The Social Security administration calculates Medicare premiums using a two year look back on Modified Adjusted Gross Income (MAGI). As an example, 2019 MAGI will set Medicare Premiums for 2021. However, if income recently dropped off, current Medicare premiums may not seem fair. Form SSA-44 allows a Medicare participant to claim a life-changing event for a reduction of MAGI. A successful file should reduce Medicare premiums for the year filed. There are several instances where this form will come in handy.
Two of the significant life-changing events that affect Medicare premiums are work stoppage and work reduction. For example, if recently retired from a high-income job, elevated Medicare premiums would take two years to roll off. However, Form SSA-44 allows the filer an opportunity to show reduced income in the current year. This can be particularly advantageous as the top Medicare bracket costs $347 per month more than the lowest Medicare bracket. The total savings can equate to $8K a year for married filing joint couples. Below is an overview of Medicare premiums for 2020.
Another common use for the form is marriage, divorce, or death of a spouse. The married filing jointly bracket is generally more favorable, but there may be some opportunity to decrease premiums if one spouse had a higher proportion of income. For these cases, you will need to show proof of the life-changing event as well as evidence of reduced income.
Form SSA-44 also considers the loss of an income-producing property, loss of pension income, and employer settlement payment as life-changing events eligible for a reduction of Medicare premiums. The form is three pages long, with five additional pages of instructions and disclosures. A successful file could save thousands of dollars in one or two years while actual income received catches up to the 2-year MAGI lookback. If you would like to learn more about health insurance planning, please reach out to Sebold Capital Management.
SSA-44 form: https://www.ssa.gov/forms/ssa-44-ext.pdf
April 28, 2020