Decoding alphabet soup: Medicare price hikes & avoiding fraud

Penn State Extension program specialist in ag economics, sociology and education Paula Ledney urges farmers to familiarize themselves with Medicare and how it’s regulated to make wise purchase decisions and understand how premiums might increase. One aspect that sometimes catches farmers off guard is income-adjusted premiums. It’s also important to recognize Medicare fraud to avoid becoming a victim.

“Everyone pays a base monthly premium for Part B,” Ledney said. “If your income is above certain thresholds, you pay extra income-related monthly adjustment: the Income-Related Monthly Adjustment Amount (IRMAA).”

Medicare Part A (hospitalization) is not adjusted for income, but parts B and D are adjusted based on a person’s tax return from two years ago. Medicare receives this information from the Social Security Administration. The higher the income, the higher the premium.

“Farmers often have unique income patterns that can trigger unexpected Medicare premium increases,” Ledney said. “You could have income spikes from land or equipment sales. If you sell farmland, livestock or machinery, you can create a one-time high-income year which can push you into a higher IRMAA bracket. Even if it’s a non-recurring event, Medicare will still raise the premium two years later. You can also have some depreciation recapture surprises. Farmers often depreciate equipment over time then owe taxes when they sell the equipment. That’s considered the depreciation recapture. That taxable gain can increase the modified adjusted gross income, which can trigger IRMAA unexpectedly.”

Medicare treats income as stable, which keeps the premium at the higher rate even though it was due to a one-time income spike. Ledney suggests farmers carefully plan large transactions to avoid IRMAA impact. Prior to selling land, equipment or crops in one year, consider spreading income across several years or using installment sales.

“Work with a tax advisor who’s familiar with agriculture,” Ledney said. “They can help manage your modified gross adjusted tax income, time the recognition of income and find and use deductions effectively.”

If a farmer’s income is less compared to the income claimed on a tax return from two years ago, they can request a reduction in the Part B premium. This is an appeal regarding the higher Medicare premium based on two-year-old tax data.

“Ask them to use your current lower income instead,” Ledney said. “The request requires proof of reduced income, which is where having solid, accurate records helps. It’s important for folks who are close to retirement to look at this. It’s also important for folks who aren’t that close to retirement. If you’re in a farm transition situation, give the younger generation insight into this.”

Medicare is highly regulated by the federal government, so for those interested in more than original Medicare, the Center for Medicare & Medicaid Services (CMS) administers the Medicare program and follows strict guidelines for private insurance companies that market and sell Medicare plans. Be aware that only a licensed insurance agent can sell Medicare plans, and these agents must follow rigid guidelines when offering advice and plans.

“All insurance agents selling Medicare plans must be licensed in the state where they’re making the sale,” Ledney said. “A licensed insurance agent cannot visit you at your home without your permission. They can’t cold call you unless the agent has a prior relationship with you regarding Medicare. They can’t leave flyers or business cards at your door or on your car windshield. They can’t pressure you to enroll or switch plans. They can’t endorse a specific Medicare plan over another one.”

Agents are prohibited from selling non-health-related coverage such as life insurance during a Medicare sales call. They can’t offer gifts worth more than $15, free meals or cash incentives to enroll in a plan. Agents can’t invite people to an educational event then try to sell them a Medicare plan – they can only provide information. Agents can’t enroll someone in a Medicare plan over the phone unless that person contacts the licensed insurance agent or broker and requests enrollment.

“They can’t enroll you in a Medicare supplement plan if they know you have a Medicare Advantage plan unless the Medicare Advantage plan will end before the Medicare supplement plan starts,” Ledney said. “The Medigap plan can only be used with original Medicare. If you have switched to a Medicare Advantage, you can no longer have a Medigap plan.”

Agents cannot ask for personal information such as Social Security number, Medicare number, credit card or banking information unless they need it to verify eligibility or if their client has already decided to enroll in the plan. Agents also can’t ask for referrals.

A licensed agent for Medicare can contact someone by phone only if the person has given permission to be contacted, such as requesting a follow-up appointment after an educational event. However, agents can leave information at someone’s home if that person didn’t show up for a scheduled appointment. During an appointment, agents can only discuss the types of Medicare plans the person has agreed to hear about during the scheduled appointment. The person must first agree to such a discussion either in writing or through a recorded phone call. If someone wants to learn more about plans they haven’t agreed to beforehand, they must provide specific permission stating so.

“They can call you after you have enrolled in a Medicare plan to discuss other coverage options,” Ledney said, “but only if the agent calling you is the same agent who enrolled you.”

She suggested asking the agent if they represent multiple insurance companies and whether they can provide information on more than one company. This allows people to find the most suitable plan for their situation. If an agent represents only one company, they can only sell plans from that company; if someone meets with a broker who represents multiple companies, they can look at all the plans the agent represents to review the options.

Take time to fully understand Social Security and Medicare – they go hand in hand. Remember that failure to sign up for Medicare within three months before or after turning 65 will result in future penalties.

To establish a Social Security account and prepare for Medicare, visit ssa.gov/myaccount/create.html.

by Sally Colby