Medicare will make the appropriate payment, including a secondary payment, for Medicare covered and otherwise reimbursable items and services. This includes secondary payments, where the primary payer’s deductible has not been met.
Bill: I am a 64-year-old veteran. I am currently enrolled in the VA health care program and have never been in the TRICARE program. Is there information available on this topic?
Phil Moeller: VA benefits are fine as long as you are getting the care you need from VA facilities. But if you need care outside this system, you would need to explore TRICARE for Life, which is linked to Medicare. TRICARE has helpful information, including an explanation of how TRICARE works with the VA.
Anonymous: I’m 65, work for a large company and have medical insurance coverage. I plan to retire at age 66. I’ve been told by colleagues that I should sign up for Medicare Parts A and B now even though I don’t need to. Is there any advantage to this over waiting to enroll when I retire from my job?
Phil Moeller: Unless you have really crummy employer insurance, there is no advantage in paying for Part B until you leave work. Part A, however, may make sense. There is no premium for Part A if you’ve worked long enough to qualify for Social Security. And it can come in handy as a secondary payer of covered hospital expenses that aren’t paid by your employer health plan.
Part A is, however, not compatible with a high-deductible health plan. So if you have a health savings account, you don’t want to get Part A.
Lupe – Calif.: If I am paying AARP for my Parts B and D, can Social Security also ask me to pay them a premium plus what I pay AARP, just because I sold my home? When I sold my home and filed income tax for that year, I paid the IRS and the state of California a good chunk of money. Now, Social Security tells me that I have to pay more for Part B. I have to pay them $187.50 plus what I pay AARP. I will be paying per month $376.25 for a whole year! Could I drop Part B for that year and then pick it up after my income declines, and can I go back to where I only pay the AARP premium?
Phil Moeller: Yes, Social Security can do this, under what’s called the income-related monthly adjustment amount, or IRMAA. I do not know your tax situation, but when you sold your home, the gains must have raised your taxable income. This triggered an IRMAA surcharge.
This surcharge is not permanent. When your taxable income goes down, it should disappear. Older Americans generally have a lifetime tax exclusion when they sell their primary residence, so I’m not clear why selling your home raised your taxable income. If it was a second residence, however, that would be a different story.
Everyone I’ve spoken to hates these IRMAA provisions. And I’m sorry to tell you this, but IRMAA also will raise your Part D payments.
As for dropping Part B, I don’t recommend it. You need Part B to have Medicare, and you definitely don’t want to be uninsured. Also, if you stop Part B and later sign up for it again, you would face lifetime financial penalties in the form of higher Part B premiums.
Jack – Wash.: I’m 66, retiring by the end of January 2017 and need to transition from employer-covered insurance to Medicare. Initially, my wife and I plan to travel and live in North Carolina part of the year and Washington the rest. Are there Medicare providers that have broader plans that can reasonably cover us while traveling or living in two states annually beyond emergency circumstances?
Phil Moeller: There are some Medicare Advantage plans that offer coverage in more than one geographic market. I am not familiar with all of them. You might want to find an insurance broker near you and see if there are plans to cover you in North Carolina and Washington. Beyond Medicare Advantage plans, you seem more likely a candidate for getting basic Medicare (Parts A and B), a stand-alone Part D drug plan and perhaps a Medigap plan. This package will insure you anywhere in the U.S. and permit you to use any doctor who accepts Medicare (and who is accepting new Medicare patients).
Alexa: I am 57 years old, was married more than 10 years and qualify for widow’s benefits. Can I claim widow’s benefits at age 60 and then claim my own benefits at age 70?
Phil Moeller: Yes, you can. You are allowed to claim a widow’s benefit as early as age 60 while allowing your own retirement benefit to rise in value until as late as age 70, when it will reach its maximum value. The recent changes in Social Security laws did not affect your rights here. Also, you don’t need to have been married for 10 years but only nine months. The 10-year requirement is for spousal or survivor benefits involving a divorced spouse.
Steve – N.H.: I am 64 and receiving Social Security. I currently am on a high-deductible medical plan. Can I put money into a health savings account this year and part of next year?
Phil Moeller: No, you can’t. When you receive Social Security, you have no choice but to be signed up for Part A. It’s the law (and maybe a dumb one). Having Part A means that you are signed up for Medicare. Being signed up for Medicare makes you ineligible to make tax-free contributions to a health savings account.