Ask The Advisor: March 2011

Ask The Advisor: March 2011

Q: Recently my mother got a notice from Social Security saying that her income is over the limit, and now she’s paying much higher Medicare premiums than last year. Normally her income is modest, but in 2009 we sold her home after she moved into an assisted living facility. Her monthly Part B premium rose from $96.40 to $161.50. Her Part D coverage had increased by $20 per month and the government tacked on a surcharge of $12 more than doubling the premium that she paid last year. Altogether, my mother’s Social Security was reduced by $97.10 a month! Someone told me this was part of healthcare reform. Why was there no advance notice to allow families to plan for this?

A: In 2010, to generate support from wary seniors, proponents of healthcare reform widely touted new Medicare benefits under healthcare reform with mailings and even an ad campaign featuring Andy Griffith of Mayberry R.F.D. But virtually nothing about the controversial changes —like determining Part D premiums based on income — ever made it into the media, let alone Andy’s scripts.

One of the biggest traps to determining Medicare premiums based on income is how the government defines “high income.” Social Security’s rules can snag even modest-income people. This can happen when a home is sold or when converting retirement accounts. One-time capital gains can put seniors over the Medicare income thresholds. The higher Medicare premiums reduce monthly Social Security benefits for an entire year. Should your mother’s income in 2010 return to more modest levels she won’t have to pay the means test premium surcharges and her Social Security benefit should return to more normal levels next year.

Since 2007 the government has determined Part B premiums based on income. The government uses the most current tax return to determine income. For 2011, your mother’s 2009 income (the return you filed in 2010) was used. Individuals with incomes over $85,000 or married couples with incomes of $170,000 are subject to the higher premiums. The healthcare reform legislation passed in 2010 expanded “means testing” to include Part D. Based on income, seniors pay a monthly surcharge of $12 to $69.10 on top of the premium charged by their plan.

In addition, the legislation froze the income thresholds at which the higher premiums are triggered so more seniors will have to pay the higher premiums as incomes gradually grow over time. TSCL’s Legislative Assistant, Mike Watson, estimates that “individual seniors who made between $63,000 and $75,000 in 2010 could be subjected to the ‘means test’ in 2019, because of the frozen income thresholds. In addition, if the income thresholds for the ‘means test’ were allowed to increase, (the case before healthcare reform was signed into law), they would rise to about $100,500 to $121,800 in 2019.”

TSCL is working for legislation that would eliminate the one-time gain “means test,” and supports efforts that would repeal determination of Medicare benefits based on income. To learn more, please visit