Client Study: Medicare D Penalties

Just this past week we assisted a new client enroll in Medicare D for the first time.  Unbeknownst to them, they were about to get hit with two big penalties – Delayed Enrollment & Income Related Monthly Adjustment Amount (IRMAA).

“Sally” is a 73 year old widow in fantastic health.  Pair this with her solid financial status, she had not enrolled during her initial enrollment period eight years ago.  With the best of intentions, i.e. not leveraging resources that she did not require as well as obviously not wanting the headache of managing the enrollment, Sally went eight years beyond her enrollment period.

When we sat down, to calculate the monthly penalty she was shocked to understand the extent of the penalty and that it would affect her premiums for the full duration of her enrollment – not just the year she had previously believed.  Anyone who delays or suspends enrollment in their Medicare product for more than 63 days is subject to this stinger.

To calculate a Delayed Enrollment Penalty, Medicare calculates the penalty by applying 1% of the National Premium Average ($33.19 for 2019 enrollments) times the number of full, uncovered months you didn’t have Part D or creditable coverage.

For Sally this meant, 99 months (Oct 2018 minus June 2010 = 99 months) without coverage and a whopping $34.70 added to her monthly bill.  Given that her regular premium is $27.40 for her selected Medicare D product this was a shocker.

To add assault to injury, Sally is classified as a “High Earning Senior” as her Modified Adjusted Gross Income (MAGI) is in excess of $125,000 this year.  For that she is also subject to “The Medicare Income Related Monthly Adjustment Amount” which is going to tack on an additional $31.90 per month to her premium.

2019 Medicare Part D IRMAA is shown below.
Beneficiaries who file individual tax returns with income that is: Beneficiaries who file joint tax returns with income that is: Medicare Part D Income Related Monthly Adjustment Amount
Less than or equal to $85,000 Less than or equal to $170,000 $0.00
Greater than $85,000 and less than or equal to $107,000 Greater than $170,000 and less than or equal to $214,000 $12.40
Greater than $107,000 and less than or equal to $133,500 Greater than $214,000 and less than or equal to $267,000 $31.90
Greater than $133,500 and less than or equal to $160,000 Greater than $267,000 and less than or equal to $320,000 $51.40
Greater than $160,000 and less than or equal to $214,000 Greater than $320,000 and less than or equal to $428,000 $70.90
Greater than $214,000 and less than or equal to $500,000 Greater than $428,000 and less than or equal to $750,000 $70.90
Greater than $500,000 Greater than $750,000 $77.40

In the short order of one hour, Sally’s monthly out of pocket cost, before seeing any benefits, is now $94.00.  A far cry from the $27.40 premium for her selected Medicare D product.

Is there any relief for Sally?  Maybe, filing an appeal on both of these penalties are worth the trouble.  What needs to be completed is a Request for Reconsideration as well as a Late Enrollment (LEP) Reconsideration Form.

 

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