Expert Philip Moeller answers your questions about health, aging, and retirement. Phil is the author of the 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.
How do I avoid a Medicare penalty?
Ken – Georgia: I will be turning 65 next March. How long can I wait to enroll before there is a penalty? Currently, I am on Obamacare, and it is working fine for me.
Phil Moeller: There is a seven-month initial enrollment period that ends three months after the month you turn 65.
My larger concern about your timing is that your Obamacare may not continue providing primary coverage to you once you are eligible for Medicare. I would check with your insurer ahead of time and make sure you don’t get an unpleasant surprise.
How does selling our home affect Medicare?
Ruth – California: I understand that profit from the sale of your home affects income, which, in turn, can result in a surcharge for Medicare premiums. But does it make any difference if you immediately put all or part of that income into the purchase of another home?
Phil Moeller: Medicare’s high-income surcharges are based on taxable income. So, the answer to your question depends on whether the proceeds from the sale flow through to you as taxable income.
I am not a tax expert, but I believe people have a one-time exemption that permits them to sell their principal residence without adverse tax consequences.
And if you roll over the proceeds from your old home into a new one, only the net amount of the gain on the sale of your prior home would be taxable. You should confirm my advice with a tax accountant.
Also, the high-income surcharge lasts only for one year. For example, someone with high income in 2019 would see this reflected on their tax return filed in 2020 and would pay the surcharge during 2021. If their income declined in 2020, the surcharge would disappear in 2022.
How does selling our home affect Medicaid?
Bob: We have been told that if we have our daughter on a quit-claim deed for five years, our house would not be subject to being taken over by Medicare if either of us goes to a nursing home. Is this true?
Phil Moeller: Medicare does not “take over” a person’s home. The issue that arises is whether the value of a person’s home is large enough to make them ineligible to qualify for Medicaid, which can cover a person’s stay in a nursing home.
Also, is the surcharge in effect for two years until the tax cycle returns you to your lower income? These surcharge rules seem to make “downsizing” very expensive for seniors.Medicare’s high-income surcharges are based on taxable income.
If a person sells or transfers his home to a third party to hide assets and avoid this disqualification, Medicaid usually uses what’s called a “look back” period of five years to judge whether such a sale will affect Medicaid eligibility.
Because Medicaid rules are set at the state level, I suggest you get in touch with your state’s Medicaid office and find out what rules would apply to you.
You also should consult with an attorney familiar with Medicaid and real-estate law in your state.
Social Security is taking out too much for Medicare, how do I get it corrected
Steve – Florida: Social Security is taking too much out for Medicare in 2019. They are basing it on my 2017 tax return when I sold real estate, which boosted my income to the MAGI (modified adjusted gross income) range of $135,500-$160,000.
I also sold real estate in 2018, putting me in the same MAGI range. However, for 2019, my MAGI range is $85,000-$107,000. How do I get Social Security to correct this?
Phil Moeller: As I indicated to Ruth above, there’s a time lag here. Your 2018 income as reported on your tax return in 2019 will determine your 2020 Medicare premiums. If your income declines this year, it should automatically reduce your premiums beginning in 2021. The lag is related to how long it takes Social Security to receive complete tax-return records from the IRS.
People with life-changing events can get same-year relief from the surcharge, with the most common event being retirement and the loss of wage income. A spike in income due to selling a piece of real estate does not quality for such a waiver.
Will Medicare cover my out-of-state care?
Robin – Texas: I live in Texas. If I visit Alabama, will my Medicare be in effect there?
Phil Moeller: It depends on the kind of Medicare you have. Original Medicare (Parts A and B) is good anywhere in the country.
However, if you have a Medicare Advantage plan, it most likely will only cover you where you live in Texas. A good rule of thumb here is that if your Medicare is provided by a private insurer, check with them about coverage rules.
These questions previously appeared on the PBS NewsHour Making Sen$e website.