Vol. 2, Issue 6November 2010


A Client Story - Are You Overpaying Medicare Premiums?

DeSERANNO Advisor, Steve Sicklesteel, CFP

A few weeks ago I reviewed a relatively new client’s 2009 tax return and noticed that the couple paid almost $7,400 in annual Medicare Part B premiums in 2009. This is well in excess of the standard cost for couples of $2,313 per year for 2009 ($2,645 for 2010). I had discovered that they had overpaid their Medicare Part B premiums by $5,087 in 2009 and nobody even knew it!

When Social Security checks arrive each month, there is a deduction for the monthly benefit for Medicare Part B insurance premiums. This is medical insurance that covers doctor’s services, outpatient care, physical therapy and some home health care. While the government pays 100% of Medicare Part A (hospital insurance), part B coverage comes at a cost that depends on the person’s “modified adjusted gross income” as reported on their most recent tax return as of January each year. For 2009, this would be the return filed for tax year 2007.

Anytime either spouse stops working or has a reduction in work hours he or she can request a review to try and get a reduction in the amount taken out for the Medicare Part B premium. In this case, the husband had retired at the end of 2008 and consequently their income for 2009 was below the $170,000 income level where married couples start to pay higher premiums for Medicare Part B.

I had a meeting with our client and advised him to make an appointment with the local Social Security office. We discussed what he needed to bring with him in order to request a reduction in their premium deductions going forward and to also ask for a refund.

The outcome was a success for our client. The couple is now paying $4,755 less in 2010 annual premiums than they did in 2009, and they were refunded a large portion of the overpaid 2009 premiums! The client was thrilled.

Sometimes the details and loopholes of taxes escape even the best accountant when you are only talking to them once a year and the big picture is not taken into consideration. A benefit of our method (ongoing and comprehensive) allows us to know your situation throughout the years – giving us the ability to recognize when and where you need help. It is our job to look out for our client’s best interest with all aspects of their financial lives. Because of this, we often make or save money for our clients in unexpected ways.